China to bolster consumption, tech development as U.S. tensions simmer

BEIJING — China’s top leaders on Thursday emphasized their determination to boost domestic consumption over the next five years, alongside widely anticipated plans to boost domestic technology.

According to this one state media reading The closely followed “Fourth Plenum” meeting to determine five-year development goals. China also confirmed that Vice Prime Minister He Lifeng, who attended the plenary meeting on Thursday, will visit Malaysia from Friday to Monday. for US trade talks – Expectations for a possible meeting between the US and Chinese presidents at the end of the month are increasing.

Major countries were not named in the report as the meeting focused largely on domestic development, despite broad calls to increase China’s international influence and “safeguard the multilateral trading system”.

According to CNBC’s Chinese translation, the text of the meeting stated that China should “strongly increase consumption.” The leaders elaborated with calls to balance consumption needs with “effective investment” and “adhere to the strategic point of increasing domestic demand.”

“New demand will lead to new supply, and new supply will create new demand,” the report said. Leaders also called for effective implementation of policies to support businesses and “specific actions” to boost consumption.

Zong Liang, former chief researcher at the Bank of China, said this tone shows that policymakers in China are looking more closely at the relationship between economic supply and demand than in previous years.

This not-so-understood change in China’s ideologically driven government is still not the green light for cash handouts. Although retail sales have been muted since the pandemic, Beijing has refrained from giving money directly to consumers, unlike the US’s post-Covid-19 stimulus checks.

“This information points to a continued emphasis on investment as a means of encouraging consumption this time around, rather than a bold and direct push to increase consumption,” Yue Su, chief China economist at the Beijing-based Economist Intelligence Unit, said in a note.

“We can therefore expect investments to focus on consumption-related sectors and activities, such as better urban planning, public services and elderly care,” he said. Su noted that over the past decade, China has relied heavily on investment for growth, leading to concerns about overinvestment.

In the last two years, China has tried to increase consumption with subsidies for household appliances and some other consumer goods. The country has also encouraged local governments to organize sporting events and other entertainment to boost spending.

Since the statement did not call for a “strong increase in income”, Eurasia Group’s China Director Dan Wang is more cautious about Beijing’s consumption plans.

“It’s just an aspirational goal,” he said. “I don’t see the financial commitment in this.”

In the statement, achieving the 2025 growth target of approximately 5% and other previously shared targets were emphasized. for 2027 And 2035.

Wang said all of this means annual growth of 4.6 percent until 2035, stating that achieving this would be “very costly.” Ultimately, he expects resources to be concentrated in high-tech and emerging industries, with little improvement on the demand side and deflationary pressure continuing.

For example, China’s previous policy goals to become a global leader in electric cars have been criticized for encouraging companies to turn to subsidy-supported industries, leading to a race to the bottom that has in turn suppressed industries in other countries.

Beijing has tried to address some of the excessive competition this year. However, the country has been forced to accelerate its technological development in the meantime as the United States has increased restrictions on China’s ability to access advanced technology.

China’s top leaders on Thursday called for increased self-reliance in technology. “We will strive to achieve a significant breakthrough over the next five years.” [China’s] In the statement, it was stated that economic power, scientific and technological power, national defense power, comprehensive national power and international influence are aimed until 2035.