It Is Stable As She Goes For China’s Economy

THE NEWLY CONCLUDED annual Central Economic Work Conference, attended by President Xi Jinping (seen above addressing the meeting) and the top economic leadership, lays out no significant change of policy direction for China’s economy and seeks to maintain a steady course to deliver a ‘moderately prosperous society’ by 2020.

Within the umbrella objectives of fighting the ‘three tough battles’ against financial risk, poverty and pollution, and rebalancing the economy for long-term sustainable growth, the critical policy tasks highlighted in the statement issued after the meeting include:

• prioritising stability;
• maintaining a prudent and stable monetary policy stance but being more flexible with fiscal policy, which is likely to mean another income tax cut and other targeted tax support;
• pursuing social policies to meet basic needs with a high priority on providing adequate numbers of jobs;
• deepening supply-side structural reform, which means continuing with market opening and in particular financial market reforms.

Some of the key policy objectives highlighted at last year’s work conference got another airing, including:

• continuing property-market reform, on the principle that ‘housing is for living in, not speculation’;
• continuing upgrading of the industrial sector and especially high-tech manufacturing, but fleshed out this year by reference to faster implementation of coordinated development strategies for regions such Beijing-Tianjin-Hebei, the Yangtze River Delta and the Guangdong-Hong Kong-Macao Greater Bay Area. (With President Xi Jinping visiting Macao next week there could be more detail on this last one, and in particular how he might see Macao as an alternative financial centre to Hong Kong);
• acceleration of the reform of state-owned assets and enterprises;
• better protection of foreign investment and an additional cut to the negative list of sectors off-lenites to foreign investment;
• diversification of export markets.

There is also a hopeful, even wistful line in the statement about lowering overall tariff levels.

The challenge, as it has been for some time, is to continue structural reform and manage the consequent slowdown in GDP against an increasingly challenging external environment, notably a fractious relationship with the United States.

The statement encapsulated it thus:

The country faces rising downward economic pressure amid intertwined structural, institutional and cyclical problems. The global economy continues to slow down, the world is still undergoing in-depth adjustments due to the global financial crisis, profound changes are accelerating, and sources of turbulence have substantially increased. We need to be well prepared with contingency plans.

The prominence and specificity given to stability and ensuring citizens’ well being underlines the political risks that the leadership sees in a global economy that is exerting greater downward pressure on domestic growth than it would like. The margin for error is diminishing.

The official economic targets for 2020 will not be made public until next March’s government work report delivered at the back-to-back meetings of the Chinese People’s Political Consultative Conference (CPPCC) and the National People’s Congress (NPC).

Next year, remember, is the date for completing the goal of doubling total and per capita GDP between 2010 and 2020. Nothing will be allowed to destabilise achieving it.