The third plenum of the Chinese Communist party’s central committee took place from July 15 to July 18 with a commitment to “further deepening reform to advance Chinese modernization”, but the long-awaited meeting, occurring against the backdrop of a sluggish post-pandemic economy, failed to give a boost to the confidence of investors hoping for an indication of specific policy support.
On the first day of the third plenum, the Chinese government announced that China’s economy, not surprisingly, had slowed down in Q2 2024, with GDP easing to 4.7% after a strong 5.3% growth in the first quarter.
During the four-day plenum, not much information was disclosed, and it was not until the end of the plenum that the government’s official media published a communique. However, the market did not show a lot of positive feedback. The CSI 300 Index, which reflects the overall trend of the Chinese stock market, saw a meagre 0.5% growth on July 19. And the Hang Seng China Enterprises (HSCE) index, which indicates the performance of Hong Kong-listed mainland Chinese enterprises, dropped by over 2% on July 19.
In the communique, the most important contributor to China’s GDP – the real estate sector – was only mentioned once, from the perspective of guarding against market risks. Experts predict this might signal that no major stimulus measures will be introduced in the near future.
In May, the Chinese government introduced a package of real estate support policies, focusing on relaxing mortgage regulations and encouraging local governments to purchase unsold housing. Chinese policymakers have so far failed to resolve the real estate market crisis. And, as Chinese residents have placed the majority of their wealth in the property market, falling house prices and a weak job market have plunged China into its longest period of deflation since 1999.
Detailed plans for the long-term development of China and a number of structural reforms, according to a recent UBS report on the third plenum, are expected to be announced in the next two to three days.
