BEIJING, Aug 17 (Reuters) – Why are Chinese leaders rushing to revive the world’s second-largest economy as it risks spiraling into a long-term stagnation and a property crisis that threatens financial stability? There is growing concern about whether
Even in a country known for its opaque and protracted decision-making, investors, analysts and diplomats are urging Beijing to implement the bold policies needed to shore up a faltering post-coronavirus recovery. He points out signs that he seems to be hesitant about
This is not just an economic issue, it is also a geopolitical issue.
U.S. President Joe Biden last week called China a “time bomb” because of its economic recession, as he clashed with China over issues such as Taiwan, the democratic island it claims to be its own. called. “It’s not good because bad people do bad things when they have problems,” Biden said.
So why is China’s reaction so callous?
The view of some China watchers is that the national security-minded President Xi Jinping is restricting economic activity and working counterproductively, keeping away the money Beijing claims it is trying to attract.
Christopher Bedol, deputy director of China research at Gavekal Dragonomics, said: “The central issue this year is that the leadership has given officials vague, high-level instructions to balance economic development with national security. That’s it,” he said.
“If officials are unsure of what leadership wants, they are likely to delay action until more information becomes available, paralyzing policy, even if it comes at a great cost.” It will happen.”
Some say the Communist Party’s deep-seated reluctance to policies that could shift power from the state to the private sector, and a government bolstered by Xi Jinping supporters, may stifle policy debate and hinder response.
Indeed, as the rest of the world has opened up its economies, as China has insisted on maintaining its economy-damaging COVID-19 restrictions for much of last year, Changes in China may take time.
China has shown timely determination in the past, responding comprehensively to growth concerns during the global financial crisis of 2008-2009 and capital outflow concerns in 2015.
Major policy changes are often carefully planned, and such resolutions are usually drafted at the economic meeting in December.
Economists say China needs measures to boost consumer and business confidence, such as tax cuts and government-funded consumer vouchers, but unlike previous slowdowns, it’s a quick fix. He also added that no.
China has hit back at criticism of its response.
Foreign Ministry spokesman Wang Wenbin told the media on Wednesday that “a few Western politicians and media are amplifying and hyping the temporary problems that exist in China’s economic recovery.”
“They will end up getting a real slap in the face,” he says.
Wang’s comments come as Tuesday’s weak economic activity data heightened fears that China could be headed for a deeper and prolonged economic slowdown.
“Knowledge Gap”
The government has also stopped releasing data on record youth unemployment, analysts say, as restrictions on large employers in technology, education, real estate and finance. It is said to be part of signs of a crackdown by the authorities.
Without elaborating, the State Council said on Thursday it would “optimize” the environment for private companies and step up its efforts to attract foreign investment. The private sector accounts for 60% of gross domestic product and 80% of urban employment, officials said.
But Chinese diplomats say there is a growing disconnect between officials calling for investment and a sweeping crackdown on national security that undermines corporate confidence.
One example is the recent anti-espionage law, which has led to raids on some foreign consultancy firms, which has caused a wave of unrest in the foreign business community.
The Commerce Department met with foreign companies in July and said the law provides guarantees for companies doing business in China and should not be of concern, according to diplomats and other people briefed on the meeting. said no. Both declined to be identified.
But the guarantee only highlighted a “significant perception gap” between the government and foreign companies, the diplomat said. The ministry did not respond to requests for comment.
“People are really hearing, ‘We’re not doing business,'” says Lee Smith, a trade attorney at Baker Donelson who previously worked at the U.S. Department of Commerce on trade policy affecting business with China. but only under certain conditions,” he said.
Xu Chenggang, an academic at the China Center for Economics and Institutions at Stanford University, said there may be deeper reasons why leaders are in no rush to take steps to boost confidence in the private sector.
“A long-standing fear of the Chinese Communist Party is that it may be overthrown if capitalism and the private economy grow sufficiently,” Xu said.
Xu said that kind of thinking was prominent under Xi, who swept aside dissent during his 10-year tenure and backed the government after securing an unprecedented third term last year. He said that he had been hardened by a person.
A day after this week’s dismal data, party newspapers published Xi’s speech, warning against the Western capitalist economic model. In his February speech, he made no mention of structural imbalances or how to resolve them.
“We may all have to endure a stagnant economy for a long time,” Xu said.
Reporting in Beijing by Laurie Chen, Yu Lun Tian and Martin Quinn Pollard. By John Geddy.Editing: Robert Barthel
Our criteria: Thomson Reuters Trust Principles.