China is looking for consumers to grow the economy faster than it did in Covid-damaged 2022, but remains reluctant to set an actual target as opposed to rough estimates and generalities.
Premier Li Keqiang, China’s outgoing top economic official, on Sunday placed this year’s growth target at “around 5%”. less than the ‘about 5.5%’ forecast a year ago before President Xi’s tough zero-Covid control policies strangled the economy to the brink of slowdown.
There will be an early test of the strength of the rebound in the Chinese economy will come with tomorrow’s trade data for January and February. Forecasts are for another big fall in exports and imports to go with the slide seen in December, but perhaps not as severe.
It many respects the latest forecast is a wish and a hope – many western analysts will proclaim that China is going to boom (again) and yet the government is looking for growth slightly slow than a year ago.
The International Monetary Fund lifted its China GDP growth estimate to 5.2% this year from 4.4% in the IMF’s October World Economic Outlook.
Li’s report on Sunday called for boosting consumer spending by increasing household incomes but gave no details in the unusually brief, 53-minute speech which was less than half the length of work reports in some previous years.
What is odd about this speech and target is the way trade (traditionally China’s biggest driver of economic growth) has been downplayed and domestic economic activity has been promoted – because there’s a lot of untapped bank deposits held by Chinese consumers that could be unleashed like they have been in the West in the past year.
This seems to be in line with Xi’s continuing demand for greater self-reliance in the face of a nasty west.
The Premier called for “building up our country’s strength and self-reliance in science and technology,” an area in which Beijing’s state-led efforts to create competitors in electric cars, clean energy, telecoms and other fields have upset western countries led by the US, Europe and Australia.
No mention of the stricken property sector, though official state media at the weekend was full of stories of surging apartment and property sales – without pointing out the rises came from a very depressed base.
So damaging was Xi’s policies (now very much ignored in official media reports) that GDP growth slowed to just 3% in 2022, the second slowest in more than 40 years.
“We should give priority to the recovery and expansion of consumption,” Li said in a speech on government plans before the ceremonial National People’s Congress (NPC) in Beijing’s Great Hall of the People.
The full meeting of the 2,977 members of the NPC is China’s highest-profile event in 2023 but it is just a rubber stamp and will endorse last year’s decisions made by the ruling Communist Party and subsequent official initiatives.
The NPC has tightened President Xi Jinping’s control over business and society and ignore the damaging impact of its Covid control policies last year that saw riots and protests in October and November that rattled Xo and his government and forced the re-opening of the economy in December and January.
The NPC is due to endorse the appointment of a government of Xi loyalists including a new premier after the president expanded his status as China’s most powerful figure in decades by awarding himself a third five-year term as party general secretary in October. That saw Li, an advocate of free enterprise forced out as the No. 2 party leader.
It won’t be very smooth sailing for Xi’s and his new leadership team of acolytes. They will face challenges ranging from weak global demand for exports and a continuing feud with the US over technology and security to curbs on access to Western processor chips due to security fears.
At the same time China’s attempts to portray itself as an honest broker so far as Russia’s Ukraine invasion has been called out by the US and other countries who have warned Xi against supplying military equipment to Putin’s forces in Ukraine.
Separately, the Ministry of Finance revealed a 7.2% rise in spending for the People’s Liberation Army, to 1.55 trillion yuan ($US224 billion), the 29th straight annual increase.
China’s military spending is the world’s second highest after the United States and the news will see the usual spate of media reports and warning.
In January President Xi focused on encouraging hesitant consumers and entrepreneurs to spend and invest as a priority at the ruling party’s economic planning meeting in December.
Getting business to lift spending will be tough after Xi and his allies have put businesses people in jail, made some ‘disappear, stripping them of their business and fortunes, as Xi and his allies have done to Jack Ma, founder of Alibaba and other companies.
Beijing needs to “fully release consumption potential,” Xi said, according to a text released last month but how he proposes to do that has not been explained.
Getting consumers to lift spending will be a battle after the same group protested over dud mortgages, the tight lockdowns and wage theft and forced Xi to reverse course on the controls and the economy.
Xi’s government has tightened control over e-commerce and other tech companies with anti-monopoly and data security crackdowns that wiped tens billions of dollars off their stock market value.
Xi wants them to pay for social welfare and official initiatives to develop processor chips and other technology, rather than the government – which would control the spending and its direction.
Li’s report Sunday reinforced the importance of state industry. It promised to support entrepreneurs who generate jobs and wealth but also said the government will “enhance the core competitiveness” of state-owned companies that dominate industries from banking and energy to telecoms and steel.
The latter has been an ongoing promise now for years with no change in the level of state control at all – if anything, State Owned Enterprises have taken a larger share of the economy, just as economic growth has slowed noticeably.
