Can learning from 1997 help China weather the current economic storm?
Economy faces similar challenges as in late 1990s, but global and domestic factors have changed
The Chinese economy is showing similar symptoms to the last days of 1997, as headline growth at home slows down and money flees the country.
Beijing managed the challenges well at the time by blocking capital outflow under the dogma of “seeking progress while maintaining stability”, a line that has again gained prominence under the leadership of President Xi Jinping and that is once again enshrined as the “guiding” principal for the central economic work conference, which is due to end on Friday.
A statement of mixed propaganda and policy announcements is expected at the conference’s conclusion, listing the top Chinese leadership’s agreed view of the economic situation and future policy priorities after a three-day meeting behind closed doors in a heavily guarded Beijing hotel.
As the consensus-building process is secret, the final document becomes a more critical document for pundits and traders to uncover clues of what the Communist Party plans to do in 2017 to steer the world’s No 2 economy through risks that stem from the global economic slowdown, alongside domestic issues of capital outflow, yuan depreciation, rising corporate debt, excessive capacity and financial fragility – all existing challenges that have been compounded by the US Federal Reserve’s decision to raise interest rates.
“Stability is a must in the year of leadership reshuffles, which means the stabilisation of economic growth and prevention of systematic risks,” said Zhang Jun, chief economist of Morgan Stanley Huaxin Securities, the Wall Street bank’s China joint venture.