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A woman walks past a store in Shanghai. The Politburo has reiterated the principle of “seeking progress while maintaining stability”. Photo: Xinhua

Economic stability among top priorities for Beijing in 2017, Politburo says

Leadership meeting comes as producer price index jumps 3.3 per cent in November, the fastest pace for five years

The Communist Party will make economic stability a top policy priority for 2017, when the leadership goes through a once-in-a-decade reshuffle, the government said on Friday.

A meeting of the 25-member Politburo reiterated the principle of “seeking progress while maintaining stability”, according to a statement released afterwards.

The meeting, chaired by President Xi Jinping, is usually a prelude to the annual Central Economic Work Conference, where policy details are decided for next year.

Social stability would by the precondition for all other work, according to the statement by Xinhua.

“Social stability is very important as a more complex and turbulent international environment next year could affect the domestic economy,” said Hong Hao, managing director and chief strategist at the Bank of Communications International in Hong Kong. “Reform has entered a difficult stage and it could touch the pie of many vested interest groups. Thus, greater determination [of the top leadership] and dedicate planning are needed.”

The Politburo said it would push forward reforms in key sectors, including state-owned enterprises, fiscal management and taxation, financial services and social security.

It would also moderately expand overall consumer demand, strengthen government guidance of market expectations and expand innovation.

The mainland economy is undergoing changes following strong government-backed spending to reduce the risk of a hard landing.
A worker hauls boxes of shoes at a factory in Dongguan in Guangdong province. Prices for goods at the factory gate rose 3.3 per cent in November. Photo: AFP

The producer price index surged by 3.3 per cent in November, the fastest pace for five years, as prices of coal and steel jumped, in a sign of rising inflationary pressure. The consumer price index grew 2.3 per cent year on year in November, up from October’s 2.1 per cent, the National Bureau of Statistics announced yesterday.

But significant excess capacity still posed challenges, according to the Politburo statement.

The mainland is trying reduce the number of “zombie firms”, state-backed companies that continuously show losses and have little chance of returning to financial health.

Some 300 had already been shut, the state asset watchdog said on Friday.

“Reform of economic systems, such as state-owned enterprises, is not overall satisfactory,” said Li Ruoyu, an analyst of the State Information Centre, a think tank under the planning agency.

The priority of supply-side reforms, including capacity reduction, de-stocking, deleveraging, cost reduction and improving underdeveloped areas, was brought forward in last year’s economic work conference.

But the effects of the measures can only be felt years later, and the overall strategy is not seen as an immediate solution to address the slower economic growth on the mainland.

“Economic factors should receive more attention as historically they would swing the government’s policy direction,” said Kuang Xianming, director of the research centre for economy at the China Institute for Reform and Development in Hainan.

“An immediate economic risk, for China, would be US president-elect Donald Trump’s China policies” he added.

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