Beijing Sets New Year Resolutions to Strengthen Economy

China’s leaders are preparing for potential economic challenges due to raised tariffs proposed by U.S. President-elect Donald Trump once he is in office.

In response to the ongoing property crisis and interruptions caused by the pandemic, the ruling Communist Party is implementing various measures aimed at stimulating consumer spending and encouraging business investment. These efforts are critical in combating a decline in the Chinese yuan and volatility in stock prices.

Boosting Consumer Spending

One of the significant steps includes expanding the cash-for-clunkers program and appliance recycling initiatives. The government aims to incentivize the purchase of new, energy-efficient appliances by providing subsidies. Officials report that recycling efforts have successfully converted around 6.5 million traditional vehicles to electric and hybrid models since June of last year. Additionally, there has been a notable increase in sales of new home appliances.

The subsidies will offer discounts of up to 20% on various appliances and electric products such as smartphones. To support industrial growth, the government is also providing assistance for upgrading outdated manufacturing equipment.

Streamlining Business Regulations

In an effort to create a better business environment, local officials have been instructed to avoid unnecessary inspections that disrupt normal business operations. This directive aims to reduce abuses of power, including the unwarranted seizure of assets and unjust halts to production. These new regulations are vital for fostering a safer and more productive landscape for businesses in China.

Financial Support Measures

While there has not yet been a significant release of wide-scale stimulus spending, the Chinese government is preparing to introduce more substantial long-term treasury bonds to aid funding. The full details of this initiative are expected to be presented during the upcoming session of the national legislature in early March.

Maintaining Currency Stability

At a recent meeting, China’s central bank expressed its commitment to keeping the value of the yuan stable and ensuring that financial markets are secure. Currently, the yuan is showing signs of weakness against the U.S. dollar and other currencies, which has raised concerns among trade partners. The currency has depreciated recently, trading at approximately 7.3278 against the dollar compared to around 7 in early October. While a weaker yuan may boost export competitiveness, it also creates tension in international trade relations.

Controlling Economic Discourse

The ruling party in China closely monitors public discussions, especially regarding economic matters. Recently, social media platforms have seen the removal of voices from economists who criticize current policies. Authorities emphasize the importance of aligning public opinion with national narratives promoting unity and progress. However, some analysts warn that overly optimistic portrayals of the economy may mask more troubling realities. A report from the Rhodium Group estimated China’s actual economic growth last year to be between 2.4% and 2.8%, significantly lower than the official target of around 5%.

Challenges related to consumer demand, such as declining housing prices and stagnant wages, have contributed to this slower growth. As of now, comprehensive policy measures to enhance employment or income prospects are lacking, raising concerns about the long-term sustainability of economic recovery.

China, Economy, Resolutions