China redoubles first-aid for its economy with support for banks and workers

China is redoubling its first-aid for its economy, targeting banks, workers and poor families as the ruling Communist Party prepares to mark the 75th anniversary of the founding of the People’s Republic.

Unconfirmed reports yesterday by the South China Morning Post and Bloomberg said the government plans to spend about 1 trillion yuan ($142 billion) on recapitalizing six big state-owned banks. The reports citing unnamed people familiar with the situation follow this week’s statement by Li Yunze, head of the National Financial Regulatory Commission, that regulators would increase capital at six large banks.

Defaults by real estate developers following a crackdown several years ago on excessive borrowing for property projects have weighed on the banking sector, prompting the latest bailout.

Banks’ interest margins and profits have shrunk, so “it is necessary to coordinate various channels such as internal and external channels to replenish capital,” Li told reporters in Beijing.

President Xi Jinping and other top leaders held a quarterly meeting on the economy on Thursday, state media said, and acknowledged “some new situation and problems” had emerged. They promised to focus on support for new college graduates, migrant workers, the unemployed, elderly and disabled.

The capital increase for the banks and promises of other measures were a second flurry this week of stimulus for the world’s second-largest economy as it struggles to regain momentum after the COVID-19 pandemic. For a second time this week, financial markets rejoiced.

Hong Kong’s Hang Seng jumped 4.2% and the Shanghai Composite index surged 3.6%. The smaller market, in Shenzhen, was up 4.2%. Markets elsewhere in Asia and in Europe also logged strong gains.

The raft of new measures to pump up growth began Tuesday, when officials from the central bank and other government agencies held a news conference in Beijing announcing various measures to help revive China’s ailing property sector and prop up financial markets.

Those measures included lower bank reserve requirements, reduced interest rates and smaller minimum down payments for some mortgages.

The statement issued after the meeting Thursday of the ruling party’s powerful Politburo called for “additional policies” for new problems that have cropped up, Julian Evans-Pritchard of Capital Economics said in a commentary.

“However, it remains unclear if this will include the large-scale fiscal support needed to stabilize growth,” he said.

China’s leaders appear determined to show they are taking action to restore confidence in the economy on the eve of the Oct. 1 National Day holiday, 75 years after the communists took power in 1949.

The government also announced special “living allowances,” or cash handouts, for the poor ahead of National Day observances. A notice from the Civil Affairs Ministry did not say how much would be paid. Although subsidies to ordinary people are uncommon, the ruling Communist Party sometimes marks special occasions with payments to families in difficulty.

“We must look at the current economic situation comprehensively, objectively and calmly, face up to difficulties, strengthen confidence, and effectively enhance the sense of responsibility and urgency to do a good job in economic work,” said the statement issued after the Politburo meeting. ELAINE KURTENBACH, MDT/AP