China looks to consumers to drive economic rebound

Chinese leader Xi Jinping’s agenda for this month’s meeting of the ceremonial national legislature: Revive the economy by encouraging consumers to spend more now that severe anti-virus controls have ended

Joe McDonald
Thursday 02 March 2023 03:22 GMT

Chinese leader Xi Jinping’s agenda for the annual meeting of the ceremonial legislature: Revive the economy by encouraging consumers to spend more now that severe anti-virus controls have ended, and install a government of loyalists to intensify Communist Party control over the economy and society.

Xi, China's most powerful figure in decades, has no formal role in the National People’s Congress, which will convene a meeting of its full membership on Sunday. But he looms over every event: the 69-year-old awarded himself a third five-year term as party general secretary in October, possibly making himself leader for life.

The two-week gathering of 2,977 NPC members is the year’s highest-profile political event, but its lawmaking work is limited to endorsing ruling party decisions. Its more important function is to provide a platform to publicize government plans and give members instructions to take home to cities and provinces.

Xi and other leaders say their priority is to reassure consumers and entrepreneurs it’s time to spend and invest after restrictions that kept millions of people at home, temporarily shut down Shanghai and other industrial centers and wiped out jobs were lifted in December.

The economy faces challenges ranging from weak global demand for exports and lingering U.S. tariff hikes in a feud over technology and security to curbs on access to Western processor chips due to security fears. At home, the workforce has been shrinking for more than a decade, putting pressure on an economy that still relies on labor-intensive industry.

Economic growth fell to 3% in 2022, the second-weakest level since at least the 1970s.

The ruling party needs to “fully release consumption potential,” Xi said at the party's annual planning meeting, according to a text published Feb. 16.

Xi gave no details but said Beijing should encourage spending on electric cars and medical and elderly care, home improvement, culture and sports. He warned at the December meeting that work “will be complicated.”

A consumer-led rebound might take longer than stimulus spending or igniting a boom in real estate investment. But Chinese leaders are trying to avoid options that would push up debt they worry already is dangerous high.

Forecasters expect Premier Li Keqiang, the top economic official, to announce a growth target of 5% to 5.5% in a speech Sunday on plans for the year. Li, an advocate of free enterprise, is due to be replaced as premier at the congress after being sidelined as No. 2 party leader in October.

The International Monetary Fund and some private sector forecasters expect much weaker annual growth, as low as 4.4%.

“It takes time to say whether the economy will turn around,” said Song Huimin, a supermarket owner in the northeastern city of Jinzhou. He said sales are better than six months ago but not back to pre-COVID levels.

“People want to consume, but they still don’t have enough income," Song said. “Some people still are out of work.”

The former owner of a clothing factory in the eastern city of Changzhou said it shut down last year, throwing 20 people out of work. He got a job at another clothing company. Any spare cash goes to pay for his 14-year-old daughter's education.

“I have no house or car and no plans to travel,” said the man, who would give only his surname, Wu.

Since taking power in 2012, Xi has called for the ruling party to return to its “original mission” as China’s economic, social and cultural leader and carry out the “rejuvenation of the great Chinese nation.”

Entrepreneurs who generate China's new jobs and wealth have been rattled by tighter political controls and anti-virus curbs. Business groups say global companies were shifting investment to India, Vietnam and other countries last year because China's travel curbs blocked executives from visiting the country.

The party has indicated it is winding down anti-monopoly and data security crackdowns on tech companies that wiped hundreds of billions of dollars off the stock market value of Alibaba, Tencent and other industry leaders. But it shows no sign of backing off a campaign to tighten political control over them.

The industry was shaken anew in mid-February when Bao Fan, a star banker involved in some of the biggest tech deals, disappeared. His company announced Bao was “cooperating in an investigation” but gave no details.

Companies still are “expected to prioritize party instructions,” Neil Thomas of Eurasia Group said in a report. He said measures announced during the NPC might give the ruling party "more direct oversight over policymaking” in technology and innovation.

A new government will be announced at the end of the congress in a once-a-decade change that gives Xi an opening to install his supporters as premier, finance minister and central bank governor.

Xi has promoted officials with whom he has personal history in defiance of a party tradition that required leadership candidates to have served as Cabinet ministers or in other national-level posts.

The official in line to succeed Li as premier and head of government is Li Qiang, a former party secretary of Shanghai who has no government experience at the national level. Li Qiang was named No. 2 party leader in October.

Li Qiang “will do whatever it takes to ensure that Xi has no reason to doubt his loyalty,” said Thomas.

The candidate expected to succeed Vice Premier Liu He, a U.S.-trained economist in charge of finance and banking, is He Lifeng. He is chairman of the Cabinet’s planning agency, the National Development and Reform Commission, but has no finance background. Ding Xuexiang, who has acted as Xi’s chief of staff, is expected to become an executive vice premier despite having no government leadership experience.

The government is expected to announce another boost in military spending, the second-highest after the United States following what the Stockholm International Peace Research Institute says is the world’s longest string of increases at 29 years.

Beijing's economic plan has implications beyond business and trade, according to Harley Seyedin, president of the American Chamber of Commerce in South China.

Washington and Beijing are competing to show “which governance model can best solve global problems,” Seyedin said in a February report. “Performance will drive perceptions of power.”


AP researcher Yu Bing contributed.

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