BEIJING -- China's top decision-making body on Tuesday vowed to employ active fiscal spending and balanced monetary policy in the second half to beat back the downward pressure facing the economy as the trade war with the U.S. looks likely to drag on.
The Communist Party's Politburo, which meets every three months to fine-tune macroeconomic policy, acknowledged that the economy "faces new risks and increasing downward pressure," according to a statement released after the meeting.
The July meeting is closely watched because decisions made there set economic management for the second half. By recognizing economic risks amid the yearlong trade war, the top body showcased its commitment to keep the economy humming through a mixture of fiscal and monetary policy measures.
The Chinese economy "maintained the steadily advancing momentum in the first half," the Politburo said. But its acknowledgement of the risks was in stark contrast to the more upbeat assessment it gave in April, when it said the economy made a good start.
The leaders emphasized the importance of economic management in the second half, signaling that it will not let the economy cool as the nation celebrates modern China's 70th anniversary this October.
Reflecting this commitment, the Politburo revived the talk of the "six stabilities." At last July's meeting, the decision-making body for the first time called for stability in six areas: employment, finance, foreign trade, foreign investment, domestic investment and economic expectations. This expression was omitted at this April's meeting because growth in the January-March quarter was stronger than expected.
The leaders pledged to "effectively handle trade frictions," a slightly more aggressive stance than the statement issued by the Central Economic Work Conference last December, promising to "properly deal with trade frictions."
"Fiscal policy should be strengthened and policies of cutting taxes and fees should be further implemented," the document said. This signaled that Beijing is thoroughly committed to the tax and fee reductions totaling 2 trillion yuan ($290 billion) that make up the pillars of China's economic stimulus.
China will keep its "monetary policy neither too tight nor too loose while maintaining market liquidity at a reasonable level," the Politburo said. But it did not touch on debt reduction given that excessive debt cuts in the past made financing difficult for private-sector companies as well as small and midsize enterprises.
Yet the Beijing leaders made it clear that they will not turn to real estate as a means of propping up the economy. "China will adhere to the principle of housing is for living in, not for speculation, implement the long-term mechanism to maintain the sound development of the real estate market, and not use real estate as a short-term means of stimulating the economy," the statement said.
China has traditionally used the real estate market as a policy tool. During economic slumps, it has encouraged speculation by making mortgages easier to take out and offering home purchase subsidies. In times of economic overheating, it has tightened rules on real estate transactions.
But with household debt ballooning and debt at property developers rising sharply, the Politburo is apparently trying to deter speculation that is still festering in some quarters of the economy.