China’s gross domestic product (GDP) rose by 6.9% in 2017, reversing a downward growth trend for the first time since 2010 in an indication of strong resilience. In nominal terms, GDP rose by 11.2% to CNY82.7 trillion from CNY74.4 trillion in 2016, the National Bureau of Statistics (NBS) said. The strong performance is expected to give the government more room to tackle debt and financial risks in 2018, which President Xi Jinping said was a “critical battle” to fight.

Iris Pang, Chief Greater China Economist at ING, said the possibility of a “crisis” had been largely removed, but Beijing still needed to be cautious as it continued with its process of financial deleveraging. “The deleveraging is set to eliminate financial risks, but the authorities should not do it in haste as that could generate new risks,” she said. The GDP expansion meant China’s economy grew to about two-thirds the size of the United States’ last year, and at the current rate could overtake it within the next decade. The accelerated growth in 2017 is set to give President Xi Jinping fresh confidence in Beijing’s growth model. “In the current world, ‘democratic deficit’, ‘governance deficit’ and ‘development trap’ rise one after another, while problems like the rich-poor gap, terrorism and climate change keep emerging,” an article in the People’s Daily said. “The international political and economic system dominated by capitalism is flawed and needs deep reform. The new international order is budding. China’s practices offer a new choice to solve common problems facing all humankind.”

China’s per capita income rose 9% in 2017 to CNY25,974, the NBS added. Raymond Yeung, Chief Greater China Economist of ANZ Bank, said the current growth momentum was likely to continue in 2018 – with 6.5% growth forecast for the year – but the government would remain focused on reducing debt. “Risks to the economy, like debt, will be a top priority this year,” he said. Under “Xiconomics”, Beijing has downplayed GDP growth targets in favor of “quality” growth, sustainable development and greater transparency in auditing, as several provinces and cities have been found falsifying economic data, the South China Morning Post reports.

The services sector led growth with an increase of 8%, outpacing the industrial sector’s 6.1% and the agricultural sector’s 3.9%. Services continued to make up 51.6% of the country’s GDP.

Fixed-asset investment rose 7.2% year-on-year, down 0.9 percentage points from 2016. Private investment reached CNY38.15 trillion, up 6% year-on-year, 2.8 percentage points faster than the previous year, accounting for 60.4% of total investment. Online sales of physical goods rose 32.2% to CNY7.18 trillion, amounting to 15% of total retail sales, 2.6 percentage points higher than 2016. Earlier data showed China’s consumer inflation was 1.6% last year, cooler than the 2% for 2016, while the factory-gate prices rose for the first time in six years. Foreign trade recorded its first expansion in three years under strong domestic and external demand.

The Chinese government should lower the country’s expectations for gross domestic product growth and push forward reforms at state-owned enterprises (SOEs), both key for addressing China’s mounting credit and debt problem, according to Paul Gruenwald, Chief Economist at S&P Global Ratings. “Most of the debt is from the corporate sector, especially the SOEs,” he said. Gruenwald said the market should also play an essential role besides the government in containing excessive borrowing

Shanghai officially released a detailed master plan to build itself into an “excellent global city” by 2035 – three weeks after it received the central government’s go-ahead. The 2017-2035 blueprint is the third of its kind to be approved by the central government and is consistent with the earlier released 1999-2020 development plan. Shanghai aims to transform itself into “an innovative, humanistic and eco-friendly metropolis with global influence”.

According to the plan, which also encompasses a longer-term vision through 2050, Shanghai has been positioned as the core city in the Yangtze River Delta urban clusters, an international economic, financial, trade and shipping center, a technology and innovation center as well as an international cultural metropolis. To achieve these targets, the city will explore new growth models that are suitable for sustainable development in densely populated megacities and will take measures to control construction and population growth and protect the environment. The city’s population will be limited to 25 million by 2035, compared with 24.19 million residents at the end of 2016.

The total land area allocated for construction will be limited to 3,200 square kilometers, which represents a negative growth, according to the plan. To better serve the Belt and Road initiative as well as the Yangtze River Economic Belt strategy, Shanghai will strive to reach synergy with neighboring cities. The development framework consists of one core downtown area, two axes (Huangpu River and Yan’an Road-Century Avenue), and four supportive wings (Hongqiao, Chuansha, Baoshan and Minhang).

The Zhangjiang national science center, Pudong, Hongqiao and the Yangshan Deep-Water Port will all play important roles. The city plans to have a 1,000-kilometer Metro system – up from the current 666 km – and 1,000 km of intercity railways by 2035, the Shanghai Daily reports.

China’s annual three-day Central Economic Work Conference began on December 18, during which the ruling Communist Party’s economic agenda for 2018 will be mapped out. Led by President Xi Jinping, the conference involves hundreds of senior leaders from the Communist Party, and has been held every year since 1994. The meetings usually take place behind closed doors in a heavily guarded hotel in Beijing.

A statement about the general conclusions will be released via state media after the conference, but internal debates and specific instructions are usually kept under wraps. Last year’s event took place at a time when the Chinese economy was facing a mountain of debt at home and a barrage of threats from the United States, including a tougher trade stance from President Donald Trump, higher interest rates, and lower business taxes in the U.S. At a meeting of the 25-member Politburo, the Chinese leadership listed measures to curb financial risks, eradicate poverty and fight pollution as the top economic priorities for 2018.

The Politburo statement also highlighted the need to reform the property market, a key topic at the Central Economic Work Conference. The Conference is held at a time that the United States, the European Union and Japan are expected to announce a joint effort aimed at confronting China over its excess industrial capacity and trade practices. They are expected to make a joint statement on the sidelines of the World Trade Organization (WTO) ministerial meeting in Buenos Aires. It was unclear whether China would be specifically named in the statement.

Washington, Brussels and Tokyo have raised complaints about China’s subsidies to state-owned enterprises, state financing and investment rules that often force foreign firms to transfer strategic technologies. They argue that such distortions have fueled rampant overcapacity in some industries such as steel and aluminum, which are flooding global markets and forcing lay-offs elsewhere, the South China Morning Post reports.

The Politburo of China’s Communist Party has listed efforts to curb financial risks, eradicate poverty and fight pollution as its top economic priorities for the coming year. At a meeting of the 25-member Politburo chaired by President Xi Jinping, “warding off and addressing major risks to effectively control the macro leverage ratio” was identified as the most important task for the economy, the official news agency Xinhua reported.

The Politburo statement also highlighted the need to reform the property market as it set the tone for this month’s annual Central Economic Work Conference in Beijing, without saying when it would be held. The ruling Communist Party’s economic agenda for 2018 will be mapped out during the conference. Next year will mark the 40th anniversary of China’s reform and opening up, which kick-started the country’s economic miracle. China would open up further, the Politburo statement said, but the most pressing task was to stem financial risks, according to the report. Financial institutions would also be required to strengthen support for the real economy and “positive effects” should be achieved from risk prevention measures.
The Politburo also called on rank-and-file cadres to improve living standards and to make “solid progress” on fighting poverty and environment protection – in line with the policies outlined at the 19th Communist Party Congress in October, where the need for stronger leadership on the economic front was emphasized.

The International Monetary Fund (IMF) warned in a financial risk analysis that Beijing should put financial stability above its development goals and said monetary and fiscal policies aimed at shoring up employment and growth had led to a surge in debt loads, but the People’s Bank of China (PBOC) said it did not agree with several points made in the report and reconfirmed that China’s financial situation was stable, the South China Morning Post reports.

President Xi Jinping also called for advanced technologies to be “embedded” into the real economy to foster growth. Known as the “fourth industrial revolution,” artificial intelligence, robotics and big data may bolster the global economy by a further 14% by 2030 – the equivalent of an additional USD15.7 trillion in value, according to PwC. “China should lay out our digital master plan early and strive to take the initiative,” Xi said. “We should aim for world class, cutting-edge technologies, and nurture a group of big data companies.” China’s 2016 spending on technology research and development rose 10.6% to CNY1.57 trillion, equivalent to 2.1% of the economy’s output. The figure exceeded the average of 2.08% for the European Union.

Improving industry safety, public security and social stability were also on the Politburo’s priority list, the report said.

Left to right: Mark Zuckerberg, Xi Jinping and Tim Cook

China will firmly stick to the basic national policy of opening-up and pursue win-win cooperation while safeguarding the country’s sovereignty, security and development interests, President Xi Jinping said while meeting with members of the Advisory Board of Tsinghua University School of Economics and Management. The President added that China is deepening overall reform with unprecedented determination and force. China has not only benefited from but also contributed to economic globalization, Xi said, adding that China’s
development means opportunities for the world. China will not seek to take advantage of other countries but will pursue win-win cooperation, Xi said, while pledging to take more measures to boost opening-up.

Board Members who participated in the meeting included Tim Cook (Apple), Mark Zuckerberg (Facebook), Robin Li (Baidu), Jack Ma (Alibaba), Pony Ma (Tencent), Elon Musk (Tesla) and Satya Nadella (Microsoft). Former Premier Zhu Rongji is Honorary Chairman of the Advisory Board.

Commenting on his upcoming meeting with U.S. President Donald Trump, Xi said China would like to make joint efforts with the U.S. to take each other’s interests and concerns into consideration, dissolve disputes and contradictions, and engage in win-win cooperation.

Mark Zuckerberg said that boosting connections will create economic opportunities, just like what the China-proposed Belt and Road Initiative has brought to the world. “We know that when it’s easier for businesses to connect their customers on the internet, that enables the creation of new entrepreneurship, innovation and development, and improves the life of everyone,” he told Xi, as reported by the China Daily.