China’s top financial committee headed by Vice-Premier Liu He has held a series of intensive meetings behind closed doors in the past three months as the coronavirus pandemic has roiled global markets and brought the world’s second biggest economy into uncharted waters.
The Financial Stability and Development Commission, which Liu leads as top economic adviser to President Xi Jinping, held its 25th and most recent meeting on Tuesday, an official statement said this week. The committee last announced its 14th meeting in early January.
In other words, the commission, which includes China’s central bank governor Yi Gang, convened 10 meetings in-between at a frequency of nearly one a week. The commission does not publish its meeting agenda beforehand.
While none of the gatherings were publicly disclosed, their frequency shows Beijing’s concerns about heightened economic and financial risks facing the country, which could report its first official economic contraction in the first quarter of this year since 1976.
At a Politburo Standing Committee meeting on Wednesday, Xi said that “downside risks in the world economy have increased while instability and uncertainty have grown significantly”.
In particular, Xi said that China must make “ideological and work preparations” to face changes in the external environment “for a relatively long period of time” – a polite way of saying China must be ready for a more unstable and hostile global environment.
The recent concentration of commission meetings reflected deep worry over the fate of the economy in policy circles, said Ding Shuang, chief Greater China economist of Standard Chartered Bank. He added China’s financial regulators would need to work out how to apply plans made by the country’s top leaders.
“The risk prevention mindset is losing ground to the impulse of credit expansion,” he said.
Some may even resort to ‘anywhere but China
At this week’s meeting it was decided that China would seek “more flexible use” of monetary policy and “bigger credit support” for small and private enterprises, according to a statement on the central government website.
The commission said it was closely watching development of the pandemic overseas to prevent economic risk spilling over into China.
China’s role as a manufacturing hub could be threatened as developed countries encourage “reshoring” of industrial production facilities after the pandemic, Ge Honglin, a member of the Chinese People’s Political Consultative Conference, the country’s top advisory body, said in a recent interview with Beijing News.
“Some may even resort to ‘anywhere but China’,” said Ge, a former head of China’s state aluminium company.
China must do more to lure foreign direct investment and cannot take it for granted that investors will continue to flock to the country, he said.
“It’s better to attract overseas capital into China’s real economy, rather than the stock market,” Ge said.
The financial commission was established in 2017 to coordinate between China’s central bank and financial regulators, and lead the country’s quest to reduce financial risks.
Beijing is scrambling to bring economic activities back to normal after months of damaging lockdowns across the country. On Wednesday, authorities lifted the lockdown on the city of Wuhan, the initial epicentre of the coronavirus outbreak.
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