China wants more domestic consumption
China's leaders say the country must guard against financial risks and boost consumption amid signs the recovery in the world's second-biggest economy is faltering.
"China needs to cement its domestic economic growth momentum and guard against potential risks in financial sectors," the Politburo Standing Committee said in a statement late last week which was published by the official Xinhua News Agency.
Macro-economic policies should be stabilised and micro controls in some sectors should be loosened, it said after what Xinhua said was a "special session" on the economy.
Recent data has showed China's manufacturing is expanding at a slower pace, adding to evidence a recovery is losing steam after an unexpected slowdown in growth in the first quarter.
The Politburo Standing Committee's comments "provide support to the State Council's decisions and don't imply policy changes," said Ding Shuang, senior China economist at Citigroup in Hong Kong. "While the leadership is saying China needs to boost growth momentum, it's also warning about financial risks - it isn't going to pursue the old way of stimulus to push up growth at the expense of long-term structural reform."
The Politburo Standing Committee pledged to accelerate the establishment of a standard local government financing mechanism after "explosive" growth in local debt raised concerns about the financial health of the economy, according to Xinhua's report.
Greater efforts are needed to bring out the potential of domestic consumption, according to the statement. While focusing on improving the quality and efficiency of economic development, the country should maintain a proactive fiscal policy and prudent monetary policy while making them more targeted, it said.
On housing, the Standing Committee said a "good job" should be done on development of the real estate industry and building affordable housing. The government will remove or delegate power to approve investment projects in some areas while strictly limiting the "indiscriminate expansion" of energy-inefficient and polluting industries, it said.
Xu Gao, chief economist at China Everbright Securities Co in Beijing, said this was the first time the Politburo Standing Committee held an economy-focused meeting in April since 2004, when it decided to step up efforts to control overheating investment. The meeting delivered a "strong message of stabilising growth," he said in a note. Normally such meetings are held in February, July and at the end of the year, Mr Xu said.
"As growth slows, pressure on the government is building to loosen policy further," Zhang Zhiwei, Nomura's chief China economist in Hong Kong, said. The Standing Committee's comments show "the senior leadership has reached a consensus to tolerate slower growth" and indicate that policy stimulus is unlikely, he said.
Nomura estimates economic growth will slow to 7.2 per cent in the fourth quarter year-on-year, and will be 7.5 per cent for the full year. China's local governments may have more than 20 trillion yuan ($2.86 trillion) of debt, former finance minister Xiang Huaicheng said this month, almost double the figure given in a 2011 report by the National Audit Office.