At a June 16 meeting of China's Politburo, Premier Li Qiang presented to the State Council of the Communist Party of China (CCP) a plan to boost "efficiency" within the sluggish economy.
“To cope with the changing economic landscape, stronger policies are required. Policies that meet the necessary conditions must be announced promptly and implemented without delay,” a statement from the Council stressed.
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| China's economic data reported better-than-expected performance in the first quarter of 2023 but economic recovery failed to sustain. (Source: Reuters) |
Recovery not as expected
However, what those measures specifically would be, or when they would be implemented, was not detailed.
But it was a clear admission that the world’s second-largest economy was stalling. President Xi Jinping declared victory over Covid-19 late last year and abruptly ended a three-year lockdown.
China's economic data reported better-than-expected performance in the first quarter of 2023, but the economic recovery is not sustainable. April-June 2023 recorded zero growth. China's youth unemployment rate spiked to 20%. Household and local debt is rising. The real estate sector remains weak, down 22%.
Last week, the People's Bank of China (PBoC) took steps to "de-escalate" the stagnant economy. The PBoC cut several key interest rates. Analysts expect more moves in the coming weeks.
The extent of Beijing’s economic concerns can be seen in the messaging from Chinese officials. In 2023, China moved to apply “national security” concerns to some key economic reports. Beijing also considers multinational accounting firms to be “national security” risks.
China’s share of U.S. exports will fall to 50.7% in 2022, from more than 70% in 2013. That reflects the trend of current trade and investment deals, analysts say. Even China’s millionaires appear to be looking for a way out. China is expected to see a loss of 13,500 such individuals in 2023, up from 10,800 in 2022.
An extraordinary turnaround is needed for China’s economy to meet its full-year growth target of around 5% for 2023, said National Development and Reform Commission spokeswoman Meng Wei. “In the process of economic recovery, temporary fluctuations in certain sectors are normal,” she said.
But China's National Bureau of Statistics warned of "increasing pressures" on the domestic economy. It said industrial production, property investment, retail sales and trade all missed forecasts and warned of deflationary pressures.
However, according to China's Global Times , the country has entered a new stage of development and the transition from high-speed to high-quality growth will improve the structure and quality of the economy.
Western media analysis of the Chinese economy is often unreliable because it always exaggerates the negative aspects and exaggerates the "China collapse" theory. If investors believe these assessments, they will miss a great opportunity with China.
The State Council said that the economic problems are caused by the increasingly complex external environment and the slowdown in global trade and investment. China's overall economy is recovering and improving, with market demand recovering, output and supply increasing, prices and employment stable, and steady progress in high-quality development.
Officials seem to think that plans are still going according to plan. President Xi Jinping is preparing to usher his people into a “new era” of low economic growth that favors quality over quantity.
Challenges remain
More than 70% of China's wealth is invested in real estate. But the overheated market has led to developers selling properties before they are even built, leaving future homeowners saddled with debt.
Local governments, with their main source of income exhausted, have turned to the central government and asked for funding – and that includes raising public school and university tuition fees by 54%.
China’s international trade – imports and exports – has yet to recover since the country ended its lockdown. Global governments and multinational corporations are looking elsewhere for opportunities.
According to the Atlantic Council, foreign investors have dumped a large amount of Chinese assets in the past two years. "They (investors) have sold a large amount of securities in the past two years due to Chinese policies and increasing US-China tensions," said Jeremy Mark, an expert at the Atlantic Council.
Investing in China will become riskier and de-risking will become more common.
However, according to the Global Times , while Western media claim that China's economic momentum is weakening, more and more multinational CEOs and other senior executives have recently visited China, expressing confidence and optimism about the development prospects of the world's leading economy.
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