LDN - Business

China pledges industrial modernization, reiterates past policy goals

[July 18, 2024] By Liangping Gao, Ellen Zhang and Kevin Yao

BEIJING (Reuters) -Chinese leaders reiterated on Thursday their wide-ranging economic policy goals, from modernizing the industrial complex to expanding domestic demand and curbing debt and property sector risks, without detailing implementation steps.

The pledges were published in the official news agency Xinhua's readout of a key meeting of the Communist Party's Central Committee led by President Xi Jinping, known as a plenum, which takes place roughly every five years.

The report said Beijing wanted to expand domestic demand, improve social security, healthcare and income distribution systems and introduce land reforms - promises which have been made in other official documents in the past decade.

The release did not say what changes Beijing intends to implement, but said the "tasks" should be completed by 2029. A document with more detailed policy plans is expected to be published in coming days.

Analysts said that the plenum outcome pointed to continuity, rather than any shifts in policymaking or the economic growth model China pursues.

"There is no clear signal of change in macro policies," said Zhang Zhiwei, chief economist at Pinpoint Asset Management.

Previewed by state media as "epoch-making," the plenum took place at a time of financial hardship for an increasing number of Chinese at home and of heightened adversity against the country's industrial policies abroad.

The world's second-largest economy grew at a slower than expected pace in the second quarter, leaning hard on industrial output and external demand, while the crisis-hit property sector and household consumption continued to disappoint.

China pledged to resolve the deepening imbalance between high investment and output levels and tepid demand more than a decade ago at a similar plenum. However, rather than directing resources towards consumers, it poured money into infrastructure and real estate, accumulating debt at an unsustainable pace.

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A paramilitary police officer stands guard, on the day of the opening session of the Chinese People's Political Consultative Conference (CPPCC), in front of the Great Hall of the People, in Beijing, China March 4, 2024. REUTERS/Tingshu Wang/File Photo

Thursday's communique reiterated China wanted to "actively expand domestic demand," without giving details.

"There still appears to be a tension between policies aimed at boosting economic security and expanding the supply-side of the economy, and those aimed at giving market forces a greater role and rebalancing growth toward consumption," said Julian Evans-Pritchard, head of China economics at Capital Economics.

INDUSTRIAL PUSH

The communique re-emphasized China's quest for "new productive forces", a term coined by Xi last year that envisions scientific research and technological breakthroughs that could modernize manufacturing and kickstart a new era of high growth.

"We will improve the institutions and mechanisms for fostering new quality productive forces in line with local conditions," it said.

The leadership also reiterated its ambitions to reform taxation and the financial system and said China will "enhance the role of market mechanisms in the economy, create a fairer and more dynamic market environment and optimize the efficiency of resource allocation."

The previous wording in official documents was that markets would "play a decisive role" in the economy.

"Restrictions on the market will be lifted, while effective regulation will be ensured to better maintain order in the market and remedy market failures," the report said.

(Additional reporting by Joe Cash and the Beijing newsroom; writing by Marius Zaharia;Editing by Peter Graff and Susan Fenton)

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