Alicia García-Herrero
For more than a decade, the rate of economic growth in the People’s Republic of China (PRC) has been slowing. This trend first accelerated in the wake of the trade war initiated by the United States in 2018, and then even more so after the end of the Zero-COVIDpolicies in late 2022. The causes of the slowdown are both structural and cyclical. Examples of the former include a declining population, while overinvestment—leading to diminishing returns, overcapacity in many sectors, and deflationary pressures—is an example of the latter. The collapse of the PRC’s once massive real estate market has further worsened the country’s economic outlook since 2021. Considering these challenges, there was hope that the Third Plenary session of the 20th Central Committee of the Chinese Communist Party (CCP), held from July 15–18, would introduce structural reforms (China Brief; July 23, July 27).
Prior to the plenum, analysts focused on three possible reforms that could revitalize the PRC’s domestic economy: reducing the Party-state’s involvement in the economy to empower the private sector; fostering domestic consumption to reduce reliance on exports; and rebalancing away from the manufacturing sector and toward consumption as a driver of growth. The reforms introduced at the plenum disappointed on all three fronts and indicated that PRC President Xi Jinping has no intention of changing the overall direction of his economic policies. A string of weak data in the interceding months has finally persuaded the leadership that stimulus measures are necessary, yet a series of press conferences making vague announcements of further stimulus has done little to assuage concerns. It appears that further announcements will only be made at the end of the National People’s Congress Standing Committee meetings, which will likely be held at the end of the month (South China Morning Post, October 15).
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