Addressing Economic Challenges: Some Insights from China's Central Economic Work Conference
In a recent two-day meeting, China's leadership outlined a strategic roadmap to address pressing economic challenges and stimulate domestic growth for 2024. The overarching goal of this is to achieve stability through measured economic progress, acknowledging existing difficulties such as insufficient demand, overcapacity in certain industries, weak social expectations, and latent risks.
The state-owned China Central Television broadcasted the leaders’ commitment to overcoming these challenges and ensuring a comprehensive revival of the economy.
According to a brief readout published by Xinhua News, Chinese leaders expressed satisfaction with the progress made in high-quality development throughout 2023. However, they emphasized the need to confront residual challenges and outlined a nine-point plan during the Central Economic Work Conference.
Key elements of the plan include a focus on high-quality development, incorporating technological innovation into the industrial system, boosting domestic consumption, attracting high-level foreign investment, and revitalizing agriculture to ensure food security. This approach underscores China's commitment to sustainable and innovation-driven economic growth.
China's consumer prices experienced their fastest decline in three years in November, accompanied by a 14th consecutive month of producer price deflation. Import data in U.S. dollar terms fell by 0.6%, missing forecasts for a 3.3% increase.
A big part of the discussion was the real estate crisis, with major real estate developers grappling with serious debt issues amid Beijing's efforts to deleverage the sector. China's leaders pledged to mitigate risks associated with the property sector, local debt, and small and medium financial institutions. Their strategy includes the construction of affordable housing as a measure to address the ongoing real estate challenges that have unfolded since President Xi Jinping initiated a crackdown in late 2020.
The leadership also acknowledged other issues such as declining fertility rates, high unemployment rates among the younger population, and the fragility of domestic supply chains. Commitments were proposed to support the development of private enterprises and foster innovation in science and technology (including green transformation, the digital economy, and artificial intelligence).
China's leaders also pledged to strengthen macro policies, maintain proactive fiscal measures, and exercise prudent monetary action. This aligns with a prior statement from the Politburo, emphasizing the need for flexible, moderate, precise, and effective fiscal policies to stimulate economic recovery.
These recent initiatives follow a significant development in October when Beijing announced a plan to issue 1 trillion yuan ($139 billion) in sovereign bonds by the year's end, increasing the 2023 budget deficit target to 3.8% of gross domestic product, up from the original 3%.
While these measures have been introduced to bolster economic recovery, Moody's downgraded China's government credit and eight major banks from stable to negative, thus highlighting some potential challenges stemming from possible bailouts for distressed local governments and state-owned enterprises.
To conclude, China's leadership is trying to do better in 2024 by navigating and finding solutions to its economic challenges. Because of the global power of China, their initiatives will be closely monitored around the world.
BY IZZI SCHULTE