Government officials told to
keep their eyes glued on ‘downward pressure’ in a ‘complex situation’
Premier Li Keqiang has called
for 20/20 vision in spotting danger signs to China’s economy in 2020. Speaking
in Beijing to senior government officials from across the country, he
reiterated the threat of “downward pressure” next year and cautioned vigilance.
During the past four
months, Li
has warned of the risks ahead as the world’s second-largest economy
slows and he picked up the theme again last week.
“Next year, our country’s
economy could face greater downward pressure,” Li said as reported by the
influential State Council. “[We] will face a more complex situation, and
governments at every level will have more difficult tasks, and greater
responsibilities.”
Dealing with the fallout and
retaining sustainable growth will be top of the agenda in the 34
provincial-level government departments.
“General office [officials] …
must always remember that their overall goal and guiding philosophy is to serve
the people,” Li said. [You must] push forward the implementation of reform
measures, enhance department coordination, and exert all efforts to build
service-oriented government institutions.”
Overall, this has been a
depressing year for China’s economy which has been buffeted by the trade war
with the United States.
So far, signs of stress have
appeared in consumer spending, factory production, investment and tumbling
exports. The shock
waves have even stifled global growth, a report by the United Nations
highlighted.
Yet a significant part of the
reason behind the downturn has been the decision by President Xi Jinping’s
government to realign the state-backed economic model to high-tech
manufacturing and services. Consumption, not cheap low-value exports, will be
pivotal to Beijing’s blueprint.
Last month, consumer inflation
jumped to a seven-year high as pork prices soared amid an
outbreak of African Swine Fever, which has decimated the country’s hog
herd.
To complete a depressing
picture, GDP growth in the
third quarter dipped to 6%, the slowest rate in nearly three decades.
In the years ahead, it could
be close to 4% or 5%. At least there was slightly better news earlier this
month.
The National Bureau of Statistics
reported in December that industrial production increased by 6.2% in
November compared to the same period in 2018, hitting levels not seen for six
months.
Retail sales
also surged by 8% compared to October’s number of 7.2%. But that data
was probably buoyed by record spending during Alibaba’s annual “Singles’ Day”
buying spree.
“Activity and spending
indicators strengthened across the board, though we think this uptick will
prove short-lived,” Martin Lynge Rasmussen, the China economist at Capital
Economics, said.
“Admittedly, the phase-one
US-China trade deal could boost both export activity and corporate investment
in the near term. But real estate, a key prop to growth in recent quarters, is
primed for moderation as financing to the sector is being squeezed by a
regulatory crackdown,” he
added.
How much impact the phase one
trade agreement will have on the economy is open to debate.
But Beijing is proactively
easing tariffs on a range of goods, including food products, consumer items and
components for manufacturing smart-phones, in a move to boost domestic demand.
“The changes [on more than 850
items will optimize] the trade structure and promote the high-quality
development of the economy,” the
State Council announced in a statement earlier this week, adding that
the new duties would come into effect on January 1.
Still, lingering concerns
persist about future trade relations between Washington and Beijing. What is
believed to be a limited accord will pave the way for a phase two deal, which
will probably take in China’s controversial state-run model.
Finding a solution to that
conundrum will be difficult to achieve.
Da Wei, of the University of
International Relations and a director of the Center for International Strategy
and Security Studies, made it clear what is at stake between the world’s two
largest economies.
“Because we are living in an
interconnected world, a handful of pushbacks by the US will not reverse China’s
peaceful rise. But the development of China-US relations in the past two years
has diminished my optimism,” he said on the
China-US Focus website for academics.
“I am less sure when I see
[the] bashing of Huawei and other Chinese high-tech companies, on scanty
evidence, if any. Most people in China are more realistic than I am. There is
an emerging mainstream view that the US has a crystal clear goal – to keep
China down,” he continued.
“Having heard and seen so much
negative rhetoric and action from the US toward China, it is hard for Chinese
experts on the US to convince Chinese people that this is not a long-term
strategic goal,” he added.
In the meantime, Premier
Li will concentrate the minds of government officials on his 20/20 economic
vision in 2020.
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