How does the shift towards a domestic demand
The 2023 Chinese Central Economic Work Conference (CEWC) recently concluded, highlighting a stability-focused pathway for the nation’s 2024 economy.
Key directives include shifting from export-led to domestic demand-led growth, enhancing high-quality production, striving for tech self-reliance while cooperating with trade partners, and maintaining financial discipline.
While echoing previous goals, this agenda emphasises the need for structural reforms, necessitating a departure from entrenched Chinese.
China prioritises “high-quality” economic growth focused on addressing the imbalance between development and people’s increasing demands for a better life.
This shift emphasises domestic demand, specialised self-reliance, and sectors like high-tech and sustainable manufacturing.
Agriculture receives attention for its contribution to GDP and growth, aligning with goals of rural revitalisation and food security, supported by the establishment of “agriculture innovation centers.”
Self-reliance in core technologies has continued to be a repeated and explicit goal for the revival
of the Chinese economy in the backdrop of intensifying tech-related export controls placed by the U.S. and its issue-based and treaty-based allies against China.
Although, the language of the CEWC readout has changed from “self-improvement” in high-technology in 2022 to “strength” in 2023.
China maintains a “prudent monetary policy” and a “proactive fiscal policy,” focusing on financial stability.
The latter was also reiterated at the Central Financial Work Conference that took place just a month ago and has now become part of the implementational mandate of the newly
established Central Finance Commission. Under ‘proactive fiscal policy’, in the past year, China has mobilised tools such as tax rebates for medium and small enterprises, as well as interest rate discounts for local governments.
This is to enable them to alleviate some of the debt stress and continue to invest either in keeping employees on a regular payroll or in the unhindered development of infrastructure.
Fiscal tools like tax rebates and interest rate discounts aid small enterprises and local governments in managing debt and sustaining infrastructure development.
Efforts to ease local government debt include a special bond issuance for post-disaster recovery.
However, the local authorities are warned to embrace frugality and stricter financial discipline due to escalating debt burdens, reaching around $60 trillion.
The emphasis is on “fiscal sustainability” rather than bailouts.
Monetary policy aims for stabilised liquidity levels, avoiding infusion despite past promises of an economic boost.
How is China strategically addressing the challenges?
The first key area is dual circulation.
As global demand has continued to decline amidst heightened sentiments of protectionism and ‘de-risking’, the country is now looking inwards to boost domestic consumption and only allow for a complimentary relationship with international demand.
Chinese President Xi Jinping has referred to this as the “New Pattern of Development,” and is an ambitious structural reform for a country known as the world’s manufacturing hub.
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