The return of the coronavirus pandemic and the fall of the markets, made China commit to supporting activity, even if it means changing the trajectory of its economic policy.
The sentence ¨we must take concrete measures to strengthen the economy in the first quarter¨, pronounced last Wednesday, after a government meeting, resulted in an immediate effect on markets.
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Even though no concrete guidelines have been announced, the Hong Kong stock exchange gained 16% in two days, after several sessions of declines due to the return of covid-19 in China.
Plenum analyst Chen Long says that "confinement is the main reason for Beijing's decision".
Tens of millions of people are in lockdown, including the entire population of the city of Shenzhen (south), the ¨Chinese Silicon Valley¨, which is home to the Chinese giants Huawei (telephony, 5G) and Tencent (internet, video games). In terms of GDP it is the third largest city in China.
The worsening of sanitary conditions appears in a panorama of slow growth, caused by the low consumption, the toughness of regulations in several segments and the doubts related to Ukraine.
ACY analyst, Clifford Bennett, says that “China is in an unprecedented battle”, facing the economic crisis.
The government estimates this year's growth to be at least 5.5%, its lowest estimate in three decades.
In the face of uncertainty, the government seems willing to loosen its grip on the private sector, which has especially condemned technology and real estate companies over the past two years.
In the technology sector, authorities have been particularly strict on issues such as competition or personal data.
This ¨adjustment¨ of previously widespread practices has caused large companies in the digital sector to lose billions in capitalization since 2020.
Even if it follows this economic line, Beijing demanded the need for regulation to be “transparent and predictable”.
The real estate sector was also harmed by determinations to clean up the indebted sector and marked by uncontrolled speculation.
Wednesday's conference called for "risk mitigation" and acceptance of "support measures" to ¨accompanying the transformation¨of a sphere that accounts for more than a quarter of Chinese GDP, together with the construction.
Since 2020, on the verge of bankruptcy, the giant Evergrande and many contractors are struggling not to go bankrupt.
According to IHS Markit (S&P Global) analyst Rajiv Biswas, he says that Beijing is walking a tightrope trying to “empty speculative bubbles” without “causing a crash”.
In a sphere of intense pressure with the United States, China has been downsizing its tech giants for a year now.
The government resists letting them expand capital abroad, opting instead to raise funds domestically (Hong Kong, Shanghai, Shenzhen and Beijing).
The “Chinese Uber”, Didi, was forced to move away from Wall Street in 2021, having entered the market without the concession of the communist regime.
On Wednesday, China's government said it is
¨working¨ with Washington on the issue of listing Chinese companies in the United States.
Bennett announces that the Russian invasion of Ukraine is "certainly" associated with Beijing's new guidelines.
China is under great diplomatic pressure not to be a lifeline for Russia, hit by countless corrections since the invasion of Ukraine.
But Beijing is persistent in abandoning its ally, under the danger of finding itself under Western sanctions.
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