China’s Politburo targets economic risks to ensure post-pandemic recovery

Beijing expresses concern about the breadth and sustainability of national rebound
Uneven growth and technological challenges still lurk, top decision-making body says

China economy

Frank Tangin Beijing

Published: 9:16pm, 30 Apr 2021

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The Chinese political leadership has called for the country to double down on tackling its economic weaknesses, including uneven growth, deep-seated financial risks and technological challenges, to ensure that the post-coronavirus recovery continues.

Further regulation of internet platform firms, a continued crackdown on property speculation, more local responsibility for reducing financial risks and protection for the nation’s limited arable land were some of key areas discussed at the meeting on Friday of the 25-member Politburo, the government’s main decision-making body headed by President Xi Jinping.

The call came after the world’s second-biggest economy reported a record 18.3 per cent rise in gross domestic product in the first quarter compared to a year earlier, thanks in good part to the low comparison base resulting from last year’s first-quarter coronavirus-induced contraction.

Earlier Friday, the National Bureau of Statistics reported that both the official manufacturing and non-manufacturing purchasing managers’ indexes fell more than expected in April, indicating a cooling of economic activity in the first month of the second quarter. Analysts said the data showed that Chinese growth had peaked or was close to doing so, with the pace of activity likely to slow as the year progressed.

The Politburo expressed concern about the breath and sustainability of the rebound.

“Currently, the economic recovery is uneven and its foundation is still not solid,” the Politburo concluded after its quarterly economic analysis meeting, according to a statement released by state news agency Xinhua.

“We must make good use of the window of low [economic] pressures to concentrate on supply-side reforms and the removal of obstacles to dual circulation,” it said, referring to the economic strategy adopted last year that relies more on the domestic economy and home-grown innovation for future growth amid the growing economic rivalry with and technological containment efforts by the United States.

While vowing to build a large domestic market to power future growth, the country must stay on high alert for rising domestic financial risks and closely watch external uncertainties, including the spillover effects of foreign economic policies, technological containment moves and supply chain disruptions.

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China’s economy expands record 18.3 per cent in the first quarter of 2021

To better deal with the country’s financial risks – including weak liquidity at many small banks and mounting debt repayment pressures on some local governments – the central government plans to build a bad debt disposal mechanism that will be largely the responsibility of local Communist Party and government officials.

It also pledged to improve the regulation of internet platforms to ensure fair competition, without elaborating. The authorities have already conducted antitrust investigations into the nation’s biggest tech giants and on Friday fined Tencent, Didi Chuxing, and other internet firms for failing to disclose acquisition of smaller firms.

While renewing its promise that there would be “no U-turn” on economic support policies enacted last year to offset the economic damage caused by the pandemic, the Chinese leadership called on more targeted support. “We must stabilise market expectations and try to ensure economic growth remains within a reasonable range,” the Politburo said.

China’s full-year growth is widely estimated to be at or above 8 per cent, much higher than the government’s target of “above 6 per cent”.

The Politburo said fiscal policy would focus on solidifying grass-roots operations and optimising the structure of the economy. The central bank would maintain reasonably ample liquidity in the financial system, strengthen support for the real economy, particularly in key sectors and vulnerable areas, and maintain the basic stability of the yuan exchange rate.

“We must promote domestic demand, manufacturing and private investment to recover as quickly as possible … and ensure domestic demand expands with the rise in people’s income,” it said.

The Ministry of Commerce will launch a month-long promotion campaign from Saturday to help boost consumer spending.