China’s Macroe­co­nomic Logic Be­hind the “Six Sta­bil­i­ties”

Tak­ing both in­ter­na­tional and do­mes­tic macroe­co­nomic sit­u­a­tions into con­sid­er­a­tion, the CPC Cen­tral Com­mit­tee’s in­tro­duc­tion of “six sta­bil­i­ties” is tremen­dously im­por­tant.

China Pictorial (English) - - NEWS - Text by Su Jian The au­thor is a pro­fes­sor with the School l of Eco­nomics, Pek­ing Uni­ver­sity.

On July 31, 2018, the Po­lit­i­cal Bu­reau of the Com­mu­nist Party of China (CPC) Cen­tral Com­mit­tee held a con­fer­ence to an­a­lyze China’s cur­rent eco­nomic sit­u­a­tion. The con­fer­ence also em­pha­sized that work must be done to sta­bi­lize em­ploy­ment, fi­nance, for­eign trade, for­eign cap­i­tal, in­vest­ment and ex­pec­ta­tions. How is China’s cur­rent eco­nomic sit­u­a­tion look­ing? Why did the CPC Cen­tral Com­mit­tee in­tro­duce the “six sta­bil­i­ties?”

Chal­lenges for China’s Real Econ­omy

Ac­cord­ing to fig­ures re­leased by China’s Na­tional Bu­reau of Statis­tics on July 16, the coun­try’s GDP ex­panded by 6.8 per­cent year-on-year in the first half of 2018, down by 0.1 per­cent­age point from the same pe­riod last year. Growth rates of both in­vest­ment and con­sump­tion en­dured sig­nif­i­cant de­creases.

In terms of prices, al­though price growth rate is not high, the up­ward pres­sure on pric­ing is be­com­ing in­creas­ingly ev­i­dent. China’s con­sumer price in­dex (CPI), a key gauge of in­fla­tion, de­mands spe­cial at­ten­tion. In July, CPI grew 2.1 per­cent year-on-year, up by 0.2 per­cent­age point from June. The growth rate of con­sumer prices has wit­nessed a mod­est in­crease. An­a­lysts be­lieve there is a pos­si­bil­ity that prices will con­tinue to go up in the sec­ond half of the year.

China’s pro­ducer price in­dex (PPI), which mea­sures the costs for goods at the fac­tory gate, has also risen. Pric­ing trends for con­sumer goods are closely re­lated to CPI. Since April this year, the growth rates for the prices of con­sumer goods such as food and cloth­ing have seen month-on-month rises.

Risk of Es­ca­lat­ing Trade War

Trade fric­tion be­tween China, as an ex­port-ori­ented econ­omy, and the United States re­mains an im­por­tant fac­tor in­flu­enc­ing China’s cur­rent eco­nomic sit­u­a­tion. The es­ca­lated trade war di­rectly af­fects peo­ple’s ex­pec­ta­tions for China’s fu­ture eco­nomic devel­op­ment, which in turn af­fects their im­me­di­ate de­ci­sions on in­vest­ments and con­sump­tion in China.

In terms of eco­nomics, China used to serve as the “world’s fac­tory” in the in­ter­na­tional arena. It ex­ported abun­dant com­modi­ties to the U.S. and Europe and en­joyed large trade sur­pluses. How­ever, with Chi­nese ex­port com­modi­ties plac­ing greater im­por­tance on brand­ing and con­tain­ing higher tech­ni­cal con­tent at present, China is mov­ing to­wards the U.S. on the value chain at a high speed. Thus, a com­pet­i­tive re­la­tion­ship was formed be­tween the two par­ties.

The Ne­ces­sity of “Six Sta­bil­i­ties”

Con­sid­er­ing both the in­ter­na­tional and do­mes­tic macroe­co­nomic sit­u­a­tions, the in­tro­duc­tion of the “six sta­bil­i­ties” is tremen­dously im­por­tant. The con­fer­ence held by the Po­lit­i­cal Bu­reau of the CPC Cen­tral Com­mit­tee pointed out that in the first half of 2018, growth rates for many eco­nomic gauges dropped, but not em­ploy­ment. How­ever, ac­cord­ing to the macroe­co­nomic fig­ures re­leased by China’s Na­tional nal Bu­reau of Statis­tics on Au­gust 14, , em­ploy­ment also wit­nessed a de­cline ine in July. Thus, it is im­por­tant to stabi­a­bi­lize em­ploy­ment and in­vest­ment.

Sta­bi­liz­ing for­eign trade and for­eign cap­i­tal is a long-term eco­nomic is­sue. This sit­u­a­tion is stage, dic­tated and by the China’s to­tal global de­vel­op­men­tal de­mand is ld not a fig­ure that can ex­pand eas­ily. y. In the fu­ture, com­pe­ti­tion will be­come me even more in­tense.

Since the be­gin­ning of 2018, China’s fi­nan­cial risk has mounted, d, mak­ing it harder for freed-up funds ds to flow into the real econ­omy. In gen­eral, sta­bil­i­ties in em­ploy­ment, fi­nance, for­eign trade, for­eign cap­i­tal, ital, and in­vest­ment are com­ple­men­tary ry to each other.

Now, China needs steadily growow­ing for­eign trade, and its re­form and nd open­ing up should be driven to a deeper level to meet the ever-growwing con­sump­tion up­grade. Be­sides, s, sta­ble for­eign in­vest­ments are highly hly sig­nif­i­cant to China’s cur­rency ex­change rate, for­eign trade and in­ter­na­tional im­age.

Dur­ing this pe­riod, when China’s na’s econ­omy is fac­ing great down­ward d pres­sure, sta­ble poli­cies and solid eco­nomic devel­op­ment pro­vide guar­an­tees and en­hance en­ter­prises’ es’ ex­pec­ta­tions for the fu­ture.

Jan­uary 23, 2018: A worker checks new en­ergy ve­hi­cles rolling off the pro­duc­tion n line at an SGMW fac­tory in Li­uzhou City, south­ern China’s Guangxi Zhuang Au­ton­o­mous Re­gion. by Zhang Ailin/ Xinhua nhua

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