Time ripe for Beijing to rebalance economy through domestic growth
- Evidence that the global economy may be slowing abounds from China to Europe and even the US, but confidence and recovery will benefit if moves by Beijing improve sentiment
Headlines about entrepreneurs being invited to pour out their troubles to the premier while state-owned enterprises post record profits amount to a snapshot of China’s economy amid the US trade war. Li Keqiang offered the businessmen a willing ear. With the economy battling headwinds, reflected in the latest GDP figures, their problems pose a threat to China’s growth. And threats to China’s growth are not good news for global growth.
Every year, the premier consults business leaders ahead of the annual parliamentary sessions to get their input for his work report, which is expected to lay out the government’s economic policies for the year ahead. What sets the process apart this year is that it is not all behind closed doors, with Li publicly inviting honest feedback that may “hurt the ear or stab the heart”. The people and market players must be allowed to complain, he said, and the government must listen carefully and adjust policy if that was the right thing to do.
It all shows the Chinese leadership is aware the economy faces a critical moment and that the private sector has a very big part to play in coming through it. It goes beyond being seen to listen and creating a positive image for the parliamentary sessions. Li’s government will have to deliver something or risk creating political pressure for itself.
The private sector in total accounts for the largest shares of employment and GDP. But state-owned enterprises are concentrated in sectors focusing on the domestic market, whereas the private sector is largely based in the export, consumer and technology industries, meaning it is exposed and suffers most in the trade war with the US. That is why, in the current international environment, top leaders need to listen more closely to what private sector leaders want. One of those consulted was Jack Ma, chairman of Alibaba, owner of this newspaper, who told Li that although his words may be harsh, he spoke for all the businesspeople of Zhejiang, where he is head of the high-powered chamber of commerce. Another, Credit Suisse economist and senior adviser Tao Dong, urged the government to find ways to boost investment confidence.
A resolution of the trade war before the current tariffs truce ends on March 1 would be good news for business in the short term. But the authorities need to stimulate domestic consumption, and reduce dependence on exports, by further cutting various taxes and fees and import tariffs. Evidence that the global economy may be slowing abounds in the big engines of growth, from China to Europe and even the US, where the government shutdown has taken an economic toll. If moves by China’s central bank to boost bank liquidity for business lending improves sentiment, that is good for confidence and recovery. But the time has rarely been riper for rebalancing the Chinese economy towards home-driven economic growth.
