“The main challenge is the insufficient domestic demand, operational difficulties of some companies, high risks in key sectors, and complicated and severe external environment,” the official Xinhua reported, citing a statement by the Communist Party’s prime decision-making body.

The Politburo, which convened its July economic-analysis conference earlier than in previous years, described China’s post-Covid economic recovery as a “wave-shaped development, and advancement with setbacks” – rising and falling, with progress on the horizon.

Key tasks for the second half of this year are expanding domestic demand, improving confidence and preventing risks, it said.

The move to shore up the property sector – which used to be a major engine for economic growth but has lately been a source of financial risk and social instability – is part of the Chinese leadership’s broader efforts to invigorate confidence, as getting people to spend and invest is crucial for the economic growth.

And sequential growth was only 0.8 per cent in the second quarter, down from 2.2 per cent in the first quarter. This pushed several Wall Street banks to cut their full-year China-growth estimates, with most now slightly above the government’s target of around 5 per cent.

“[We should] adjust and optimise the real estate policy in a timely manner,” the 24-member Politburo, which is headed by President Xi Jinping, said after its conference.

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Any adjustments to China’s property policy are closely watched by the market. The sector used to account for more than a quarter of the national economic growth.

Beijing tightened its controls over the property market since 2017, with numerous restrictive policies introduced at central and local levels in regard to purchases, sales, taxes and bank credit.

The Politburo acknowledged that the home market has already undergone significant changes in recent years.

“[We should] make good use of the policy toolbox according to each city’s actual condition, so that we can better meet the rigid and improved housing needs of residents, and promote the stable and healthy development of the real estate market,” it added.

Zhang Zhiwei, president and chief economist at Pinpoint Asset Management, said: “The government acknowledged the economic difficulties but argued that the downturn is temporary.”

Pointing to the government’s call for “timely adjustments” to the property sector policies, Zhang called it “an interesting signal as the property-sector downturn is arguably the key challenge the economy faces now”.

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Boom, bust and borrow: Has China’s housing market tanked?

Boom, bust and borrow: Has China’s housing market tanked?

“It seems the government has recognised the importance that policy change in this sector plays in stabilising the economy,” Zhang said.

The Politburo also explicitly mentioned “invigorating the capital market” to lift investor confidence, and said it will put employment at the forefront of policymaking.

Unemployment among people aged 16-24 reached a record high of 21.3 per cent in June, government data showed.

“They have recognised the economic downturn pressure and identified the crux of this problem – the real estate sector – and they have also proposed some solutions to make adjustments to the current property policies. I think this is a very important shift,” said Lu Ting, chief China economist at Nomura.

Ding Shuang, chief Greater China economist at Standard Chartered Bank, said more property policies could also be introduced, moving forward.

“This may lead to a smooth landing of the real estate sector, rather than a big rebound, and a smooth landing is already a good result,” Ding said.

The Politburo also vowed to increase residential income, hoping to expand consumption of automobiles, electronics, sports equipment and tourism, while saying it will support the private sector and work on a package of solutions to address local government debt risks.

“A lot of the current situations were not expected by the market, nor by policymakers at the beginning of the year,” Ding said. “So, they have adjusted their measures according to the evolution of the situation.

“It also mentioned supporting private enterprises and restoring confidence, but these are long-term variables that take time to bear fruit. So, introducing macro policies to support consumption and property should be the major means to stabilise growth in the short term.”