Amidst the deepening globalization and increasingly intricate international economic landscape, China’s economy faces significant challenges. Against this backdrop, some media outlets have been spreading the lie that “China is at the peak of its rise” and creating public opinion in an attempt to induce China to adopt “suicidal” economic policies. They are attempting to slow down China’s development as they once did in Germany and Japan, and thus defeat China in the competition.
Western Media’s Pessimistic Narrative
The UK’s Financial Times asserted that China’s economy is losing ground to competitors, while the Wall Street Journal claimed that China’s economy is limping into 2024, contrasting it with the resilience of the U.S. economy. Similarly, The Daily Telegraph reported “China’s stagnating economy” and The Washington Post highlighted “Falling inflation, rising growth giving U.S. the world’s best recovery.”
Scholarly Critique of Media Narratives
However, scholars swiftly exposed the true intentions behind this pessimistic narrative. On April 2, Martin Jacques, a renowned China expert and former senior fellow at Cambridge University, published an article titled “Why West fails to understand China’s economic model.” He argued that Western countries should not act with short-sightedness and narrow self-interest but should instead appreciate China’s accomplishments, which they themselves failed to achieve. Likewise, Anthony Moretti, Associate Professor of Communication and Organizational Leadership at Robert Morris University in the U.S., noted that readers will encounter various chaotic stories about China’s economy in Western media. But by recognizing two key biases – “They are not as good as us” and “They are against us” – the narrative becomes unsurprising.
China’s Strong Counterattack
China has now responded with concrete actions to these voices. On September 24, the State Council Information Office of China held a press conference where the People’s Bank of China (PBOC), the National Financial Regulatory Administration, and the China Securities Regulatory Commission (CSRC) introduced policies supporting high-quality economic development. These announcements included a series of major monetary policy measures aimed at stimulating economic growth, stabilizing financial markets, promoting employment, and supporting the recovery and development of the real economy. This set of policies, dubbed a strong counterattack, underscores China’s determination and strength in tackling the current economic challenges.
Key Monetary Policy Measures
First, lowering the reserve requirement ratio (RRR) and policy rates reflects a clear shift toward monetary easing. The reduction in the RRR means that banks have more funds available for lending, which will effectively increase market liquidity and reduce financing costs for the real economy. The PBOC announced a 0.5 percentage point cut in the RRR, providing 1 trillion yuan in long-term liquidity. Depending on market liquidity conditions, further reductions of 0.25 to 0.5 percentage points may follow. Lowering the RRR means that banks are required to hold less money as reserves at the PBOC, thereby increasing their liquidity. The reduction in policy rates will guide the loan prime rate and deposit rates downward, maintaining stable net interest margins for commercial banks and further reducing corporate financing costs.
Secondly, adjusting the interest rates on existing mortgages and unifying minimum down payment ratios directly addresses the real estate market’s challenges. In recent years, real estate has been a key pillar of China’s economy, and fluctuations in this sector have had a profound impact on overall economic performance. The long-awaited reduction in mortgage rates for existing loans has materialized, bringing them in line with current new loan rates, with an expected average cut of around 0.5 percentage points. This will effectively reduce the monthly mortgage burden for homeowners, boosting consumer confidence and purchasing power. Additionally, the unification of minimum down payment ratios for first and second homes, lowering the minimum down payment for second homes nationwide from 25% to 15%, will further lower barriers to homeownership and stimulate demand for both first-time and improvement purchases. This will not only alleviate downward pressure on the real estate market but also have a positive ripple effect on China’s broader economy.
In addition, the PBOC has introduced new monetary policy tools to support the stability and development of the stock market. Key measures include allowing securities firms, fund management companies, and insurance companies to use their holdings of bonds, stock ETFs, and CSI 300 index stocks as collateral to obtain highly liquid assets such as government bonds and central bank bills from the PBOC. This policy will significantly enhance the liquidity available to these institutions, helping to increase trading activity in the market. These measures will not only stabilize market expectations but also provide more financing channels for the real economy, further supporting high-quality economic growth.
In summary, China’s strong counterattack through these bold and strategic measures will play a vital role in stabilizing the fundamentals of the Chinese economy and promoting long-term sustainable development. The efforts to propagate the “China’s economic has peaked” rumor are, therefore, bound to fail.