Leaders poised to prop up recovery
BEIJING — China’s new Communist Party leaders promised Sunday to be ready to spend more if needed to shore up a shaky economic recovery but gave no sign of plans for major changes.
A statement quoted by the official Xinhua News Agency after an annual planning conference pledged more marketopening reforms in 2013.
The world’s second-largest economy is gradually pulling out of its deepest slump since the 2008 global crisis, but weaker-than-expected November trade data prompted suggestions the rebound might be faltering.
The leadership under party General Secretary Xi Jinping pledged a “proactive fiscal policy” and “prudent monetary policy,” Xinhua said, referring to willingness to boost spending if needed and keep credit easy so long as inflation stays low.
The conference is the first opportunity for the new leaders to announce their own plans for China’s economic course. Most analysts expect them to stick largely to the goals of the party’s current five-year development plan, which runs through 2015.
Xi and other leaders who were installed last month in a once-a-decade handover of power are under pressure to overhaul an economic model based on exports and investment that delivered 30 years of rapid growth but is running out of steam.
The World Bank and other analysts say Beijing needs to curb dominant state companies and promote service industries and consumer spending to keep incomes rising. They say without prompt action, growth might stall, leaving China stuck at middle-income levels.
Companies, investors and political analysts are watching to see how far Xi and others on the seven-member ruling Standing Committee are willing to go to change the state-dominated economy. They face potential opposition from state companies that might be hurt by changes and have influential allies in the party.
“If China does not change its strategy, it risks falling into the ‘middle income trap’,” Robert Zoellick, former World Bank president, said in a speech at a Beijing business conference last week.
Brief reports by Xinhua on Sunday’s statement gave no details of long-term plans but affirmed the new leadership’s commitment to ruling party pledges to promote reform, open markets further and encourage economic efficiency.
Economic growth fell to a three-and-a-half-year low of 7.4 per cent in the three months ended Sept. 30. Factory output, consumer spending and other indicators are improving in the current quarter but analysts say a recovery is likely to be gradual and too weak to drive a global rebound without improvement in Europe and the United States.
Data last week showed November trade deteriorated sharply following a rebound that started in August. Export growth plunged to 2.9 per cent over a year earlier from October’s 11.6 per cent. Imports were flat, down from October’s 2.4 per cent growth.
Sunday’s statement promised to “fully deepen reforms” and “firmly promote opening up” next year, Xinhua said. The leaders said “enhancing quality and efficiency of economic growth” will be a “central task.”
The leadership pledged to increase domestic demand, though it gave no indication how it will do that.
Companies are under pressure to put more money in consumers’ pockets by raising wages. Other changes require longer-term effort, such as freeing up money in household budgets by raising government spending on schools, health care and other social programs.
Earlier statements by the new leadership suggested they want to narrow China’s yawning and politically sensitive wealth gap between an elite who have benefited from economic reform and the poor majority.
The new party Politburo pledged this month to pursue both economic growth and “social harmony and stability.”
The government is due to release a long-awaited report this month on proposals for policy changes to narrow the wealth gap.