Post-pandemic recovery has remained elusive this year for China’s political leaders, as long-standing structural problems in the economy came to a head and consumers tightened their purse strings. Now, as a second year of recovery is fast approaching, the government is promising to kick consumption up a notch to make it the last.
China’s top decision-making body, the Politburo, has pledged to boost domestic demand and stabilise foreign trade in 2024, Reuters reported on 8 December. “Efforts should be made to expand domestic demand and form a virtuous cycle of mutually promoting consumption and investment. We need to deepen reforms in key areas and continuously inject strong impetus into high-quality development,” Xinhua news agency said.
These pledges set the tone for the Central Economic Work Conference, which takes place each year in mid-December. More specific policy points are expected to be hammered out there, but reports from the Politburo meeting over the weekend suggest that policymakers will prioritise addressing major risks in the economy (the housing bubble and mounting local government debt) and providing support for emerging sectors.
On 11 December, the State Council separately issued a spate of measures designed to “accelerate the integrated development of domestic and foreign trade”. The 18 measures include strengthening the protection of trademark rights of foreign enterprises and expanding the sale of high-quality foreign products in e-commerce platforms, shopping malls and supermarkets. The State Council also said it will increase relief efforts for domestic enterprises affected by “unreasonable” foreign trade restrictions, like smartphone maker Huawei.
These moves from the Politburo and State Council come after China’s consumer prices fell at their fastest in three years this November, a troubling sign for the country’s continued economic recovery in the new year. The Consumer Price Index (CPI) fell 0.5% year-on-year, steeper than the predicted 0.2% drop, suggesting consumer demand could continue to weaken under the weight of deflationary pressure.
Many analysts believe China is still on track to meet its growth target of 5% for the year, but given that this compares to an incredibly weak economic year due to COVID, hitting this target might not be a cause for major celebration. Businesses both foreign and domestic will be watching closely to see if the Politburo and State Council will be able to deliver a full return to pre-COVID form in 2024.
