The Chinese government is returning to growth mode as a rapid deterioration in economic conditions prompts alarmed officials to focus more on development, after years of criticizing cadres for prioritizing growth at the expense of social stability and fiscal prudence.
He Lifeng, who was added to the Politburo, the Communist Party’s top policy-making body, at a party meeting in October, is preparing a growth plan of over 5% for next year, according to sources familiar with the matter.
At an internal meeting shortly after the Communist Party congress as chairman of the National Development and Reform Commission, China’s top economic planning body, Mr. He called for policies to ease Covid controls, revitalize the real estate sector, and revaccinate. People said there is trust among entrepreneurs.
Some of these Covid and real estate sector measures have since been implemented, leading to the current wave of Covid-19 infections and a slowdown in the recent decline in housing prices.
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Separately, government officials have begun to re-examine policies towards the tech and education sectors in recent weeks – two of the heaviest targets of recent regulatory campaigns – and are poised to wrap up long-running investigations against internet companies. According to people familiar with the matter, such a move would allow the mobile apps of ride-hailing company Didi Global Inc. to be restored to local app stores.
A spokesperson for the Chinese cabinet did not immediately respond to a request for comment from the State Council Information Bureau.
Setting an official target for gross domestic product growth of over 5% next year is a relatively ambitious target, given the myriad uncertainties about China’s exit from zero Covid-19 and the battered sentiment in the housing market. The solid target signals growing concern among senior leaders that a prolonged sharp slowdown could undermine one of the pillars of the Communist Party’s legitimacy.
Some Wall Street economists are already predicting that the world’s second-largest economy will grow 5% or more in 2023, given the comparisons to weak growth this year and optimism about lifting the Covid measures that have held the country back for three years. Standard Chartered Bank forecasts 5.8% growth, while Citibank economists predict GDP to grow by 5.3% in 2023.
Other economists lowered their expectations, worrying about the possibility of a messy exit from zero Covid and worried about the continuing fallout from escalating geopolitical tensions and real estate sector woes.
It is almost certain that China will miss its official GDP target of around 5.5% growth this year by a substantial margin. Most economists expect growth to stay around 3% this year, and on Thursday China released data showing a larger-than-expected slowdown in retail sales, factory production and fixed asset investment, but the year-long slowdown in property prices showed some signs. Relaxation after China announced real estate sector support measures in mid-November.
Senior Chinese leaders are now meeting in Beijing for the annual Central Economic Labor Conference, which helps set economic priorities for the year ahead.
With the internal target of GDP growth of more than 5% next year, Covid and the adjustments to housing policy are intended to send a clear signal to the authorities that the importance of economic development is increasing over ideological priorities such as reining in property developers. ‘ debt levels, reducing inequality and making the economy more resilient to geopolitical shocks – at least for now.
Authorities are also reshaping the Communist Party’s relationship with the private sector, which has been strained by leader Xi Jinping’s campaign to promote “common prosperity,” a political slogan aimed at addressing concerns about growing inequality.
To do this, the authorities present a friendlier face to the business world. Last week, Alibaba Group Holding Ltd. and government officials in the wealthy coastal province of Zhejiang, home to other giant companies, took a delegation of local businessmen on a six-day tour to stimulate business in France and Germany. Officials from Jiangsu and Sichuan have also made similar overseas trips to seek trade deals.
Officials in Guangdong, Anhui and other major provinces have opened talks with entrepreneurs aimed at boosting their confidence in the country’s future. In the poor southwestern province of Guizhou, Governor Li Bingjun told local business leaders this month that the government is willing to “do everything possible to help companies solve practical problems,” according to local media reports.
Chinese officials last week held their first offline meeting since the pandemic with leaders of major international economic institutions, including the World Bank and the International Monetary Fund, to discuss China’s development and global debt issues.
“The economy is recovering and showing momentum to stabilize,” Chinese Premier Li Keqiang told reporters after meeting with the heads of the World Bank and IMF last week. “China will continue to advance high-level openness and steadily expand institutional opening. We invite more foreign investors to invest and do business in China.”
People say these moves are part of a broader campaign by the new Communist Party leadership to reassure local business and the world that the management of the Chinese economy is on track and that Beijing has the tools to prevent an even sharper slowdown in growth. familiar with the subject.
Chinese leaders are concerned that escalating political tensions between Washington and Beijing, as well as disruptions caused by Covid policies, could lead to a broader divide between China and the world. Foxconn Technology Group founder Terry Gou’s warning to Beijing that tight Covid controls would threaten its central position in global supply chains played an important role in persuading leaders to step up the country’s plans to eliminate zero-Kovid policies, The Wall Street Journal reported. played.
Mr. He was tipped to take charge of the country’s economic and financial systems; This appointment will place him in the prime position to replace Deputy Prime Minister Liu He, Mr. Xi’s top economic adviser and the point man in trade talks with Washington. The Journal reported earlier this year.