China holds back on more stimulus, citing necessary ‘pain’

BEIJING — China is not planning additional stimulus for the second half of the year, according to officials from the economic planning agency and finance ministry.

The world’s second-largest economy grew by exactly 5% in the first half of the year, with retail sales slowing to 2% year-on-year growth in June. Those official figures have raised concerns about whether China can achieve its full-year target of around 5% growth.

When asked this week about stimulus plans for the second half of the year, officials affirmed existing measures and emphasized longer-term goals to develop advanced technology and other “new growth drivers.”

The economy faces challenges not only from the external environment but also from structural transformation — “pain that must be experienced in the process of pushing for high-quality development,” Zhao Chenxin, deputy director of the National Development and Reform Commission, told reporters Thursday in Mandarin, translated by CNBC.

On the flip side, he highlighted growth in new tech such as electric cars, and how Chinese businesses were expanding to emerging markets.

That followed comments Wednesday by Lin Zechang, director of the general affairs department at the Ministry of Finance, that fiscal policy for the year had been announced shortly after the “Two Sessions.” That’s the annual parliamentary meeting held in March.

The two press conferences followed a regular meeting of top leadership called the Politburo on Tuesday, and a highly anticipated Third Plenum last month that set the economic agenda for the coming few years. Official readouts from both meetings did not indicate major policy changes.

Zhao pointed out that the high-level Third Plenum meeting in mid-July had called for achieving the full-year economic targets, while the agency would work hard to implement the Politburo’s policy plans. He also noted the accelerated implementation of programs such as ultra-long government bonds and planned central government spending.

Last week, the National Development and Reform Commission and Ministry of Finance announced that in a bid to spur consumption, 300 billion yuan ($41.5 billion) in ultra-long bonds would be used for subsidizing businesses’ equipment upgrades and consumers’ appliances and car purchases.

China will put “promoting consumption in a more prominent role,” Yuan Da, deputy secretary-general of the National Development and Reform Commission, told reporters Thursday in Mandarin, translated by CNBC.

In addition to the trade-in program, he laid out support for consumption in categories such as education, elderly care, childcare, housekeeping, tourism and sports. He reiterated that authorities would work for the “healthy” development of real estate and ensuring the delivery of pre-sold apartments.

Yuan and the other central government officials did not mention consumption vouchers. Only local governments have launched such specific measures.

For example, Lu’an City in Anhui province announced Thursday it was issuing 1.5 million yuan in coupons for discounts on eating out at restaurants, 3 million yuan for buying home goods and 3 million yuan for car purchases.

Unlike the U.S. handouts during the pandemic, mainland China has resisted giving out consumption vouchers at scale, despite many calls for Beijing to do so.

“They’re looking at the long-term trajectory and the transition of the Chinese economy, where I think the right medicine is really short term. They’re not focused on that,” Keyu Jin, associate professor of economics at the London School of Economics, told CNBC’s “Squawk Box Asia” on Thursday.

“I think the issue right now is they’re doing austerity in times of downturn, really, you know, the government current cutting, cutting wages, and then, you know, raising taxes and government spending, not compensating,” she said.

— CNBC’s Sonia Heng contributed reporting from Singapore.