My Take | Beijing’s pivot to growth puts onus on local governments to deliver
- With business confidence remaining weak, Beijing may have no alternative than to rely on local governments and state-owned firms to drive investment
- A shared understanding has emerged among local officials that they must help speed up economic development to make up for lost time during the pandemic
Beijing’s pivot to refocus on economic growth after three years of stringent Covid-19 controls has been welcome news to many. Probably the ones most excited about this shift are China’s local government officials.
Enormous manpower and financial resources were wasted during the draconian lockdowns and strict quarantines in 2022, which brought unnecessary misery to China’s citizens and its vast government apparatus.
Local government officials privately complained about the extra pressure and shrinking income that they faced, while some expressed genuine concerns over the country’s worsening economic outlook and widening fiscal deficit.
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Local cadres knew that without a functioning economy, it would be impossible to deliver what the central government had asked from them. Poverty alleviation could not come without jobs, common prosperity could not be achieved without additional funding, and a “beautiful China” was unattainable without sustained efforts in dealing with pollution and gentrification.
There is now a shared understanding among local officials that they must help speed up economic development to make up for lost time. The sense of urgency has released what can be described as “animal spirits” in the economy. If Beijing gives its blessings by offering easy bank credit for several months, for example, a quick economic revival is on the horizon.
Critics may argue that Beijing is merely tapping its old playbook of relying on local governments and state-owned firms to drive investment, a growth model that proved to be wasteful, inefficient and unsustainable. But with private sector confidence remaining weak and consumer spending difficult to boost amid unstable income, some people say there may be no alternative.
Like it or not, economic factors in China such as land and funds are in the hands of local authorities and their affiliated entities – a result of nearly two decades of state advancement in economic activities.
