China’s Central Economic Work Conference: Key Data | Daily News Byte

As noted at the Central Economic Work Conference, China will be more focused on economic growth than ever in 2023, with expected policies to expand domestic consumption, attract and use foreign capital, stabilize the real estate market, and rebuild the technology sector.

China’s 2023 economic agenda will be focused on one thing: growth.

That is the key conclusion from Central Economic Working Conference (CEVC), the annual meeting of China’s top leadership to be held in Beijing on December 15-16, 2022.

President Xi Jinping, Premier Li Keqiang, China’s number two, and incoming premier Li Qiang all gave speeches at the meeting outlining the economic policy agenda for the coming year.

The new political agenda comes after China took decisive steps in late November and December to lift most of its longstanding COVID-19 restrictionswhich hampered growth in 2022.

As the country transitions from its zero-covid-19 policy to a less restrictive business and living environment, the government hopes to return to the high-growth environment that China nurtured before the pandemic and also briefly during the post-pandemic recovery in 2021.

How will China stimulate growth in 2023?

Expansion of domestic consumption

Domestic consumption has dropped significantly during 2022. Retail sales fell 5.9 percent year-on-year in November 2022, and per capita consumption slowed to just 1.5 percent year-over-year growth in the third quarter of 2022.

Encouraging consumption will therefore be an important aspect of stimulating economic growth. While the lifting of COVID-19 restrictions will largely encourage more spending, the CEVC also outlined a number of measures the government will implement to boost spending in 2023.

One method is to increase the incomes of urban and rural residents and support people to spend on things like housing improvements, new energy vehicles (NEVs) and aged care services.

It also suggests using government incentives to increase investment across society, increase financial support for large projects, and encourage more private capital to participate in the construction of large national projects.

The upshot of these measures appears to be that the government will seek to restore consumer confidence by providing funding and support to businesses, rather than handing out stimulus checks to individuals.

Attracting and using foreign capital

The CEVC emphasized the need to increase foreign trade and investment cooperation in the new year in order to stimulate growth. Proposed mechanisms to foster a better environment for foreign investment and trade include:

• Expanding market access and further opening up the modern service industry.
• Ensuring equal treatment for foreign-funded enterprises and ensuring that foreign-funded enterprises have equal opportunities to participate in government procurement, tenders and the formulation of industry standards.
• Increasing the protection of intellectual property rights and the legitimate rights and interests of foreign investments.
• Promoting the construction of significant projects with foreign capital.

The CEVC also mentioned the promotion of joining multilateral economic and trade agreements, such as A comprehensive and progressive agreement for the Trans-Pacific Partnership (CPTPP) and Agreement on Digital Economic Partnership (DEPA). China formally applied to join these agreements in the fall of 2021, just weeks apart, despite certain legislative obstacles to its acceptance. Member countries are still negotiating China’s accession to the agreements. In order to promote its offering, the CEVC states that China will “actively compare relevant rules, regulations, management and standards and deepen domestic reforms in related fields.” This suggests that China may make some changes to its domestic legislation to become compliant with the agreement’s requirements, such as its cross-border data transfer laws.

Finally, the CEVC reading stated that it is necessary to allow foreign businessmen the “highest degree of convenience” to travel to China and participate in trade and investment negotiations. This suggests a formal policy change to remove quarantine requirements for incoming travelers.

Stabilization of the real estate market

The real estate market was one of the main obstacles to China’s economic growth in 2022. The market has been in crisis since regulations were introduced that affected investor debt, leading to loan defaults by some of China’s largest companies.

In the summer of 2022, the property sector came under further fire as thousands of would-be homeowners threatened to refuse to pay their mortgages to investors who failed to complete the homes they had sold under the pre-paid scheme.

The CEVC reading addresses the risk that the real estate market poses to the country’s economy in 2023, stating that “it is necessary to ensure the stable development of the real estate market.” It also calls for “effectively preventing and spreading major economic and financial risks” and “ensuring the delivery of buildings”, in relation to the delivery of pre-paid houses.

However, the CEVC reading reiterated the mantra that “houses are for living, not for speculation”, suggesting that the government will continue to aim to deleverage the housing market in 2023. represented by the real estate market, the country will implement measures to “meet the reasonable financial needs” of investors, promote industrial restructuring and mergers, and improve assets and liabilities.

In addition, it calls for the implementation of policies to address housing needs, especially for younger people and people who have moved to new cities, which includes building long-term rental housing.

Monetary and fiscal policy

Over the past few years, China has adhered to what the government has called a “prudent” monetary policy and “proactive” fiscal policy. “Smart” monetary policy involves using highly targeted monetary tools instead of flooding the market with liquidity. This can include tools, such as lending and policy lending, to support specific industries and groups of people, as well as broader tools to increase liquidity through the banking system.

“Proactive” fiscal policy, meanwhile, meant providing support for various stakeholders, but without direct fiscal stimulus. In the pandemic years, the government implemented measures such as tax rebates and fee reductions to help distressed market entities, while stimulating investment by expanding special purpose bond (SPB) issues, the main tool for local governments to invest in local infrastructure projects.

The CEVC reading also repeats the terms “prudent” monetary policy and “proactive” fiscal policy, suggesting that the government will continue to implement these types of measures to stimulate the economy in 2023.

In terms of fiscal policy, the CEVC reading mentions many fiscal tools that have already been implemented in the past few years: issuing SPBs, increasing central government transfers to local governments, and interest rebates to ensure that local government debt is under control. while providing enough to support economic development.

Meanwhile, when it comes to monetary policy, the CEVC reading states that the Government should maintain “reasonable and sufficient liquidity” and keep the growth rate of money supply and social financing at the same level as the nominal rate of economic growth. It also calls for directing financial institutions to increase support for small and micro enterprises, technological innovation, green development and other areas.

Regulation of the technical sector

CEVC marks a potential turning point for the technology sector, which has passed a series of regulatory measures in the last two years which hindered growth. That includes investigations and fines against big tech companies for violating the country’s antitrust and fair competition laws, up to tougher regulations on privacy and data security.

The CEVC states that science and technology policy should “focus on self-reliance and self-improvement”, suggesting that industry oversight may be less difficult in the future.

The role of technology and digital industry in nurturing talent was also highlighted, stating that it is necessary to “support platform companies in leading development and creating jobs”. Separately, it calls for improving the industry’s ability to train talent independently and attract more top talent to the sector.

What does CEVC mean for the economy in 2023?

It is important to note that CEVC does not represent specific economic policies; rather, the meeting sets the tone for the kinds of policies that will be announced in the coming year. This year, CEVC has set a pro-economic growth agenda, which means we expect various government departments to announce policies to stimulate growth in their respective areas.

A more concrete economic policy will be formulated in the coming months and will most likely be announced during the Second Session of 2023, which normally takes place in early March.

It remains to be seen to what extent China will focus on growth while putting other economic goals on the back burner. It is unlikely that the government will allow the unhindered growth of the industry as it has been for the past two decades. While this may loosen controls on some industries to allow more freedom of movement, significant deregulation is unlikely.