Xi Jinping pledges ‘forceful’ rate cuts to halt China’s economic crisis

Xi Jinping has called for the introduction of “forceful” interest rate cuts as the Chinese president battles to kickstart the stuttering economy.

In a rare admission from China’s leadership, officials said the world’s second-largest economy was facing fresh turmoil as they vowed to inject greater levels of fiscal stimulus.

The announcement from the 24-man Politburo – the highest political body of the Chinese Communist Party – sent Asian stock markets surging on Thursday.

It follows a series of measures laid out by the People’s Bank of China earlier this week that are designed to help China avoid missing its annual 5pc growth target.

Following the Politburo meeting, which was attended by Xi, a report from state news agency Xinhau cited government officials as saying: “Some new situations and problems have emerged in the current running of the economy.

“We must view the current economic situation comprehensively, objectively and calmly, face difficulties squarely, [and] strengthen confidence.”

The report added that Politburo members agreed on the need to “further improve the focus and effectiveness of policy measures” to stabilise the fiscal situation.

Officials also vowed to “respond to the people’s concerns” about the economic malaise,  calling for the “forceful” implementation of rate cuts.

Shares in Hong Kong rallied more than 3pc after the update and the Shanghai Composite Index added 2.2pc as the Politburo said China would push for the real estate market “to stop declining”.

This comes amid an ongoing crisis in the sector that was sparked by the collapse of Evergrande in 2021.

Bruce Pang, the chief economist for greater China at Jones Lang LaSalle, said: “This stimulus package endorsed by today’s Politburo meeting represents a strategic shift in macro policy.

“If there are more substantial fiscal supports and a pick-up in government spending, it will probably be sufficient to drive a turnaround in business confidence, market sentiment and economic activities.”

However, Julian Evans-Pritchard, head of China economics at Capital Economics, said: “It remains unclear if this will include the large-scale fiscal support needed to stabilise growth.”

He added: “The communique underlined the recent shift toward more aggressive monetary easing – whereas previous Politburo meetings called for a ‘steady decline in financing costs’, the latest one called for ‘substantial rate cuts’.

“This suggests that rate cuts could end up being larger than expected – we are currently forecasting another 20bp cut to policy rates next year, in addition to those announced earlier this week.”