As US tensions rise, China will boost consumption, technology development

BEIJING – China’s top leaders on Thursday stressed their resolve to boost domestic consumption over the next five years, on top of widely expected plans to boost domestic technology.

According to A State media reading A closely watched “Fourth Plenum” meeting to set five-year development goals. China also confirmed on Thursday that Deputy Prime Minister He Lifeng, who attended the plenary meeting, will visit Malaysia from Friday to Monday. For US trade talks – Anticipation is growing over a possible meeting between the US and Chinese presidents at the end of the month.

Despite widespread calls for China to increase its international influence and “protect the multilateral trading system”, the readout did not mention key countries by name as the meeting focused largely on domestic developments.

According to a Chinese-language CNBC translation, China should “vigorously increase consumption,” the meeting said. The leaders elaborated on the need for consumption with calls for “effective investment” and “adherence to the strategic focus of increasing domestic demand”.

“New demand will create new supply and new supply will create new demand,” the report said. Leaders called for effective implementation of policies to support businesses and “special actions” to boost consumption.

Zhong Liang, a former chief researcher at the Bank of China, said it indicated that China’s policymakers are looking more closely at the relationship between financial supply and demand than they have in years.

That change — which doesn’t come lightly in China’s ideologically driven government — still isn’t a green light for cash handouts. Despite muted retail sales since the pandemic, Beijing has moved away from direct payments to consumers, in contrast to US stimulus checks in the wake of Covid-19.

The readout “signals a continued emphasis on investment – this time rather than a bold, direct push to boost consumption – as a means of boosting consumption,” Yu Su, Beijing-based chief China economist at the Economist Intelligence Unit, said in a note.

“We can therefore expect investment to focus more on consumption-related sectors and activities, such as improved urban planning, public services and care for the elderly,” she said. Su pointed out that China has relied heavily on investment for growth over the past decade, raising concerns about overinvestment.

Over the past two years, China has tried to boost consumption with targeted subsidies on home appliances and some other consumer goods. The country has encouraged local governments to organize sporting events and other entertainment to boost spending.

Dan Wang, China director of Eurasia Group, is more cautious about Beijing’s consumption plans, as the readout did not call for “vigorous growth in income”.

“It’s just an aspirational goal,” she said. “I don’t see a financial commitment in this.”

The readout emphasized achieving the 2025 growth target of around 5% and other previously shared targets. For 2027 And 2035.

All this implies annual growth of 4.6% until 2035, Wang said, which would be “too expensive” to achieve. She expects that resources will eventually be concentrated in high-tech and emerging industries, with little improvement on the demand side, while inflationary pressures will continue.

China’s previous policy goals of becoming a world leader in electric cars, for example, have been criticized for encouraging companies to get into these cars. Subsidy supported industryAs a result a Race to the bottom This puts pressure on industries in other countries.

It also calls for developing a “strong agricultural nation” and “accelerating the establishment of a strong manufacturing nation” in view of the need to maintain a “reasonable” level of production in the country.

There is only mention of ongoing property declines for “high-quality development” of real estate. Beijing has also noted that it will act on previously released plans Reduce carbon emissions.

Senior officials are set to share more details about the country’s next five-year goals at a press conference Friday morning, while a more comprehensive reading is expected in the coming days. China typically does not release detailed full five-year targets until a parliamentary meeting in March.