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China signals more stimulus in the offing after economic summit meeting

CHINA's leaders signalled they will take further steps to support growth, including widening the fiscal deficit and stimulating the housing market, to put a floor under the economy's slowdown, reports Bloomberg.

Beijing's spending surged in November at more than double the pace of gains for revenue, a signal the government has stepped up fiscal stimulus. Fiscal spending jumped 25.9 per cent year on year to CNY1.61 trillion (US$249 billion), while revenue rose 11.4 per cent to CNY1.11 trillion.

Robust consumption and strength in services hasn't proved enough to offset the drag from slumping old-economy sectors including steel, coal and cement.

The latest round of economic data showed signs the economy is stabilising after policy makers unleashed several rounds of monetary and fiscal stimulus. Industrial output climbed 6.2 per cent in November from a year earlier, while retail sales gained 11.2 per cent for the best reading of 2015.

Monetary policy must be more "flexible" and fiscal policy more "forceful" as leaders create "appropriate monetary conditions for structural reforms," according to statements released at the end of the government's Central Economic Work Conference.

The fiscal deficit ratio should be raised gradually, said Xinhua. While the leadership also endorsed structural reforms and reining in China's increasing reliance on credit, the macroeconomic policy statements indicated concern about letting the economy's expansion slow too much.

The government's annual growth target is typically set at the gathering; President Xi Jinping has said the nation must meet a minimum pace of 6.5 per cent.

"They have a challenge to restore their own credibility, and to that end we'll see concerted easing efforts in order to try to turn the economy around, at least in the short term," said Mark Williams, the chief China economist at Capital Economics in London.

"It's clear that policy in a broad sense is still being eased, and it's reasonable to expect looser fiscal policy next year and also looser monetary policy."

The growth target this year was for a rate of about seven per cent. Even meeting that, China would see its weakest expansion since 1990.

Officials also pledged assistance for rural residents seeking to buy homes in urban areas and encouraged cheaper residential prices, which would help shrink a glut of unsold properties.

People's Bank of China recently surveyed banks on the possibility and potential impact of removing its benchmark deposit and lending rates, people familiar with the matter said.

The survey won't necessarily result in the immediate removal of benchmark rates, according to the people, who asked not to be identified as the matter hasn't been made public yet.