Amidst Global Uncertainty, China Eyes Economic Stability
By Allison Lapehn
The Central Economic Work Conference, held in Beijing between December 8-10, charted the course for the next year’s national economic priorities. The Economic Work Conference gives the Party a chance to evaluate the overall implementation of policy priorities in the past year and map out the goals for 2022. The message from the official summary notes is clear; in 2022, stability takes priority.
Last year, President Xi Jinping attended the annual Central Economic Work Conference to provide his year-end review on economic progress in 2021 and highlight areas of priority for 2022. 2021 saw the national government taking an increased interest in regulating a wide array of sectors in the name of preventing risk and ensuring high-quality, sustainable development. The meeting held that in this landmark year, the Party achieved its first centenary goals and has now begun paving the way towards the second centenary goals. Furthermore, in the first year of China’s 14th Five-Year Plan, it was noted that China took steps to create a new development paradigm and achieved good progress to launch the Plan.
In the year ahead, officials are looking to take advantage of their risk prevention efforts and achievements and see an increase in the stability and predictability of the overall economy. China’s economic growth has slowed over the past decade. The decelerating growth has been further exacerbated by domestic consumption changes throughout the pandemic and an increasingly uncertain global economic environment overall. The official readout displayed a shift in tone from some previous government reports, highlighting the “serious pressures” confronting China’s economy.
Economic forecasts set the current Q4 growth at 3.1% – a sharp decline from the Q2 and Q3 figures of 7.9% and 4.9% respectively. While new outbreaks of COVID-19 can help explain the declining confidence and lower consumption, uncertainties about the property market and continuing employment concerns underscore the need to create a foundation for stability in the new year. Official growth targets for the next year will not be released until the annual parliament meeting in March, but growth will have to continue to be around 5-8% to stay on track to reach the goal of doubling China’s economy by 2035.
Areas of Focus
The Conference highlighted seven core areas of focus leading into 2022: stable and effective macro policy, micro policies to stimulate the market, structural policies to support smooth domestic economic activities, further focus on science and technology policy promotion and development, continued reform and opening, regional policies coordinating development, and social policies to support economic development and people’s livelihoods.
The Conference readout also mentioned five new “major and practical issues” facing China after entering its new stage of development. These five issues include common prosperity, the regulation of capital, primary products, resolving risks, and carbon peak and carbon neutrality. Addressing these concerns is central to ensure that enough positive momentum is created to realize China’s economic targets in the short to medium term. Throughout the discussion of these risk areas, “stability” seems to be the core, underlying goal related to each point.
The elephant in the room as analysts and economists make predictions based on China’s plans for the year ahead is concerns over regulatory sustained pressure. There is an ongoing debate as to whether China will continue with its crackdown on industries ranging from internet platforms to education providers. After a year of market uncertainty and the loss of billions of dollars, investors and business owners are searching for clarity in the year ahead. Promises of reform and opening have always painted a picture more welcoming to capital. However, the identification of both “regulation of capital” and “resolving of risks” as major issues to be dealt with in the year ahead suggests that the trend of increased regulations on sectors that are viewed as evolving in unhealthy or risky ways will continue. While it is unclear which sectors will face further regulations, the readout seems to prioritize long-term stability over short-term gains in economic indicators.
Despite this, there are some indications in the official reports that the disruptions from market regulations and enforcement of new regulations were not always welcome. The conference readout specifically noted that all stakeholders in the government should “actively introduce policies that are conducive to economic stability, and policy efforts should be carried out appropriately.” This call directed at lower-ranking officials throughout the government to support stability at all levels could perhaps encourage local officials to take a softer approach towards implementation in order to avoid shockwaves to the local economy.
While speculation and economics go hand in hand, the future of China’s economy in the year ahead will depend on China’s ability to make progress towards its domestic goals while remaining resilient in an increasingly unpredictable global environment. In this new era of development, China’s economic stability will be key to achieving its plans of economic transformation and overall revitalization.
Allison Lapehn is a Government Affairs and Policy Associate at AmCham China.