Premier Li Keqiang presided over a State Council executive meeting on Wednesday, April 6. The meeting made two decisions:
- increase government support for "sectors under special hardship" by deferring pension insurance premiums, and increase unemployment insurance support and job training; and
- increase support for the real economy by adopting the timely use of monetary policy tools.
The State Council executive meeting warned of "further increases in new downward pressures" facing the Chinese economy. These include the slowing of world economic recovery, volatility in global food, energy and commodity markets, and the worsening of the domestic COVID situation. According to the readout of the meeting: "the complexity and uncertainty of the domestic and international environments have intensified and in some cases exceeded expectations."
In the face of these challenges facing the Chinese economy, the State Council executive meeting emphasised prioritising "stable growth" (achieving growth while maintaining economic and social stability). The meeting called on all departments of the Chinese government to "introduce measures conducive to the stabilisation of market expectations" in a timely fashion. The meeting also called on all localities to put forward practical and useful measures such as reducing rent.
Sectors under special hardship
The State Council executive meeting listed five "sectors under special hardship": food (hospitality), retail, tourism, civil aviation, and road/water/rail transport.
First, from Q2, the government will defer pension insurance premiums for these sectors to alleviate financial pressures, especially pressures on micro, small and middle-sized enterprises and sole proprietorships.
Second, the policy of phased expansion of unemployment insurance protection will continue.
Third, the government will allow local governments to increase the rebate on unemployment insurance for micro, small and medium-sized enterprises from 60 to 90 per cent. Moreover, local governments can allocate four per cent of their unemployment insurance fund balance for vocational skills training.
The State Council executive meeting pointed out that "a variety of monetary policy tools, such as relending, should be used flexibly and timely...to increase support for the real economy."
First, the government will step up efforts to implement a prudent monetary policy that ensures a "reasonable abundance of liquidity", especially for micro, small and medium-sized enterprises.
Second, the government will adopt financial policies to support consumption and effective investment, and lift the quality of financial services for new urban residents.
Third, to support the financing needs of key areas, the government will set up two relending facilities for science and technology innovation and universal pension. The People's Bank will provide 60 per cent and 100 per cent relending support for these facilities, respectively.
By Adam Ni