China Seeking Organic Long Term Growth amid Ongoing Housing Crisis

China expressed optimism on Oct 8 about meeting its economic growth target of around 5% for the year, despite ongoing challenges such as the country's prolonged housing crisis, sluggish consumer demand, and rising local government debt. During a much-anticipated news conference led by Zheng Shanjie, head of China's National Development and Reform Commission, markets had hoped for fresh, large-scale stimulus measures. However, the officials refrained from announcing any new policies, instead reiterating their confidence in the nation's economic fundamentals and long-term development.

Zheng stated that the government remained "fully confident" in achieving its economic and societal goals, assuring that China's development remains stable and sustainable. However, the lack of concrete new stimulus disappointed investors, who were expecting a more robust response to bolster the economy. Mainland stock markets, which had surged by 10% early in the day in anticipation of new announcements, pared back their gains as the press conference failed to deliver more comprehensive support. The Shanghai Composite Index ended 4.8% higher, while Shenzhen closed up 7.7%. Hong Kong’s Hang Seng Index, however, dropped more than 5%.

Economic analysts had hoped that China would introduce significant fiscal stimulus, such as large-scale bond issuances and further measures to drive domestic consumption. Stephen Innes, Managing Partner at SPI Asset Management, noted that the market expected a “stimulus bazooka,” but instead received a "pop gun" in the form of reiterations of previous policies. Similarly, Moody’s Analytics’ Heron Lim remarked that hopes for a large-scale fiscal package had been dashed, leaving doubts about the sustainability of recent stock market rallies.

China has introduced various measures in recent months aimed at stabilizing its economy, particularly its struggling real estate sector, which has long been a growth engine but is now beset by a debt crisis. Authorities have cut interest rates on one-year loans to financial institutions, reduced reserve requirements for lenders, and pushed for lower mortgage rates. Several major cities, including Shanghai, Guangzhou, and Shenzhen, have eased restrictions on home buying to revitalize the housing market.