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China Politburo Said Stable Growth Top Priority, More Infrastructure Spending Pledged

China’s top policy makers have agreed to take a greater focus on stabilising the economic growth amid increased challenges at home and escalating trade tensions with the United States and vows more infrastructure spendings to boost the economy.

A statement released on Tuesday after a meeting of China’s Politburo chaired by Chinese President Xi Jinping said China will allow fiscal policy to play a bigger role in expanding domestic demand and restructuring the economy and will step up infrastructure investment in targeted areas, support innovations and lower corporate costs.

“We must do a good job in stabilizing employment, finance, foreign trade and investment, and expectations,” while China’s economy faces some new problems and new challenges, including “significant changes in the external environment,” according to the statement.

Policymakers pledged to fulfil of the annual economic growth target, while maintaining a proactive fiscal policy and a prudent monetary policy to ensure ample liquidly.

However, the meeting reiterated that China will continue with the campaign to reduce leverage at a measured pace while improving economic policies to make them more forward-looking, flexible and effective in the second half of 2018.

It also warned that it will change the stance the real estate sector and will continue to firmly curb rising home prices, stressing tailored property policies in different cities.

The expression of “improve the weak links in infrastructure” is notable, said the China CITIC Securities in its latest research note.

“Infrastructure spending is expected to increase in three fields, including infrastructure construction in underdeveloped regions, rural areas and in the country’s planned economic zones such as Xiongan News Area, Hainan Special Economic Zone and Guangdong-Hong Kong-Macao Bay area,” according to the note.”

Shares in Chinese infrastructure firms have since risen, bucking broad weakness in the stock market. An index tracking major infrastructure firms on the mainland .CSI300II has gained about 0.7 percent since Friday.

“The meeting also said the policy should maintain composure, which suggest broad monetary easing in unlikely,” according to the note.

The message from the Politburo meeting is consistent with the easing tone in an earlier meeting of the State Council amid more signs indicating that the world’s second largest economy is losing momentum.

China’s official Purchasing Managers’ Index (PMI) released by the National Bureau of Statistics (NBS) on Tuesday fell to 51.2 in July from 51.5 in June, the lowest index reading since February. The Caixin manufacturing PMI, primarily tracking medium- and small-sized companies, hit 8-month low of 50.8 in July from 51 in the previous month.

Another survey released by the NBS on Tuesday showed growth in the service sector moderating in July, with the official non-manufacturing PMI dipping to 54.0 from 55.0 the previous month.

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