BEIJING – As imbalances in China’s economy deepen, pressure is growing on Beijing to deliver on the decade-old policy promises it revived at an agenda-setting leadership meeting last week, having failed to achieve major breakthroughs in recent years.
Faced with deflationary pressures and weak demand at home and increased hostility towards its export dominance abroad, the twice-a-decade political event, known as a plenum, chose to point towards policy continuity rather than any structural shifts.
Chinese stocks fell on July 22, even as the central bank surprised markets with rate cuts.
The plenum “has clearly not been a game changer in terms of the reforms announced, especially given the challenges ahead both externally and domestically,” said Ms Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis.
“It seems as if the Chinese authorities prefer to muddle through while doubling down on their convictions. The problem is that there is now much more mud to deal with.”
While economists would welcome progress on pledges such as improving the business environment for the public sector, giving markets a decisive role in allocating resources or increasing tax revenues, they are not convinced that will occur.
The 2024 plenum agenda included limited deviations from the one published in 2013, which at the time fuelled a great degree of confidence in China’s future expansion and positioned President Xi Jinping as a reformer in the eyes of global investors.
But many economists argue China has since made steps in the opposite direction on market liberalisation and the private sector, having tightened capital controls after a stock market rout in 2015 and with regulatory crackdowns on tech, finance and other industries in recent years.
China’s pledges to boost domestic demand, reform a Mao-era internal passport system blamed for huge rural-urban inequalities, strengthen rural land rights or improve social security also date back to at least 2013.
In reiterating a policy agenda with a mixed track record, Beijing faces a credibility deficit it did not have a decade ago and will need to act with more urgency if it wants to lift business and consumer sentiment from near-record lows, economists say.
Unusually for a plenum, as they tend to be vague on implementation timelines, Beijing committed to meet its policy goals by 2029.
But the concrete deadline failed to inspire investors.
“It’s not simple and easy to change market expectations,” said Mr Zong Liang, chief researcher at state-owned Bank of China.
“Having gone a little bit too far, now you want to reverse course, but people are not confident.”
Mr Zong said the plenum set out a positive path forward, but worried that a “troublesome external environment”, especially if former president Donald Trump wins the US election, could weaken reformist voices in China.
Source link : https://www.straitstimes.com/asia/east-asia/china-faces-growing-scepticism-over-its-commitment-to-decade-old-policy-pledges
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Publish date : 2024-07-22 06:57:45
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