From the top of the government, China is heavily pushing a plan to fix the country’s stagnant economy and reverse the damage from a decades-long housing bubble.
The program has a new slogan, introduced mainly by Xi Jinping, the country’s top leader, as “new, quality productive forces”.
But it has features familiar from China’s economic playbook: The idea is to spur innovation and growth through massive investment in manufacturing, particularly high-tech and clean energy, as well as massive spending on research and development. And there were few specifics on how the government hopes to persuade Chinese households to reverse a prolonged slowdown in spending.
Premier Li Qiang, the country’s No. 2 official, unveiled the plan on Sunday in a speech to executives from around the world who had gathered in Beijing for the country’s annual China Development Forum. “We will accelerate the development of new, quality productive forces,” he said at the opening ceremony of the forum.
Started in 2000, the China Development Forum is designed to explain to corporate leaders the economic plan drawn up by the prime minister every year on March 5.
In previous years, the forum included a long, closed-door discussion with executives, where the prime minister asked many questions. But the prime minister’s chat, usually on the last day of the event, was canceled this year without explanation, prompting some chief executives to skip Monday and schedule their private jets to fly out on Sunday night.
The China Development Forum also featured a fairly open discussion of economic policies by Chinese leaders and corporate ministers the day before the opening ceremony, but that too did not take place this year.
Evan Greenberg, chairman and chief executive of the Chubb Group, a major US insurance company, co-hosted the opening of the conference on Sunday. The list of attendees included Tim Cook, Apple’s chief executive, who was in China last week trying to revive iPhone sales, as well as Mike Henry, the chief executive of BHP, the Australian mining giant.
In his speech, Mr Li called for boosting production and increasing services and consumption. He repeated calls for Chinese households to replace old cars and home appliances, but did not say whether the government would provide money to help them.
Consumer spending in China was weak as apartment prices fell by a fifth over the past two years, according to semi-official data. The number of housing transactions has also plummeted. Homeowners complain they have to cut prices by as much as half if they want to find buyers.
Real estate accounts for 60 to 80 percent of household assets, much higher than in most countries. Thus, the near-collapse of the housing market has left many families feeling less affluent and struggling to meet mortgage payments.
Mr Lee touched on real estate and a related problem, local government debt, only briefly during a discussion on risks. Over the past four decades, he said, “dangers and challenges have not defeated us.”
Mr Li said the government would look to provide legal residency to more than 250 million people from rural families who have moved permanently to cities but do not have the qualifications to live there. Cities provide much higher medical, pension and educational benefits than rural areas.
But Mr. Lee did not explain how already cash-strapped city governments could afford to provide these costly benefits.
The mantra of “young, quality productive forces” is partly aimed at assuaging concerns in China and abroad that US-led restrictions on high-tech exports to China could hamper its growth. In briefings before the forum, officials emphasized that manufacturing accounts for a large part of the country’s economy — more than double the share in the United States.
“In China, you can see that it is steadily rising and much higher than in other countries,” Shi Dan, director general of economics at the Chinese Academy of Social Sciences, a government ministry, said in a briefing.
China’s trading partners worry that more manufacturing will likely lead to more Chinese exports. The European Union is preparing to impose tariffs on electric cars from China. The European Union Chamber of Commerce issued a report last Wednesday warning that the policy could lead to deindustrialization in Europe, as European companies may not be able to compete with government-backed Chinese enterprises.
Companies that depend on selling goods to China to build housing and infrastructure are closely watching the redoubled emphasis on high-tech manufacturing.
Andrew Forrest, executive chairman of Fortescue Metals Group, an Australian iron ore mining giant, said China will inevitably continue to spend heavily on infrastructure, including roads, railways and ports.
“The infrastructure situation will not really be a change from that, it will just be an emphasis on construction,” he said in an interview.
Chinese officials have made many promises to stabilize the housing market, but have offered few details on how.
Li Xuesong, another director general of finance at the Chinese Academy of Social Sciences, said in a briefing that local governments could provide more apartments for public sector workers. But he did not address how local governments, many of which are laboring heavily in debt, would pay for those apartments.
After a recent collapse in sales of public land to real estate developers, many local governments have had to cut the salaries of municipal employees and needed help from Beijing to make interest payments. China’s finance ministry has launched a program to help some cities with their debts, provided they cut back on costly but popular infrastructure-building programs.
Helping consumers afford more spending is crucial, Wang Dan, the chief China economist at Hang Seng Bank’s Shanghai office, told an online conference organized by the International Finance Forum, a subsidiary of China’s central bank. . “Direct cash transfer would still be the most efficient way,” he said.
For now, the emphasis in China is on boosting the supply and quality of goods rather than worrying about demand.
“The growth momentum of investment in new driving forces is good,” said Liu Sushe, deputy head of the National Development and Reform Commission.
