With China’s economic plenum still unscheduled, observers worry politics remain in command

Beijing’s reluctance to go full throttle in boosting economic growth – combined with an absence of clear directives for reform – could further dampen an already dreary climate, experts and foreign business groups warned.

China’s subdued economic recovery, its restraint in employing strong stimulus measures and mixed policy signals continue to weigh on both domestic and foreign investment as well as consumer confidence, they said.

Despite those concerns, during Wednesday’s meeting of the Communist Party’s Politburo – its first of 2024 – the 24-member decision-making body indicated the balance of attention will be placed on politics, as the People’s Republic prepares to celebrate its 75th anniversary in October.

Top priorities will include party discipline and cohesion, according to a statement issued after the meeting, though “high-quality development” was also emphasised.

National security and upholding unity under the party and central government’s leadership remain the most crucial goals, while other matters such as youth employment and economic rejuvenation seem to rank lower, observers and foreign chambers said.

“Businesses do not know where they stand due to mixed messaging from the Chinese government, which is contributing to a growing sense of uncertainty, further eroding confidence in this important market,” said Adam Dunnett, secretary general of the European Union Chamber of Commerce in China.



China’s slow road to economic recovery after dropping its zero-Covid policies

China’s slow road to economic recovery after dropping its zero-Covid policies

A lack of coordination between different ministries with different agendas has often led to contradicting actions, he added.

Disparity between words and action has often confused the market. Beijing has frequently pledged support for the private sector as well as foreign businesses, but concrete aid has at times eluded those affected. Regulatory crackdowns, a revamped law on spying and investigations related to national security have also had a chilling effect.

Moreover, Wednesday’s statement made no mention of the already deferred third plenum of the Communist Party’s Central Committee, typically held in October. The regular session is an important part of the five-year political cycle, and is conventionally used to draw the blueprint for economic policy.

Any delay in delivering on promises made to the foreign business community will decrease trust
Jens Hildebrandt, German Chamber of Commerce in China

“The unexplained delay in holding the much-anticipated third plenum will further undermine already low business and consumer confidence,” said Trivium China, a policy research group, in a report on Wednesday.

“That will make it more difficult for the economy to consolidate its nascent recovery.”

German companies would like to see stimulus and reform to be prioritised to boost the economy, said Jens Hildebrandt, executive director of the German Chamber of Commerce in China.

Hints suggest private-sector confidence high on China’s 2024 agenda

“Any delay in delivering on promises made to the foreign business community will decrease trust among German investors,” he said. “A third plenum that delivers clear signals on how China plans to address its structural economic challenges and shape its future would be greatly appreciated.”

The country is currently attempting to scrape numerous economic barnacles from its hull as it navigates its post-pandemic recovery.

“Despite some reassuring signs … such as the temporary introduction of visa-free entry to China and the extension of some tax policies”, said Dunnett of the EU chamber, “more is needed to address other issues. Chinese policymakers have rhetorically signalled their intent, it is an open question as to how far regulators are willing to go.”

Lip service is paid to the private sector and foreign investment, said Jean-Pierre Cabestan, emeritus professor at Hong Kong Baptist University, but in reality state-owned enterprises remain the major pillars of the economy.

“Social stability is the priority above economic development,” he said, adding “the real estate crisis and the lack of decisive action to relaunch the economy will make [private and foreign investors] wary.”

Rather than the pace of China’s meetings, US companies are more focused on concrete steps the government takes to improve the business climate, said American Chamber of Commerce in China chairman Sean Stein.

“What we’re concerned about is how China is implementing the 24 reforms that were announced last August, and how the central government and local governments are working together to create [a more conducive] environment.”

Additional reporting by Frank Chen



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