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Citizens pose for photos with a giant inflatable rabbit installation in front of a shopping mall in Changsha, central China’s Hunan Province on Monday. Photo: Xinhua
Opinion
Editorial
by SCMP Editorial
Editorial
by SCMP Editorial

Vibrant private sector can put China back on path to growth

  • Falling economic and population numbers at a time when country re-emerges from Covid-19 call for healthy moves to restore investors’ confidence

Not that long ago, when China’s economic growth defied gravity and the population headed towards 1.5 billion, 3 per cent annual growth coupled with population decline within a decade seemed incredible.

The reality, amid a hardline Covid policy that held fourth-quarter growth to 2.9 per cent, is that last year’s figure, the second lowest in 46 years, is close to expectations.

Three per cent is well short of Premier Li Keqiang’s initial target of “around 5.5 per cent”. That will trigger a lot of discussion, especially in tandem with news that the population actually fell for the first time in 60 years, which along with ageing has serious implications for growth strategies.

When such numbers are released together they drive market sentiment. As a result, there is bound to be a negative view about China’s economic prospects. But it is premature to draw any firm conclusions about an economy that is still maturing.

02:14

Chinese reluctant to have children as China reports first population fall in 61 years

Chinese reluctant to have children as China reports first population fall in 61 years

The immediate future hinges on whether Covid can be brought under control after Lunar New Year, or the holiday triggers another wave of infection.

Despite the heavy price in case numbers and deaths China paid for suddenly opening up last month, this year can mark a resurgence of economic growth.

Indeed, speaking at the World Economic Forum in Davos, Vice-Premier Liu He, President Xi Jinping’s top economic adviser, said the country was returning to normality faster than expected.

Then China can resume a relatively high-speed growth path, and it is speed of growth that will be the decisive factor, for all China’s problems such a population decline, environmental quality and other political and social issues.

If economic growth fails to regain momentum, that will compound other problems that will need to be resolved amid steady, healthy growth.

Worst appears over for China’s economy as reopening unleashes pent-up demand

Policymakers understand the importance of maintaining growth, contrary to some expert assessments in the West that Xi is putting ideology ahead of the economy. He is unlikely to underestimate the importance of growth to the achievement of political goals.

That is why the coming “two sessions” of China’s parliament will be watched closely as Xi puts together a team to lead the economy for the next five years.

The underwhelming gross domestic product number is a reminder to the government and economic leaders that growth can no longer be taken for granted, and that they face a big challenge in policy design and implementation.

In that respect, the key to reviving the economy is the private sector, the country’s main job creator and engine of investment and innovation. So mobilising the dynamic vibrancy of the sector and restoring the confidence of private investors will go a long way towards putting China’s economy back on a healthy growth path.

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