(Bloomberg) — Investors swayed by China’s policy signals in recent weeks can find clues about the economy’s long-term goals in a series of published articles. by top officials this month.
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He Lifeng, up-and-coming economist, central bank governor Yi Gang, and others, outlined economic priorities for the next five years in articles to expand on President Xi Jinping’s report before the Communist Party congress last month.
He, believed to be a likely successor to Liu He, said upgrading the “supply side” of the economy was a key goal and stressed the importance of building a secure and reliable supply chain. His comments generally agree with Liu’s, although he opens his article by emphasizing economic development as the party’s “top task,” in line with analysts’ expectations that Mr. will focus more on growth.
The latest sign that he will take on the role of the nation’s top economic official came this week when he took the familiar position of Liu in the delegation of Chinese officials accompanying Mr. US counterpart Joe Biden at the G20 meeting in Bali, Indonesia. He, who currently heads the nation’s economic planning department, was promoted to the Communist Party’s 24-member Politburo last month, while Liu left that group.
Other key officials warned against too loose monetary and fiscal policy, and eased bailouts for struggling state-owned companies. Most of the officials – with the exception of He – are expected to step down in the coming months after leaving the party leadership in October, although they are likely to remain influential in policy circles.
Here are some highlights from the articles:
He Lifeng
He, a longtime associate of Xi, said combining expanding domestic demand with supply-side reform was the country’s top economic priority. To get there, consumer spending needs to be “boosted” but investment spending is key to “improving China’s supply structure,” he wrote, possibly referring to demand. build more advanced infrastructure and production facilities.
Second on He’s list of priorities is improving “composite factor productivity,” which refers to an increase in output explained by factors such as technological improvements rather than the addition of additional labor or the infrastructure.
In clear agreement with the US technology sanctions, He said his third priority is to ensure the security of China’s industrial supply chains. Supply chain ‘resilience’ should take a ‘more important place’ in economic planning, he added.
He suggested reforms that would allow rural-to-city migrants to enjoy better public services. He also pledged to promote a market-oriented environment where “state-owned enterprises dare to do, private enterprises dare to take risks and foreign enterprises dare to invest”.
Liu He
Liu emphasized the fundamental role of supply in driving demand in the economy, saying the main constraint to future growth is insufficient supply to meet demand for goods and services. High Quality. “To some extent, supply creates demand,” he writes.
Liu also warned against “profound changes” in the global industrial chain and attempts by other countries to hinder China’s development. “Such developments call for efforts to boost domestic demand, which can keep the economy afloat even in “extreme situations,” he wrote.
Liu writes that sustaining economic growth for “a long time” is necessary for China to achieve its long-term goals. But he cautioned against over-stimulation – domestic demand must be driven by “reasonably profitable investments” or “income-based consumption”. He believes that fiscal and monetary policies need to be appropriate and precise.
Translate Cuong
The governor of the People’s Bank of China reaffirmed his opposition to zero or negative interest rates, saying that China’s “normal” monetary policy since the pandemic began has led to the yuan stable currency and controlled inflation.
Yi warned that central bank financing of fiscal spending would lead to hyperinflation. The rampant inflation in the 1980s and 1990s led the Chinese leadership to establish the principle that the PBOC cannot finance budget deficits to protect a stable currency, he said.
Yi said there was still much work to be done to mitigate financial risks, and stressed that more work needs to be done to ensure shareholders of financial institutions will bear the brunt of any bankruptcy or reincarnation. structure, instead of waiting for the state’s bailout to avoid “moral danger.” Yi also criticized the lack of financial regulation and coordination among regulators, urging improvement.
Quach Thu Thanh
Guo, party secretary of the PBOC and head of the banking and insurance regulator, issued a strong warning about the financial risks China faces due to its tight money policy. Strong currencies in developed countries, highly indebted property developers, “hidden” imbalances of local government- table debt and the performance of internet platforms in the financial sector.
He vowed to prevent the economy’s overall debt ratio from rising rapidly and to conduct “normalization” regulation of the financial business of internet companies. China must strengthen the leadership of local party officials in their regional financial institutions, he wrote, and build a risk-resolving mechanism primarily led by local governments.
Liu Kun
The finance minister repeated his vow to break expectations for government bailouts of failed local government financing vehicles, which local governments used to raise money from their official balance sheet. That would be a huge shock to China’s financial system as LGFV has never been officially in default.
He also called on China to build a system in which all local government debt could be managed and adjusted to the same standards, seemingly implying the replacement of off-balance sheet debt with debt. official.
–With support from Fran Wang.
(Updated with the possibility of retiring officials in the fifth paragraph.)
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