China’s economic policy for 2018 in the pipeline as key meeting opens

2017-12-18
Xinhua

BEIJING — Chinese leadership opened the annual economic work meeting on Dec 18, drawing plans for 2018 with a target of high-quality growth while minimizing financial risks.

The Central Economic Work Conference will review the economic work of the past five years, and make policy priorities for 2018 with a focus on implementing the decisions from the 19th National Congress of the Communist Party of China.

Observers believe that the decisions to be made at the meeting will reflect China’s new development concept featuring high-quality development.

The event is being closely watched as it marks the first economic work conference since the 19th CPC National Congress was held in October at which the leadership declared China’s economy has been transitioning from a phase of rapid growth to a stage of high-quality development.

The economic agenda for 2018 will focus on deepening supply-side reform, invigorating market participants, applying rural revitalization strategy, pushing coordinated rural-urban development and all-around opening up, observers say.

The work for the next year will also be aimed at helping improve people’s living standards, building a housing mechanism with lasting effects, and supplying more high-quality ecological products.

Language on monetary and fiscal policy will be under scrutiny for even minor changes. China set the tone of its monetary policy in 2017 as prudent and neutral, keeping appropriate liquidity levels but avoiding excessive liquidity injections.

In the lead-up to the meeting, the Political Bureau of the CPC said the country will seek solid progress in curbing major risks, eradicating poverty and controlling pollution, the “three tough battles” for 2018.

China’s GDP expanded 6.9 percent year on year in the first three quarters, above the government’s target of around 6.5 percent for this year.

The economy has shown structural improvements, with new models contributing more than 10 percent to the economic growth, and the growth rate of residents’ income outstripping the overall economic growth.

Manufacturing data show the economy remains in a sweet spot and points to continued resilience in China’s growth, said Tom Orlik, Bloomberg’s Chief Asia Economist.

Backed by better-than-expected growth, the International Monetary Fund (IMF) has revised up its forecast for the fourth time this year, to 6.8 percent for 2017 and 6.5 percent for 2018.

The Asian Development Bank (ADB) also revised up China’s growth prospects for 2017 from 6.7 percent to 6.8 percent as household spending held steady.

The world’s second largest economy, however, still faces a complicated global environment and domestic structural conflicts, potential risks in the financial system, and disparities by industries and regions.

The IMF recently warned of China’s rapid build-up of credit and risky lending moving away from banks toward less-regulated parts of the financial system known as “shadow banking.”

“The system’s increasing complexity has sown financial stability risks,” the IMF said, advising China to take measures such as strengthening systemic risk oversight and improving regulation.

In the past year, China’s leaders have made financial stability one of their top priorities and have made notable progress in their bid to bring to heel some of the major “gray rhinos,” generally shadow banks that pose significant threats to the economy.

“Given the size and importance of the Chinese market, with the world’s largest banks and second-largest stock market, that is welcome news for China and the world,” Ratna Sahay and James P. Walsh, two senior IMF officials, said in a recent blog post.

Global ratings agency Moody’s this month predicted a stable outlook for Chinese financial institutions through 2018, citing strengthening regulations and steady economic growth.

Over the past four years, China’s economy has expanded by an average annual rate of over 7 percent, outstripping the 2.6-percent average global growth and the 4-percent growth of developing economies.

It contributed over 30 percent of global economic growth, and is seen as powerhouse and anchor of the global economy.

The Chinese leadership has reiterated that China will not close its door to the world, and will only become more and more open, with its business environment becoming more open, transparent and regulated.