Pity Chinese policy makers. They must deal with an unbalanced economy in more ways than one. China’s population ranges from the millions of rural poor to hundreds of entrepreneurial billionaires, with an expanding middle class in between. Activity growth is still dependent on fixed asset investment, and consumers, in spite of the hordes of Chinese shoppers worldwide, are not spending enough at home. Efforts to stamp out corruption are not helping.
And so it was that last week Premier Li Keqiang hinted that the 2014 gross domestic product growth target of 7.5 per cent – once unthinkably low – might be missed. August data confirmed a slowdown in industrial production, retail sales and fixed asset investment. Little is going right.
On Wednesday the People’s Bank of China appeared to save the day. A report on sina.com, a Chinese portal, leaked news of the central bank’s move to inject Rmb500bn ($81bn) into the top five Chinese banks. The liquidity will be available for three months. Analysts expect that the loans will be rolled over – this move is the first of a new wave of stimulus measures. Hong Kong-listed H shares, after dropping 6 per cent since Mr Li’s cautious outlook, bounced 1.5 per cent in relief.