Beijing redoubles efforts to quell fears about state of the Chinese economy as bad news piles up

Beijing has stepped up efforts to reassure the public that the economic slowdown is under control, as the country deals with its slowest growth in decades amid an ongoing trade war with the US.

The Chinese government organised two back-to-back press conferences in the last two days, with senior officials from six powerful ministries voicing confidence in the prospects of world’s second biggest economy and providing Beijing’s explanation on negative economic news such as the first year-on-year fall in car sales in nearly three decades and job market stress.

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Xin Guobin, Vice Minister of Industry and Information Technology, told a media briefing on Wednesday that China’s industrial sector was actually performing “slightly better than expected” and that the recent economic slowdown was merely a “short-term fluctuation”.

On car sales, Xin said he was optimistic about 2019 as “new demand will be unleashed in China’s third and fourth-tier cities” as “old car models will be replaced”.

Qiu Xiaoping, a vice labour minister, said at the same briefing that the “employment situation last year was fairly good”, citing that over 13 million jobs were created in 2018 which kept the official unemployment rate at 3.8 per cent.

The tone of confidence was similar at another press event on Tuesday when officials from China’s National Development Reform and Commission, Ministry of Finance and the People’s Bank of China told reporters of their policy plans to stabilise growth.

Lian Weiliang, a deputy chairman at NDRC, said that the economic planning agency was speeding up approval of new projects. At the same time, he denied that China was adopting an all-out stimulus to propel growth.

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The two press conferences came on the heels of a series of interviews on the state-owned China Central Television with China’s economic ministers to rectify some “wrong perceptions” about the economy.

Ning Jizhe, the head of China’s National Bureau of Statistics, told CCTV this month that China will continue to enjoy its “demographic dividend”, dismissing views that China’s rapidly greying population will become a burden on the country’s growth.

Liu Kun, China’s Finance Minister, said the country’s tax cuts in 2018 were bigger than the reductions made by US President Donald Trump.

“China’s tax scale far exceeded that in the US,” Liu told the state television network last week in response to arguments that China’s tax cuts were not serious enough.

Zhang Jinan, the Minister of Human Resources and Social Security, also said in a televised interview that China’s job market remains good, denying reports that there was a wave of unemployment.

The efforts of China’s top economic cadres in painting a rosy picture came after a slew of poor economic data following which China’s top leadership decided to tilt towards pro-growth policies.

China’s imports and exports data for December were weaker than expected as the trade war started to take a toll on exports and domestic demand. Manufacturing activity too contracted for the first time in 19 months, raising questions about Beijing’s ability to arrest the deepening slowdown. Along with the car sales drop in 2018, iPhone maker Apple also issued its first revenue warning in nearly 12 years, citing poor Chinese demand.

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Investor confidence in China’s financial markets also took a beating last year. The benchmark Shanghai stock index fell more than 25 per cent, wiping off more than US$2 trillion in market value last year, while the yuan lost about 10 per cent against the US dollar.

China is scheduled to release the 2018 GDP growth rate next week. The headline growth had decelerated to a decade low of 6.5 per cent in the third quarter.

Analysts, however, say the worst is yet to come, citing the lack of progress in tackling structural issues and a mountain of domestic debt that could be 300 per cent of gross domestic product, among other issues.

Banny Lam, managing director and head of research at CEB International Investment, said the chorus of China’s senior economic bureaucrats will boost public confidence to a certain degree.

“Because China is led by one party, the public tends to rely on these messages from the leadership, or [else] they may think that things are not going well,” Lam said.

He added that the joint press conferences showed that the central government has stepped up its efforts to get different ministries to work as a team, which implies that Beijing can be flexible in introducing different types of measures targeting specific types of weaknesses.

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“Whether these efforts will translate into good results, we won’t know until after February,” said Lam. “But it will save markets from panicking over the outlook as the outcome of the trade talks is still not certain.”

The country’s leadership headed by President Xi Jinping agreed at the Central Economic Work Conference last month that China will “turn pressures into dynamism in promoting high-quality economic growth” by expanding domestic consumer spending, upgrading its vast manufacturing industry and increasing spending on infrastructure amid an increasingly hostile world.

Max Zenglein, an economist at the Mercator Institute for China Studies in Berlin, however, argued that foreign investors could become more unsettled by China’s state-led efforts to bolster growth, as many new projects were state investments approved by the NDRC.

“Competitive neutrality is another buzzword, or catchphrase,” said Zenglein. “It’s hard to convince people that they mean it if you look at the evidence.”