Quality growth the focus of China’s next five-year plan, says J.P. Morgan’s Ulrich
Regional managing director downplays the magnitude of China slowdown
Steering quality growth driven by consumption and innovation will be the priority of the top policymakers meeting in two weeks to sketch out China’s economic blueprint for the next five years, according to one of the leading China experts.
Jing Ulrich, Asia-Pacifc managing director and vice-chairman at J.P. Morgan, said the top brass in Beijing would lay out five priorities in the 13th five-year plan that starts next year: high-quality growth, stimulating service and high-tech industries, implementing further financial reforms, infrastructure spending, and addressing environmental issues.
“The upcoming five years will be much tougher than the previous ones. In the midst of headline data that suggest the pressure on the economy, it is very comforting that consumption has become the single most important growth driver, responsible for 60 per cent of GDP increase,” Ulrich said at a luncheon at the American Chamber of Commerce in Hong Kong on Wednesday.
The 18th Central Committee, the top decision making body of the Communist Party, will convene for the fifth plenum from October 26 to 29 to set the course for economic and social development from 2016 to 2020.
Ulrich’s remarks come on a day Beijing released worse than expected inflation figures, fuelling fresh concerns about the economy.
Consumer price index (CPI) rose 1.6 per cent year on year in September, compared to a market consensus of 1.8 to 2 per cent in August. Producer price index contracted 5.9 per cent over the same period, the 43rd straight month of decline.
The flaccid numbers prompted economists to urge further monetary easing by the People’s Bank of China.
“We reiterate that China needs to ease monetary policy and call for a cut of reserve requirement ratio by another 50 basis points in the fourth-quarter . If CPI falls further, the PBOC may also adjust the benchmark interest rates,” ANZ greater China chief economist Li-gang Liu said in a report.
But Ulrich said it is not all doom and gloom in the Chinese economy. “Lots of private enterprises have not just survived but thrived, independent of preferential loans from the government and succeeding on their own.”
At the third plenum in 2013, the Communist Party vowed to let market play “a decisive role” in the economy. But faltering reforms of state-owned enterprises and the strong-arm tactic to arrest a recent stock market collapse have shown Beijing’s reluctance to take it hands off the controls.
Describing herself as “a firm believer in market”, Ulrich said: “There is a tussle between the invisible hand of the market and the visible hand of intervention. I still think the market will win out, but it will take some time.
“Hopefully, at the fifth plenum, the leadership will re-emphasise the importance of the market, creating a level playing field for all kinds of corporates and making sure they all have adequate access to capital.”