March 6, 2024 (EIRNS)—China’s chief economic policy officials conducted a lengthy press conference on the sidelines of the Two Session today, indicating that China is prepared to meet any headwinds while facing a very uncertain global environment. They also expressed a great deal of confidence that China had the tools necessary to overcome any obstacles that may be thrown up to hamper their development by the U.S. and its allies, a situation which they realize will not be easily resolved whatever the results of the U.S. elections in November.
The key concept is an escalation of the innovation-driven development. Or the creation of “high-quality productive forces,” lifting the level of production in all areas of the economy. The scientific and technological push is of paramount importance. The Minister of Finance Lan Fo’an noted that the government budget for R&D had increased between 2018 and 2023 by 30%. That budget would be increased by 10% this year, greater than the earlier year-by-year average. This does not include the R&D funding which is also coming from the government institutions and from the enterprises.
NDRC Chairman Zhang Shangjie also explained the role of the “ultra-long bonds” that would be issued to promote the investment in science and technology. This is not a bailout scheme but rather a targeted effort to bring all areas of the economy to a higher platform of technology. The bonds would target scientific and technological innovation projects, projects aimed at integrating urban and rural development, high-quality population development, and food and energy security. In addition, he added, there would be an increase in the issuance of local government “special purpose bonds” and larger government investment this year. There would also be an increase in so-called “hybrid investment” involving public-private partnerships.
Minister Lan said that the government would conduct a “pro-active fiscal policy.” Government spending would be intensified and Treasury bonds that had been issued last year would also be put to use in the present year. The government would also use tax and rate reduction policy to also free up investment funds.
Minister of Commerce Wang Wentao discussed the economic measures that would be taken to carry out this “high-quality development.” He said there would be an effort to encourage enterprises and consumers to replace old equipment and old items of consumption with more updated models, transforming the technology of industry as well as household consumption. In the recent period, he noted, that while the expansion of consumer goods had not seen a dramatic rise, this was not the case in the area of consumer services, where demand had increased substantially. Therefore there would be a conscious effort to expand the consumption of services, for instance, in health care, sports and tourism. China would also open the service sector wider to outside investment, including foreign investment . Specific measures that were planned, Wang said, were to strengthen rural planning and continued urban transformation in the central and western areas of China.
PBOC Chairman Pang Gongsheng noted that in the current situation abroad was “complex and fluid” and that the task of the People’s Bank was to balance risks and growth. He said there would be an appropriate increase in the money supply. At the moment the reserve ratio is at 7%, which he said left room for further cuts. “We will continue to lower financing costs[i.e. interest rates] in a targeted manner,” Pang said. The Bank would also be paying attention to making monetary policy more effective and will be encouraging institutions to better estimate risks. The bank would also see to it that the RMB exchange rate remains stable.
Wu Qing, the head of the China Securities Regulatory Commission, seconded Pang on the issue of watching for risks. Investment and financing are two sides of the coin, he said. “We must ensure an efficient allocation of resources, paying attention to fairness and impartiality.” This involved both “strengthening and tightening up,” he said. He noted that the study of the financial structure “had revealed deep-seated problems.” “We have to give investors a greater trust in the market and raise the quality of investment,” he said. (China has recently seen a retreat from the stock markets by the many small investors who have been taken aback by the hefty reactions toward China from the West, fearful that growth will slow down.) Wu indicated that the Commission would make “a preemptive correction to avoid risks,” pointing in particular to acts that violate regulations, like outright fraud. “We will be tightening regulations and management of the stock, bond and futures market,” saying that the investors must live up to their responsibilities to their companies. This no doubt applies to domestic as well as foreign companies investing in China.
