China Cracks Down on Officials to Revive Economy

Beijing, Sep 27 (PTI) China's ruling Communist Party has cracked the whip on officials ordering them to implement corrective measures to revive the flagging economy amid heightened concerns that it may miss the official target of around five per cent growth rate this year.

The Political Bureau of the party, headed by President Xi Jinping, called for stabilising the real estate market, which in recent years has emerged as the biggest black hole by strengthening fiscal and monetary policy support, official media reported on Friday.

“Party members and officials are urged to take responsibility and be willing to innovate, using challenges as opportunities to grow and achieve results,” state news agency Xinhua quoted the Politburo as saying.

Many civil servants are reputedly reluctant to innovate and fear making mistakes, daunted by the system's centralisation, tight controls and lack of flexibility.

Deng Yuwen, former deputy editor of Study Times, the official newspaper of the Central Communist Party School, said a clear message has been given to officials down the line that economic recovery was now the top performance indicator on their report card.

“It's a clear signal from the party's top leadership, telling officials down the command chain that now the economy is their priority. It essentially relaxes the current strict political requirements so that officials know what they should focus on,” Deng said.

“As the economy continues to worsen, the party's leadership is getting more anxious than before, because they know a stagnant economy will mean major political risk in the future,” Deng told the Hong Kong-based South China Morning Post.

“They have also come to realise that besides the stimulus from the central bank and the Ministry of Finance, they also need to stimulate the enthusiasm of cadres,” he said.

“It is necessary to take a comprehensive, objective and sober view of the current economic situation, face the difficulties squarely and remain confident,” an official statement said.

The meeting also underlined promoting the stabilisation of the real estate market and stopping it from further declining, outlining measures, including strictly managing new commercial housing construction, increasing loans for “white list" projects, vitalising idle land stock and adjusting housing purchase restrictions, state-run China Daily reported on Friday.

Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, said: "The meeting has placed real estate in an unprecedentedly important position, and has made specific arrangements for significantly strengthening the policy support for both the supply and demand sides of the real estate industry."

The political bureau meeting came a day after People's Bank of China (PBOC) Governor Pan Gongsheng announced plans to lower borrowing costs and allow banks to increase their lending.

The measures announced by the governor included cutting the the amount of cash banks have to hold in reserve — known as reserve requirement ratios (RRR).

The banks move to initially cut the RRR by half a percentage point, expected to free up about a trillion yuan (USD 142 billion) cash flow.

He also announced measures aimed at boosting China's nearly bankrupt property market, including cutting interest rates for existing mortgages and lowering minimum down payments on all types of homes to 15 per cent.

There is a sense of urgency being shown by the party leadership to revive the property sector though the real estate industry has been struggling since 2021 with a sharp downturn with several developers declaring bankruptcy leaving large numbers of unsold homes and unfinished building projects.

Pan's new economic stimulus measures followed the US Federal Reserve decision to lower interest rates with a bigger than usual cut.