China policymakers see renewed urgency for economic support

A staff member wipes a seat at a restaurant, following a ban on dine-in services amid the coronavirus disease (COVID-19) outbreak, in the Central Business District (CBD) of Beijing, China June 2, 2022. REUTERS/Tingshu Wang

BEIJING, Sept 5 (Reuters) – Chinese policymakers signalled a renewed sense of urgency on Monday for steps to shore up the flagging economy, saying this quarter was a critical time for policy action as evidence points to a further loss of economic momentum.

Senior officials from China’s central bank and leading ministries warned at a news conference of risks for the economy, battered in recent months by COVID-19 related curbs, while promising fresh measures to follow a stimulus package released in May.

“Currently, China’s economic stabilisation and rebound are at a key window, and the third quarter is crucial for rolling out policy measures,” Yang Yinkai, Deputy Secretary General of the National Development and Reform Commission, said at a news conference.

“The second half of the year is a critical period to make up for the losses in the second quarter due to COVID outbreaks.”

China will accelerate infrastructure investment and attract social capital into key projects, Yang said, while aiming for the best possible results for economic growth.

Liu Guoqiang, Vice Governor of the People’s Bank of China, said at the same news conference that the central bank had relatively ample room for monetary policy, although it would avoid flood-like stimulus.

The central bank last month cut rates to shore up the economy, making it an outlier among major central banks that are mostly raising rates to battle inflation. read more

Liu said the central bank would also guide China’s policy banks and commercial banks to support infrastructure projects, which policymakers typically rely on to spur growth, as domestic demand wanes.

China’s economy narrowly avoided contracting in the second quarter amid widespread COVID-related lockdowns and a deepening property crisis, which have badly damaged consumer and business confidence. read more

Recent factory activity surveys and a rising number of COVID cases pointed to a further loss of momentum in the economy in August, pressuring the shaky recovery. read more

While booming exports remained a major driver of the world’s second-biggest economy this year, Assistant Commerce Minister Li Fei warned at Monday’s news briefing that China’s foreign trade faces unfavourable factors, including weakening external demand.

With the yuan weakening, Li said the commerce ministry will help foreign trade firms hedge exchange rate risks.

The Chinese currency has come under particular pressure in recent weeks, falling to a two-year low against the dollar on Monday while investment banks lowered their near-term forecasts, due in part to the economy’s slowing momentum.

China’s central bank said on Monday it will cut the amount of foreign exchange reserves that financial institutions must hold, a move seen as aimed at slowing the pace of the yuan’s recent depreciation. read more

The central bank’s Deputy…