China Seeks to Cushion Blow of Economic Pain as Momentum Slows

HONG KONG—Last year, Chinese policy makers shook up the world’s second-largest economy just as its rebound from the pandemic was starting to wear off, unleashing a flurry of measures to address longer-term economic imbalances—and delivering a short-term hit to business activity.

Now, China’s leaders are hoping that they can put a floor under the economy, which officials said Monday expanded by just 4% in the fourth quarter of last year, the slowest pace since the beginning of the Covid-19 recovery in the second quarter of 2020.

To do so, they are easing some of their earlier tightening policies, for example by increasing mortgage lending to home buyers. The country’s central bank on Monday cut two key interest rates that could pave the way for further cuts to the benchmark lending rate.

But they face rising uncertainty around the spread of the Covid-19 pandemic, as well as a continued property-market slump and what economists say is a looming drop-off in export demand during a politically important year. Chinese leader Xi Jinping is expected to break with recent precedent and seek a third term as leader at a closely watched Communist Party meeting later this year, and the political imperative for growth and stability have raised the likelihood that Chinese policy makers respond to any weakness by easing some of its regulations.