China’s leader warns of economic challenges amidst stimulus rally

Business Insider highlights in the wake of China's unexpected stimulus package, President Xi Jinping delivered a cautious message at the Great Hall of the People, emphasising the need for preparedness amid ongoing economic challenges.

China's unexpected stimulus led to a significant rally in its stock market last week, but even President Xi Jinping isn't ready to celebrate. In his first comments on the country's situation since the stimulus announcement, Xi cautioned about "violent storms" ahead and urged China to brace for challenges while emphasising its determination to succeed. "The road ahead will not be easy," he stated during a speech in Beijing. "We will undoubtedly face difficulties and obstacles, and we may confront major challenges, including strong winds, high waves, or even violent storms."

Speaking on the 75th anniversary of the People's Republic of China, Xi reiterated his goals for modernizing the nation and pursuing the integration of Taiwan under Beijing's authority. 

However, he did not mention the extensive stimulus measures announced by his government, which included the issuance of $284 billion in sovereign bonds and reductions in mortgage and short-term interest rates. While these initiatives have sparked a wave of optimism for China's struggling economy, skeptics argue that the policy changes are unlikely to address the myriad issues driving the economic downturn. Xi's remarks at the Great Hall of the People reflected this sense of caution, even as his administration made efforts on Monday to present China with grandeur and pride. A grand orchestral choir sang praises of the nation while images of its industries and landscapes flashed on a massive screen before rows of officials. 

The Chinese leader spoke of a "new era" for China with a "bright and brilliant future," but concluded his speech with a traditional poem, indicating that the nation was only halfway to achieving its goals. "We must prepare for danger and be ready for rainy days," Xi stated. Beijing's stimulus package was announced as the government urgently sought to revive the declining sentiment in China's economy.

The country has faced three years of stringent lockdowns during the COVID-19 pandemic, which devastated businesses and led consumers to tighten their spending. This was compounded by significant challenges in China's already struggling property market. Barclays analysts estimated earlier this month that households in China lost a total of $18 trillion in wealth, averaging about $60,000 per three-person household, which is nearly four times the median annual wage of a typical city worker.

By Naila Huseynova