At Politburo meeting, Xi stresses need to push ahead with supply-side reforms

Looking at policies for year’s second half, China’s decision-making body calls for deeper changes to state firms, reducing property glut and making labour more agile

PUBLISHED : Wednesday, 27 July, 2016, 2:01am
UPDATED : Wednesday, 27 July, 2016, 2:01am

Chinese President Xi Jinping urged further progress on supply-side structural reforms as the Communist Party’s decision-making Politburo on Tuesday discussed economic policies for the second half of the year.

In a separate meeting with non-party experts on Monday, and reported by state media on Tuesday, Xi said policies should be accommodative to ensure growth stayed on track.

The Politburo meeting was attended by top economic policymakers, including Premier Li Keqiang, according to state television.

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According to a statement about the gathering carried by Xinhua, the Politburo said the key to retiring redundant capacity and deleveraging was deepening reforms of state-owned enterprises and financial institutions. Reducing oversupply in the property sector would proceed in line with urbanisation needs, while the asset bubble should also be reined in and the tax burden cut.

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The labour market should be made more agile to reduce overall costs, the Politburo said.

It was reiterated the mainland would maintain a proactive fiscal policy and a prudent monetary mechanism as it stuck to supply-side reforms in its search for a new growth engine.

The meeting seemed to endorse greater fiscal support. “Ensuring the capability and pace of fiscal expenditure” would guide private capital investment in the real economy and infrastructure, it said.

Sheng Songcheng, head of statistics and analysis at the People’s Bank of China, earlier this month called for an increase in the fiscal deficit along with better policy coordination as the mainland appeared to be falling into a liquidity trap, where money-pumping failed to spur corporate investment.

The actual actions to deepen reform ... will be gradual and can’t be made in one push
Yu Pingkang, economist

The meeting heard that the economy still faced strong headwinds, although it was stable in the first half, with sustained job creation in urban areas and improvements in living standards for the public.

Xi also presided over a meeting with non-party experts on economic development in the second half, according to Xinhua.

He said a package of policies were needed to guide expectation for development and expedite supply-side structural reforms.

Economists said the half-year stocktaking signalled Xi’s firm stance on pushing forward supply-side reforms.

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“We have repeatedly heard about pushing ahead with supply-side reforms,” said Yu Pingkang, chief economist at Changjiang Pension Insurance. “However, the actual actions to deepen reform, which will touch on vested interest, will be gradual and can’t be made in one push.”

In May, the mainland’s most ambitious tax overhaul in more than two decades came into effect, with changes aimed at reducing the burden on services companies and encouraging factories to upgrade their facilities and pursue innovation.

Gross domestic product rose 6.7 per cent in the second quarter, the same pace as in the first quarter. It was also within the central government’s annual target of 6.5 to 7 per cent.