한국인 미국 교수가 멀찍이 보는 미국과 중국이야기
중국의 경기부양책 2024년 9월 24일 (English version)
Last summer, while visiting China at the invitation of a university, I made a brief stop in Shanghai to meet with a highly esteemed chairperson from a trade organization. While there, I couldn't resist exploring the iconic Bund, one of the city's most popular landmarks. After a leisurely stroll along the waterfront, I headed back to the subway station, only to notice that nearly half the storefronts on a nearby block were closed. Although I regularly track China's macroeconomic indicators as part of my work, seeing the effects of the slowing economy firsthand gave the situation a stark and tangible reality.
This wasn't limited to Shanghai. Similar scenes played out in other major cities I visited—Wuhan, Changsha, Changchun, and Zhengzhou. Even during the evening hours, streets and shopping districts that should have been bustling were eerily quiet. On highways, I passed countless empty apartment buildings, and restaurants sat vacant, with few to no customers.
Amid this economic malaise, on September 24, the Chinese government announced a new round of monetary easing. The first issue it tackled was the real estate sector. For years, an oversupply of housing and mounting debt at major developers has led to plummeting property prices. With developers like Evergrande facing debt crises, countless projects have been delayed or halted, placing a significant burden on the broader economy. Given that the real estate sector accounts for about 25% of China's GDP, its troubles have rippled through the entire economic landscape, dampening consumer confidence along the way. As property prices fall, people tend to tighten their belts, reducing spending out of fear and uncertainty about the future.
To address this, China lowered policy rates and the reserve requirement ratio to inject liquidity into the financial sector, making it easier for banks to increase cash flow. However, China's banking sector remains dominated by state-owned banks, which means that the effects of these rate cuts may take longer to trickle through the system. To expedite this, the reserve requirement was lowered to accelerate the release of money into the economy.
The second policy focused on the real estate sector. The government cut existing mortgage rates by 0.5% and reduced the down payment requirement for second homes from 25% to 15%. Additionally, state-owned banks would now purchase unsold properties and land, easing the financial burden on the real estate sector. This is, however, through its cash injections, the government would indirectly absorb some of the debt held by struggling property developers—an implicit bailout facilitated by the state-owned banking sector.
The third measure aimed to boost the stock market. The plan? Encourage companies to buy back their own shares using funds borrowed from the central bank, hoping this would prop up share prices and, in turn, boost consumer sentiment along with a surge in stock markets in China. It's a pretty curious policy that seems only possible in China's socialist market economy. However, share buybacks in China are far from what they are in free-market economies such as the U.S., where they typically reflect confidence and ownership from corporate insiders. In China, where figures like Jack Ma, the former chairman of Alibaba, can vanish from the public eye due to political pressure, it's hard to imagine executives feeling secure enough to back their companies in such a way.
Following the Chinese government's announcement of substantial stimulus measures, U.S. stock markets initially saw a brief surge, only to retreat again as investors remained unconvinced. With the worst real estate market, the lowest consumer sentiment, and the stagnant stock market since the economic reforms of 1978, the question lingers: Can China still achieve its ambitious 5% growth target by the end of 2024?
