China: Strategic Plan to Revitalize Economic Growth
Beijing is considering a $142 billion “infusion” into major state-owned banks
The Chinese government has published a 24-point program to “expand employment, guarantee a more equal distribution of income, and protect self-employed workers.” The goal of the government plan is to “counteract the slowdown in economic growth,” which calls into question the +5% target set for the Chinese economy in 2024.
For the Chinese government, employment represents an “absolute priority for the socio-economic development” of the world’s second largest economy. Therefore, the government invited state-owned enterprises to commit themselves to attract labor and prevent the risk of rampant unemployment. “We will strengthen the principles of wage and income distribution in state-owned enterprises,” the Chinese government wrote in the program, among other things promising “a series of reasonable wage increases and priority support – including lot allocation – for market operators who make significant contributions to job creation.”
To revitalize the Chinese economy, the government is evaluating the possibility of “injecting” liquidity of up to $142 billion into the country’s six largest state-owned banks to “increase their financial capacity to support the economic recovery” of the Asian country. This was reported by Hong Kong’s South China Morning Post newspaper, citing “very informed” sources, specifying that the Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China, Bank of Communications, and Postal Savings Bank of China “may soon receive $14.2 billion each.”
According to the newspaper’s “confidential” sources, “the funding, the first of this scale since the 2008 financial crisis, will come mainly from the issuance of new special government bonds.”
This is quite urgent, as in August, compared to the same month in 2023, “China’s industrial profits collapsed 17.8%, the biggest decline since the beginning of the year.” According to China’s National Bureau of Statistics (NBS), “weak market demand and extreme weather events had a negative impact on China’s industrial performance last month.” The NBS also noted that Chinese industrial profits rose 0.5% from January to August 2024, compared with the 3.6% growth recorded in the first seven months of the year.
