More intervention in economy expected after 19th Party Congress
October 17, 2017 Category Macro-economy, Weekly
Picture from a previous Party Congress, which is held every five years
Beijing is likely to increase its intervention in China’s economy after the 19th Communist Party Congress – which opens on October 18 – hampering any effort by U.S. President Donald Trump to wring substantial trade and investment concessions from China during his visit to the country in November, analysts say.
Scott Kennedy, a China expert at the Washington-based Center for Security and International Studies, told the South China Morning Post that rather than overall market liberalization, the Party Congress “is likely to be followed by even greater government and party intervention in industries and markets”. Beijing would make “modest, largely symbolic concessions” on some areas of market liberalization ahead of Trump’s visit, Kennedy said. But “China Incorporated is likely to get more support and made more powerful, not dismantled. Interventionism works and China has paid little diplomatic or economic price for it. So why not continue?,” he said.
Markus Rodlauer, Deputy Director of the International Monetary Fund’s Asia and the Pacific Department, told an Asia Society Policy Institute think tank event in Washington that he expected no overall economic policy changes to come out of China’s Party Congress, owing to the ruling elite’s desire for stability as leaders are reshuffled. “The reasonable expectation is that things won’t change dramatically,” Rodlauer said. The congress might provide “some clues” to possible policy changes, but no specific economic policies could be set until the Economic Work Conference in December and the National People’s Congress (NPC) session next March, the IMF official said.
Washington China-watchers have speculated about the extent to which China’s ruling elite will proceed with economic reform. Four years ago, at a Central Committee session of the 18th Party Congress, the leadership pledged to let markets play a “decisive” role in the economy and unveiled a comprehensive reform agenda towards achieving “decisive results” by 2020, but the outcome so far has disappointed U.S. observers.
“We have not seen the kind of overall economic reforms we are seeking,” said Erin Ennis, Vice President of the U.S.-China Business Council. “China is falling short of reforms for the benefits of foreign companies,” she told the Asia Society Policy Institute event. With a huge surplus on the government’s balance sheet, sufficient foreign reserves and liquidity in its banks, China still has “a very strong system even if they have problems,” Rodlauer said.
The IMF this week raised its 2017 and 2018 economic growth forecasts for China but warned that the nation’s long-term growing debt load raised the risks of a “sharp growth slowdown”. The IMF urged China to “de-emphasize near-term growth targets and focus on reforms that would enhance the sustainability of growth”, the South China Morning Post reports.
China’s producer prices rose 6.9% in September from a year earlier, beating market expectations of a rise of 6.3%, the same pace as in the previous month. China’s consumer price index (CPI) rose 1.6% in September on-year, in line with forecasts. “China’s economic growth has slowed over the past few years, but economic growth has rebounded this year, with GDP reaching 6.9% in the first half, and may achieve 7% in the second half,” People’s Bank of China Governor Zhou Xiaochuan told the G30 International Banking Seminar in Washington on October 15.
Profound, fundamental changes were made over the last five years indicating the nation’s development stands at a “new historical starting point,” according to the communique of the four-day Seventh Plenary Session of the 18th Central Committee of the Communist Party of China (CPC), published on October 13. The plenary meeting made final preparations for the 19th National Communist Party Congress.
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