At the highest level of governance, China is actively advocating for a strategy to revitalize the nation’s sluggish economy and counteract the effects of a long-standing housing bubble.
There is a new slogan for the initiative, championed primarily by Xi Jinping, the nation’s top figure, as “innovative, superior productive forces.”
Yet, it incorporates elements that echo familiar themes from China’s economic strategies: The aim is to stimulate advancement and expansion through substantial investments in manufacturing, particularly in advanced technology and eco-friendly energy, along with significant allocations for research and development. However, there are limited specific details on how the government plans to encourage Chinese households to reverse the prolonged decline in spending.
Premier Li Qiang, the country’s second-ranking official, outlined the plan on Sunday in an address to business leaders from various countries gathered in Beijing for the annual China Development Forum. “We will speed up the progression of innovative, superior productive forces,” he stated at the forum’s commencement.
Established in 2000, the China Development Forum serves to elucidate the economic agenda set forth each year by the premier on March 5.
In previous editions, the forum included a lengthy, private deliberation with business leaders wherein the premier fielded numerous inquiries. However, this year, the premier’s dialogue, typically held on the event’s final day, was abruptly canceled without explanation, leading some executives to depart on Sunday evening to avoid Monday’s session.
The China Development Forum also historically featured an open discussion of economic policies by Chinese corporate figures and ministers the day before the official opening, yet this was omitted in the current year.
Evan Greenberg, chairman and CEO of the Chubb Group, a prominent U.S. insurer, co-hosted the conference kick-off on Sunday. Notable attendees included Tim Cook, CEO of Apple, who has been working to reinvigorate iPhone sales in China, and Mike Henry, CEO of BHP, the Australian mining behemoth.
During his speech, Mr. Li advocated for enhanced manufacturing, expanded services, and increased consumption. While calling for Chinese households to upgrade aging cars and domestic appliances, he did not specify whether government assistance would be provided for these purchases.
Consumer expenditure in China has been lackluster as housing prices have dropped by twenty percent over the last two years, according to semi-official data. Housing transactions have also sharply declined, with homeowners reporting the need to slash prices by up to half to attract buyers.
Real estate constitutes a significant portion of household assets, comprising 60-80 percent, a proportion higher than many other nations. The substantial downturn in the housing market has left numerous families feeling financially strained and struggling to meet mortgage obligations.
Mr. Li briefly mentioned real estate and the associated challenge of local government debt as part of a risk assessment. He remarked, “Risks and challenges have not overwhelmed us over the past four decades.”
Mr. Li outlined the government’s intent to grant legal residency to the over 250 million individuals from farming backgrounds who have permanently relocated to urban areas but have not qualified for local residency status. Cities offer significantly greater benefits in healthcare, retirement, and education compared to rural regions.
However, Mr. Li did not elaborate on how financially strained city administrations could sustainably provide these extensive benefits.
The focus on “innovative, superior productive forces” partly aims to allay concerns within China and abroad about U.S.-led restrictions on high-tech exports to China potentially impeding its growth. Preliminary briefings before the forum emphasized that manufacturing plays a substantial role in the nation’s economy — more than double the share in the United States.
“In China, the trend is consistently upward and far exceeds other nations,” noted Shi Dan, an economics director at the Chinese Academy of Social Sciences, a government institute, during a briefing.
China’s trading partners are apprehensive that a surge in manufacturing may result in increased Chinese exports. The European Union is gearing up to impose tariffs on electric vehicles from China. The European Union Chamber of Commerce issued a report cautioning that this policy shift could lead to deindustrialization in Europe, as European enterprises might struggle to compete with state-supported Chinese firms.
Businesses reliant on selling goods to China for construction purposes have been closely monitoring the renewed emphasis on high-tech manufacturing.
Andrew Forrest, executive chairman of Fortescue Metals Group, a major Australian iron ore miner, projected that China will continue substantial investments in new infrastructure such as roads and railways.
“The focus on infrastructure will not diminish; there might just be a greater emphasis on manufacturing,” he expressed in an interview.
While Chinese officials have pledged measures to stabilize the housing market, specifics on implementation remain scarce.
Li Xuesong, another economics director at the Chinese Academy of Social Sciences, mentioned during a briefing that local administrations could allocate more public housing for civil servants. However, the challenge of how financially strained local governments, burdened with heavy debts, could fund these residences was left unaddressed.
Following a recent downturn in sales of public land to real estate developers, numerous local administrations have had to reduce municipal workers’ salaries and sought financial support from Beijing to meet interest payments. The Chinese finance ministry initiated a program to assist some cities with debt relief, contingent on these cities scaling back costly infrastructure projects.
Facilitating increased consumer spending is deemed critical, highlighted by Wang Dan, chief China economist at Hang Seng Bank’s Shanghai office, during an online conference hosted by the International Finance Forum, an affiliate of China’s central bank. “Direct cash transfers remain the most effective approach,” she asserted.
Presently, the focus in China is on bolstering the supply and quality of goods without immediate concern for demand.
“The growth trend in investments in new productive forces is positive,” remarked Liu Sushe, deputy head of the National Development and Reform Commission.
Source: www.nytimes.com