China's leaders pledge incremental measures to support economy

China's top leaders pledged on Thursday to accelerate fiscal spending and adopt "incremental policies" to boost economic growth in the second half of the year, following a worse-than-expected slowdown in the second quarter. The Politburo, the ruling Communist Party's top decision-making body, acknowledged "difficulties and challenges facing the economy" at its meeting, according to the official Xinhua news agency. The second-quarter economic growth rate of 4.3% was the slowest in more than three years, missing the lower end of the full-year target of 4.5% to 5.0%.

The Politburo also vowed to step up efforts to boost domestic demand, though specific measures were not detailed. Beijing's willingness to implement broad stimulus is constrained by efforts to curb industrial overcapacity, which is feeding underlying deflationary pressures, and by the need to manage indebted local governments' spending. The body signaled it would "continue to comprehensively rectify 'involution' competition," a term describing price wars among manufacturers that erode profits.

Many economists believe that accelerating already-budgeted national infrastructure projects could help stabilize growth in the coming months without significantly widening the fiscal deficit. The meeting concluded that China must "accelerate the pace of fiscal expenditure."