Premier faces China’s economic issues square on in meeting as inflation adds to pressures

The world’s second-largest economy continues to grapple with an uneven recovery, but Li and other top leaders have tipped stable growth in the first half of the year and said that the around 5 per cent annual growth objective was attainable.

Beijing is trying to whip up more positivity in the lead-up to the reform and economy-centric third plenum slated to be convened next week, but the upbeat official portrayal of the economy is marred by poor demand and confidence, which has been further compounded by weak inflation.
China’s consumer price index (CPI) edged down to a three-month low in June after growing by a paltry 0.2 per cent year on year, compared to an increase of 0.3 per cent in May, the National Bureau of Statistics said on Wednesday.

The producer price index – which measures the cost of goods at the factory gate – dipped 0.8 per cent last month, falling for the 21st straight month, although the reading represented a 17-month high.

Amid uncertainties, consumers and businesses are seen unwilling to spend due to a prolonged property slump and a bleak jobs market, with the CPI having stagnated around zero since April 2023, in contrast to Beijing’s annual target of around 3 per cent.

At the meeting on Tuesday, Li said efforts must be dialled up to tackle the “troubles” in economic operation and that scientific decisions must be based on a factual diagnosis of the situation.

He also urged solid implementation of macro policies to unleash their effectiveness to promote development, while giving full support to the role of enterprises, who can expect targeted policy support to be further strengthened to bring about tech and innovation breakthroughs.

This is a gesture that Li … to assure entrepreneurs that he knows their difficulties and complaints

Beijing-based scholar

The attendees at Tuesday’s meeting included the heads of state-owned enterprises and private entrepreneurs, including tech start-up founders, and economists.

A Beijing-based scholar said the Chinese economy was set to grow by 5 per cent or slightly higher this year, but that the premier’s remarks were proof that his attention was on the complexities and deeply-entrenched problems.

“The premier has admitted to these challenges in a face-to-face meeting with business representatives and experts, not to cadres,” said the scholar, who spoke on the condition of anonymity due to the sensitivity of the issue.

“This is a gesture by Li, who is tasked by Xi to run the economy, to assure entrepreneurs that he knows their difficulties and complaints.

“Compared with Xi’s remarks in the May meeting, Li’s words are more reflective of the headwinds and problems.

“It’s a bid to reassure businesses that their hardship is not ignored, a bid to restore confidence as the premier will face the issues squarely.”

We anticipate the third plenum to come up with strong reform measures and effective economic policies.

Peng Peng, Guangdong Society of Reform

The scholar added that with the recent exchanges with the business community before the third plenum, expectations for reform policies and implementation had been raised.

Peng Peng, executive chairman of the Guangdong Society of Reform think tank in Guangzhou, also said the top leadership was keenly aware of challenges and expectations.

“As we head into the second half of the year, stakes are high as we anticipate the third plenum to come up with strong reform measures and effective economic policies,” said Peng.

“Although the economy remains on a growth trajectory, the consumption sector is not optimistic. This is not only reflected in the weak growth of retail sales but also in the sluggish CPI.

“The fact is that residents are saving rather than spending under pessimistic expectations for employment, income and business profitability. It even puts pressure on achieving the annual growth target.”


Business Asia
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