China’s campaign to “curb the disorderly expansion of capital” across several sectors of the economy is on track to ease as the government shifts focus toward bolstering growth, according to a tone-setting commentary issued by state media.
The report from the official Xinhua News Agency, which was republished by major newspapers including Securities Times and People’s Daily, outlined how the government was managing the 10 most pressing challenges facing the world’s No 2 economy.
It also hints at the policy direction of China’s top leadership ahead of a series of high-profile meetings, including the sixth plenary session of the 19th Central Committee early next month and the Central Economic Work Conference.
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The commentary comes on the heels of weaker-than-expected growth in the third quarter of 4.9 per cent, down from 7.9 per cent in the second quarter and 18.3 per cent in the first.
The latest quarterly economic data could partly be explained by fading low-base effects, but was still stronger than many economies around the world.
Xinhua said boosting private consumption and investment was high on the new economic agenda for Beijing as growth plateaus. But the central government would not return to “the old playbook” of monetary and fiscal spending to “flood the economy”.
The report, which was based on interviews with relevant departments and experts, said the government would wean the economy off its dependence on the property sector and debt. It would also step up oversight of industrial sectors prone to overproduction and high fossil fuel emissions.
Among the 10 major issues facing China’s economy were short-term challenges like power cuts and the Evergrande crisis, as well as longer-term matters such as “common prosperity”.
The Xinhua piece argued the economy was running “within a reasonable range” during the first nine months of the year, when the growth rate was 9.8 per cent, higher than the full-year target of “above 6 per cent”.
“Considering the current changing external environment and the odds of slowing export growth in the future, it is more crucial to stabilise and expand domestic demand,” Xinhua said.
“Consumption and investment are the ‘two engines’ to reach larger domestic demand.”
The government would soon implement a series of policies to boost private consumption in big cities like Shanghai and Beijing, in rural areas and in the catering sector, the report said.
Annual retail sales are expected to reach 44 trillion yuan (US$6.8 trillion) for the full year, Xinhua said, a nominal 12.2 per cent rise from last year.
Infrastructure investment would also be supported.
Yao Jingyuan, the special research fellow at the Counsellors’ Office of the State Council, said last week infrastructure investment would play a pivotal role in “stabilising growth in the fourth quarter and next year”.
Analysts are concerned a recovery in private consumption, especially among the middle class, could be undermined by resurgent pandemic outbreaks.
China’s central bank released a survey earlier this month showing the ratio of residents tending to save more had increased by 1.4 percentage points between the second and third quarter to 50.8 per cent, while the rate of those consuming more dropped by 1.0 percentage point to 24.1 per cent.
“China’s ‘zero-Covid’ policy could also slow the recovery pace of retail sales,” Lu Ting, chief China economist at Nomura, wrote in a note last week.
China’s latest Delta outbreaks have spread to 11 provinces, with nearly half freezing interprovincial travel or mass gatherings.
The Xinhua report predicted a decline in China’s trade, but it said authorities were confident export orders would remain buoyant through the first half of next year.
Control would be tightened over the steel, aluminium, cement, plate glass and oil refining sectors, which consume a lot of energy and emit large amounts of carbon emissions.
“Relevant analysts warn that as the pandemic abroad is gradually brought under control and the capacity in major economies begins to recover, it is necessary to be wary of the return of overcapacity after the export slowdown,” Xinhua said.
China would also focus on a more dispersed supply chain regionally and globally, and would further open its domestic market.
In addition, Beijing will “strengthen adjustments” in tax collection to boost revenue and reform the country’s income distribution. However, it would be done in a targeted way, as part of efforts to achieve long-term “common prosperity”.
The spillover from the Evergrande crisis was limited as it was a “single case risk”, the article also said.
“Although China’s economy faces complex phased, structural and cyclical problems, we have the means and ability to sustain the recovery, maintain strategic focus and constantly strengthen the endogenous growth momentum,” said the commentary.
“In front of pressure, confidence is more precious than gold.”
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