Reassuring message for China economy despite challenges
- In an interview with state media, Vice-Premier Liu He has tried to boost domestic confidence and send a positive signal to the Americans as the trade war rages
Amid a slowing economy, faltering stock markets and an ongoing trade war with the United States, Liu He, President Xi Jinping’s mastermind on economic policy, gave a high-profile interview last week with the state media to boost domestic confidence and send a positive signal to the Americans. Published by Xinhua and People’s Daily just after a rare joint pep talk given by the country’s top financial officials on the same day, the interview with Liu, a member of the powerful Politburo of the Communist Party and vice-premier in charge of economic affairs, offered what amounted to a summary statement and a declaration of intent by the central government.
What was conspicuously missing was any sustained discussion of the escalating trade tensions with America. He referred to them only once, saying the impact so far had been more psychological than actual. But the trade war was clearly the elephant in the room. Crystallised in his remarks was the unstated trillion-dollar question: how committed is Beijing to economic reforms and whether the Americans can ever be satisfied with them?
Liu said the central government fully recognised the importance of the private sector to the economy and was fully committed to supporting it. He criticised “business personnel” at state-run financial institutions for “misunderstandings and deviations” to think it was safe to “provide loans to state-owned enterprises, but politically risky to lend to private enterprises”. He referred to such practices as “political mistakes”, not economic ones, meaning it was against central government policy.
The recent contraction registered in the Caixin China General Manufacturing Purchasing Managers’ Index, which gives weight to small and medium-sized firms, was no doubt on Liu’s mind. And the latest disappointing third-quarter GDP data shows the economy has recorded its lowest growth rate in nearly a decade while the stock market has fallen to a four-year low. Top policymakers clearly see a need to set public discourse on a more positive note as China marks its economic liberalisation started four decades ago while Xi is preparing to meet US President Donald Trump next month.
Addressing American demands, Liu said Beijing was committed to maintaining a level playing field, strengthening the rule of law as well as the protection of property and intellectual property rights as part of “a deepening reform and opening up”of the economy. The deleveraging of risks within the financial system was also improving steadily. Liu managed to gloss over the latest economic data and downplayed the cloud hanging over the economy. Not everyone would be convinced, though. A great deal depends on America’s ultimate intention. If Washington just wants China to open up, there is clearly a deal to be made. But if it aims to contain China’s rise, then no amount of compromising by Beijing will be enough.