Josef Mahoney on 3rd Plenum
Joins Tian Wei and Iain Berg to discuss first major economic work meeting following the recent 3rd Plenum, chaired by President Xi
Prof. Mahoney joined #cgtn World Insight with Tian Wei and lain Begg at #lse and LiuBaocheng with the University of International Business and Economics in #beijing to discuss first major economic work meeting following the recent 3rd Plenum, chaired by President Xi, with an eye on adjustments for the second half of 2024.
What's good, what isn't?
Exports surged in the first half, beating expectations, driven in part by a weak yuan and desires elsewhere to fight inflation with lower prices. Top exports included phones,computers, integrated circuits and EVs, all consistent with policies tomove up the value chain.
However, export-led growth is vulnerable to international headwinds including anxiety related to trade imbalances. Domestic consumption remains low. China's property market woes is the biggest drag, along with high levels of local government debt. The need to spark a reboundin inbound #fdi is also a key concern.
How to stimulate demand? The 3rd Plenum emphasised supply-side reforms, but we've already some adjustments to key rates. The government is leery of throwing money at the economy and piling up debt without sustainable returns. The recent meeting notes it's"necessary to increase residents' income through multiple channels enhance the capability and willingness of the medium-to-low income groups for consumption, make service consumption a major driver in the expansion and upgrading of consumption, and support consumption remain vague. All said and done, the key is managing the property crisis over the next year or so, and this will encourage consumer confidence.
Will the 5% target be met or exceeded? The target is reasonable but might require more stimulus. Exceeding it could result from excessive stimulus (unhealthy), or follow disruptions overseas that might benefit China in the short term but lead to the sort of seesawing, cyclical effects of the last several years.
What should #china do to meet the needs of industries and businesses amid an economic transition? Double down on infrastructure?
Doubling down on infrastructure is an unhealthy crutch. Howeverefforts to foster better regional integration and smart competition, aspioneered in the #gba especially, is now spreading to other areas,including the Yangtze Delta and #shanghai.
The meeting called for improving bankruptcy procedures so failing firms exit the market and removing red tape so new firms can enter more easily. lt also called for "accelerating the issuance and usage of special bonds, and promoting large-scale equipment upgrades and trade-ins or bulk durable consumer goods."
Also paramount: Finding the right policy mix to create complementary relationships between the private and public sector, as called for in the 3rd Plenum, is also paramount.
Upgrades and private sector key relate to tech innovation...
