My Take | Beijing’s big policy shift signals new approach to state-market ties
Much more than a cyclical adjustment, Beijing’s latest policy shift marks a milestone in the history of its economic management
Beijing’s larger-than-expected market rescue plan announced last week is extraordinary in every way. The policies, from interest rate cuts to special funding schemes for the stock market, are significant. But investors are particularly excited about a shift in policymaking that may have removed certain self-imposed constraints in dealing with the economy and stock market.
Before the shift, a big concern regarding China’s economic prospects was whether Beijing was serious in putting growth at the top of its agenda. There were fears among investors that development may have lost significance to security and order.
Beijing sometimes looked indifferent when market participants pleaded for support. As late as the Politburo meeting on July 30, when deflationary pressure was obvious and Beijing’s own growth target was at risk, China’s leaders still vowed to keep “strategic focus” and a “prudent” monetary stance, implying that they were not in the mood for any meaningful supportive measures.
Therefore, the press conference by China’s financial regulators last Tuesday was a big surprise for many. And a bigger surprise came two days later when China’s Politburo, the supreme 24-member decision-making body, broke its own tradition to convene a special meeting on economic problems, rallying the state apparatus and the whole country to make growth a priority. The wording in the Chinese readout leaves no room for doubt that Beijing is taking economic growth seriously.
The Politburo meeting also showed that China’s top leaders are aware of the problems on the ground and are willing to face them, removing another source of anxiety for investors. For some time, China has sent confusing signals to the market, going so far as to label not-so-positive economic views and comments as unwelcome or even acts of hostility.
