• By The Financial District

Beijing Signals Policy Changes; Stocks Rebound

Updated: Mar 20

While Chinese stocks sank initially, they bounced back last week as Beijing signaled a shift away from the crackdowns of the last two years, including inhospitable policies against foreign initial public offerings (IPOs), James Palmer reported for China Brief.

Photo Insert: At the heart of China's property woes is the Evergrande Group.

The initial fall was generated both by the existing concerns after China’s assault on big technology firms and by concerns about COVID-19 and the war in Ukraine.

Vice Premier Liu He, Xi’s main economics czar, now signaled some change as he spoke at a State Council meeting about new policies “favorable to markets” and called upon departments to implement business-friendly policies. Liu’s pontification was greeted with glee by investors sensitive to Beijing’s position.

Chinese technology firms have already knelt before the Chinese Communist Party and this satisfied Xi’s faction comprised of cronies and businessmen opposed to disgraced leader Bo Xilai.

At least in the case of IPOs, this also appears to be something of a compromise from Beijing, showing how much anxiety around the economy there is. The recently announced 5.5 percent GDP growth goal announced is relatively modest, but Chinese officials already show doubts about whether it can be achieved.

All the news: Business man in suit and tie smiling and reading a newspaper near the financial district.

However, the state of the Chinese property market remains dire. New house prices have fallen for six months straight and are down by 22 percent year over year. Real estate underpins the Chinese economy even more than in the US before the 2008 financial crisis.

Government has announced a major policy change to try to shore up the market: Abandoning already watered-down plans to introduce a property tax nationwide. Yet, without a property tax and changes in local funding, the problems will simply cycle around again.

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