Tag Archives: Central Economic Work Conference

It Is Stable As She Goes For China’s Economy

China’s President Xi Jinping addresses the annual Central Economic Work Conference held in Beijing from December 10 to 12, 2019. Photo credit: New China News Agency.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.


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Short-Term Stimulus Trumps Long-Term Risk

THERE IS MUCH to digest in the official reports of the annual Central Economic Work Conference just concluded in Beijing.

In short, every available policy tool will be thrown at stabilising slowing growth in the short-term while attempting to keep a clear eye on the long term goal of rebalancing and deleveraging the economy and establishing China’s greater role in global economic governance, the unstated part being that the successful execution of the long-term plan is what will ensure the Party’s continued monopoly on power.

For now, keeping the economic ship stable in turbulent waters in 2019 will demand bigger tax cuts, no tightening of monetary policy and easing as needed, particularly to keep liquidity flowing to small and medium-sized enterprises in the private sector, and a significant expansion of special-purpose local government bond issuance to pay for the old stimulus standby, more infrastructure investment.

This all adds up, if not to a full-blown stimulus package then at least a considerable expansion of this year’s targeted measures.

The downside is that it will slow the long-term structural reforms needed to move the economy up the development ladder and to defuse the country’s underlying debt bomb. The trade tensions with the United States are lengthening the fuse, and that may do more damage to the economy than tariffs themselves.

Deleveraging the economy while simultaneously stimulating it is a difficult balancing act, and the more so in a global economic environment that is more unpredictable and unfavourable to Beijing that any recent leadership has experienced.

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Steady As She Goes For China’s Economy In 2013

China’s annual two-day closed door economic policy-setting conference has concluded with a cautious weather eye again being cast to the squalls of the global economy next year. Policy will be kept as is, not unexpectedly, but with room for maneuver in both fiscal and monetary policy reserved should the global economy deteriorate.

Rising protectionism, inflation and asset bubbles are listed as the main risks along with the longer running lack of demand in China’s export markets in the rich countries. Beijing will target 7.5% GDP growth for 2013, the same as this year. Monetary policy will remain modestly expansive, with a hand being kept on the bank lending and public spending taps ready to open or close them a turn as necessary. Property controls will remain and the yuan held steady.

The conference seems to have said all the right things about economic reform. The country will push forward with the next stage of economic reforms “with greater political courage and wisdom,” state media reported. That, though, is more difficult to deliver than economic targets.

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China’s Cautious Creep For Growth

China will keep its economic policies steady next year in the face of growing uncertainty over the prospects of the world economy and its own leadership transition. At the same time, it is signaling that it stands ready to stimulate the economy through increased social spending and tax changes to promote domestic consumption should the worst prognostications of an “extremely grim and complicated” outlook for the global economy, and particularly its developed-economy export markets, come to pass.

After the conclusion of the three-day annual central economic work conference, which brings together the country’s top central and provincial economic planners, the heads of its biggest state companies, senior PLA officers and top leaders (both the president and prime minister attend), state media reported that:

China will ensure that macroeconomic regulation policies and overall consumer prices will remain basically stable and will guarantee the steady growth of the economy and maintain social stability.

Post-meeting statements from the annual work meeting rarely add little that isn’t in the current five-year plan, and are most profitably read for tone. This year’s does not reflect the sharp debate over where the balance between macroeconomic policies to promote growth and those to fight inflation should fall, with the extent to which measures to cool the property market should continue acting as its proxy.

With inflation slowing, if still elevated, and growth next year possibly falling below 9% for the first time in a decade the pendulum is swinging towards more expansionary policy, but ever so slowly. The decision to continue next year the measures imposed to cool the property market, “to ensure housing prices return to a reasonable level”, even though real estate accounts for 15% of GDP, indicates that the go-for-growthers didn’t have the argument all their own way. The debt incurred from the infrastructure splurge from the previous round of stimulus spending casts a long, grim shadow of its own–as is the specter, always frightening to the Party’s leadership, of social unrest such as that playing out in Wukan.

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China’s Economy in 2010: Steady And Uneasily As She Goes

This year’s Economic Work Conference, the annual top-level economic policy meeting, was as much about politics as economics, though that can be said most years. Creating socially stabilizing jobs was the focus, not that China is alone in that, and particularly rural jobs to absorb the migrant labor left jobless by the slump in the export manufacturing sector.

Few concrete policy details have emerged from the closed door meeting yet; they rarely do immediately but there was a broad commitment to keep the stimulus going in what will be the final year of the current five-year plan and last full year of the Hu-Wen leadership. Monetary policy will be kept loose, despite the central bank having being gently reining that in for some months. Fiscal policy will be “proactive”, which presumably means an extension of tax breaks that have been so beneficial to industries such as car making and to a lesser extent export manufacturers. In particular, more public money will be pumped into the countryside to raise demand there and thus the need for local jobs.

But as a sign of the fragility of the reaccelerating of growth seen this year, industries suffering from overcapacity will continue to see excess production capacity stripped out, under the guise of modernization and consolidation, much as we have been seeing with energy intensive and polluting industries over the past several years. New industrial investment will be kept “moderate”, according to Xinhua‘s post-meeting report.

If anything, industrial overcapacity is getting worse, especially in steel and cement making. That is not what should be being seen if recovery was on a solidly sustainable footing. And it goes to the heart of the problem China faces in growing its way out of a slowdown through investment spending, the central planner’s go-to policy response.

It is unsustainable and becomes an increasingly inefficient way to grow. Other countries might end up building bridges to nowhere, but in China state spending flows through state-controlled banks to state-owned enterprises and thus potentially deflationary industrial overcapacity.

Switching spending from investment to consumption, as we have noted before, is no easy task. Joblessness is one of the political costs of not being able to do so. Next year will see more expensive tending to the symptons and not enough curing of the underlying disease. Investors haven’t priced that into equities yet, but they will, possibly the hard way.


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China’s Annual Economic Policy Meeting Concludes With No Surprises

The annual three-day high-level economic policy meeting, the Central Economic Work Conference, is over. No word of any policy shifts, at least on the basis of Xinhua‘s reporting.

Economic policy in 2009 will be aimed at maintaining stable growth in the face of the global slowdown through stimulating domestic demand and economic restructuring. Job provision and rural well-being will be the focus of the stimulus package to ensure social stability. Fiscal policy will be active, suggesting there may be something to reports of income and business tax cuts to come. Monetary policy will be “moderately easy”.

All that could have been written ahead of he meeting. The only thing really to catch this Bystander’s eye were comments suggesting that the yuan’s little burst of devaluation might be done but that the currency wouldn’t be allowed to appreciate much, if at all.

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Economic Planners Look For Growth In 2009

The annual economic conference kicks off today, three days of policy planning at the highest level for 2009, Xinhua reports.

Growth is the top priority, with 8% the baseline. That is the level commonly assumed to be needed to create the jobs necessary to sop up the new entrants to the workforce. Last week, Zhou Tianyong, a researcher at the Central Party School, says that the official unemployment  figure of 4% is artificially low. He contends that the real rate of urban joblessness came in at 12 percent this year and should rise to 14 percent.

The Central Economic Work Conference is also likely to endorse income tax cuts, China Daily reports, raising the threshold of personal income tax from 2,000 yuan a month to 3,000 yuan a month. Along with parallel cuts in business taxes, this would be intended to increase domestic consumption and investment to offset the slowdown in exports.

Zhao Tao, deputy secretary-general of the Policy Research Office of the CPC Central Committee, wrote in commentary published on Saturday in Outlook Weekly, that the goal was to raise domestic demand’s share of GDP to 75%-80% by 2020. It is now 40%. If it were to pull off the transformation, it would be at the same level as the consumption-happy U.S.

The meeting may also provide more detail on the four trillion yuan stimulus package announced last month, or at least on how to finance it.

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