China redoubles first-aid for its economy with support for banks and workers

China is redoubling its first-aid for its economy, targeting banks, workers and poor families as the ruling Communist Party prepares to mark the 75th anniversary of the founding of the People’s Republic.

Unconfirmed reports Thursday by the South China Morning Post and Bloomberg said the government plans to spend about 1 trillion yuan ($142 billion) on recapitalizing six big state-owned banks. The reports citing unnamed people familiar with the situation follow this week’s statement by Li Yunze, head of the National Financial Regulatory Commission, that regulators would increase capital at six large banks.

Defaults by real estate developers following a crackdown several years ago on excessive borrowing for property projects have weighed on the banking sector, prompting the latest bailout.

Banks’ interest margins and profits have shrunk, so “it is necessary to coordinate various channels such as internal and external channels to replenish capital,” Li told reporters in Beijing.

President Xi Jinping and other top leaders held a quarterly meeting on the economy on Thursday, state media said, and acknowledged “some new situation and problems” had emerged. They promised to focus on support for new college graduates, migrant workers, the unemployed, elderly and disabled.

The capital increase for the banks and promises of other measures were a second flurry this week of stimulus for the world’s second-largest economy as it struggles to regain momentum after the COVID-19 pandemic. For a second time this week, financial markets rejoiced.

Hong Kong’s Hang Seng jumped 4.2% and the Shanghai Composite index surged 3.6%. The smaller market, in Shenzhen, was up 4.2%. Markets elsewhere in Asia and in Europe also logged strong gains.

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