China’s economic vulnerabilities to be focus of 2021 work conference amid strong GDP forecast, analysts say
- Communist Party officials are expected to convene for the annual Central Economic Work Conference in coming days
- With headline growth likely to be strong next year, the focus is expected to be on addressing domestic economic risk
China’s leaders are expected to prioritise fixing social and economic weak links in 2021 – the year the ruling Communist Party celebrates its 100th anniversary – when they gather to take stock of the country’s economic performance in coming days, analysts said.
President Xi Jinping and hundreds of party officials are set to convene for the annual Central Economic Work Conference in Beijing to settle policies and targets for next year.
While authorities do not release the conference schedule beforehand, it is clear from a flurry of state media reports – including a front-page People’s Daily story praising China’s economic performance under Xi’s leadership – that the meeting is near.
With headline gross domestic product (GDP) growth rate set to be strong next year thanks to a low base in 2020, the focus of the work conference will likely be tackling economic vulnerabilities to offset an unstable external environment, according to Chinese government researchers and scholars.
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Beijing faces a range of pressing economic problems, including a mountain of local government debt, uneven economic recovery from the coronavirus pandemic and China’s testy relationship with the United States, which will enter a new chapter when Joe Biden assumes the presidency.
“We must pay great attention to a variety of risks in the first year of the five-year plan,” said Li Daokui, a Tsinghua University professor and former central bank adviser, referring to China’s 14th five-year plan for the period 2021-25.
Li told a forum in Beijing on Wednesday that the world’s second largest economy needs to be more “self-reliant” as part of its dual circulation strategy, which focuses on developing the domestic market for future growth.
China, where the coronavirus outbreak was first reported, has seen a V-shape economic recovery this year.
Rating agency Fitch this week revised up its estimate for China’s 2021 GDP growth to 8 per cent.
China’s relative success in containing the Covid-19 pandemic and restarting its economy, in sharp contrast to the US and India, has been a source of pride for in Beijing, where only a year ago many were worried about the prospects for growth amid a bruising trade war with the US.
But the country’s weak consumption and employment rate remained the economy’s soft underbelly, said Yu Chunhai, a professor of economics at Renmin University of China.
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Social retail sales, a key indicator for consumer spending, fell 5.9 per cent in the 10 months of the year.
Many academic and policy advisers in Beijing are divided in their assessment of the Chinese economy and the reversal of stimulus measures.
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The Bank of Communications, China’s fifth largest lender, expected further tapering of monetary policy. It estimated that aggregated financing growth would slow by 3 percentage points to about 11 per cent next year, while money supply growth would drop to 9 per cent from the current 10.7 per cent.
However, its chief analyst Tang Jianwei called for continued fiscal expenditure to support the economy, suggesting a fiscal deficit ratio of 3 per cent in 2021.
“There should be many key projects launched at the start of the five-year plan, a certain pace of fiscal expenditure is needed. It is also needed to offset the impact of credit tightening,” he said.
“The central government still has room to increase its leverage.”
