How to accurately identify the features of China economic recovery thus far has been clarified by the Communist Party of China’s (CPC) top decision-making body. Recently, the Politburo of CPC Central Committee met to analyze the current economic situation and plan the economic work for the second half of the year. “After a stable transition of epidemic control, economic recovery is a process of wave-like development and twisty progression,” the Politburo said.
This assertion, which serves as a significant guide to clearly understanding the complex situation of China’s current economy, overcoming a lethargic mentality and pessimistic thinking, and promoting a resolute and vigorous attitude to return the economy to the right track, deserves careful consideration.
Earlier, there were diverse opinions on how to assess the current economic situation in China. Many were simply observing, while others even began to question the priority of economic development in decision-making. The recent Politburo meeting was indeed timely. The meeting was rich with highlights, including revisiting “counter-cyclical adjustments,” proposing effective ways to prevent and resolve local debt risks, formulating comprehensive debt strategies, and considering employment stability from a strategic height. This was a true “soothing pill.”
The meeting not only calmed the private sector and all other market entities, but also sparked reflection in various regions and departments. The public anticipates more of these “soothing pills.”
The importance of the judgment that “economic recovery is a process of wave-like development and twisty progression” lies in its profound answer to the perplexing question of “why the economic recovery is not meeting expectations.” It points out a bright prospect while also revealing the unavoidable difficulties and challenges, radiating the light of dialectics. Since the end of last year, the fixed phrase “with the optimization of epidemic prevention and control policies,” combined with expectations of a rapid economic turnaround, frequently appeared in speeches and research reports. Now that data for the second quarter and the first half of the year have been disclosed, a wave of pessimism has once again spread. The direct cause of excessive optimism and blind pessimism is the oversimplified notion that an economic recovery would surely come about with the end of China’s strict epidemic prevention control policies, which overlooks the long-term deep-seated contradictions of China’s economy. Some financial officials believe that, in the context of a global economic downturn, China’s current economic growth rate is commendable. This view certainly has merit, though it shouldn’t become an excuse for complacency. After all, for struggling enterprises and tens of millions of unemployed people with no foothold in life, the current economic recovery is wanting.
The Politburo meeting resulted in a sober estimation of the difficulties and challenges facing China’s economy. As the meeting pointed out: there is a shortage of domestic demand; some businesses are struggling; there are many potential risks in key areas; and the external environment is complicated and severe. In response, the Politburo has made policy deployments in three areas: expanding domestic demand, boosting confidence and preventing risks. The Politburo also emphasized that China’s economy has tremendous resilience and potential, and its long-term positive fundamentals have not changed. This is undoubtedly the ultimate source of our confidence.
Of course, maintaining resilience and unleashing potential are not to be taken for granted, and the fundamental state of affairs cannot be sustained without effort. The real issues must be confronted and resolved. The pressing task is to swiftly implement the spirit of the Politburo meeting, to fully utilize the policy space and pinpoint the direction of force, to further energize the economy, improve people’s livelihoods, and effectively reverse the lingering situation that has recently appeared.
At present, we must be highly vigilant for the tendency to implement directives with more directives. Under the central government’s supervision, relevant departments and local governments will undoubtedly issue a series of documents. However, the emphasis is on implementation, not on issuing and forgetting. To verify whether departments and regions are genuinely in sync with the central government, it’s not just about the number of documents issued, but more importantly, the effectiveness of their implementation. Amid an uphill economic recovery and relatively weak expectations from all sectors, resorting to empty rhetoric only wastes precious time. Concrete measures must be taken to stimulate the supply side and expand total demand.
The private economy is paramount in the current economic recovery, and the operating status of private enterprises will be the best gauge of policy effectiveness. Prior to the Politburo meeting, the CPC Central Committee and the State Council issued Opinions on Promoting the Development and Growth of the Private Economy. These policy statements are beneficial in fostering a positive social atmosphere that respects and supports the private economy. At present, many advocate for strict punishment of those persistently spreading false statements denigrating the private economy. Such indignation is understandable, but dealing with these issues should strictly follow the spirit of the rule of law. In reality, falsehoods cannot suppress truth. As long as the voices promoting the development and growth of the private economy prevail, opportunistic elements in public opinion will naturally restrain themselves. Recently, a scholar suggested that instilling confidence in private enterprises requires significant theoretical breakthroughs and proposed no longer classifying businesses based on ownership, blurring the distinction between state-owned and private enterprises, and making substantial progress in correcting ownership discrimination. This suggestion is worth serious study.
In the process of wave-like development and tortuous progression, it’s crucial to balance both immediate relief and long-term remedies, giving equal weight to short-term and long-term considerations. Short-term stimulus policies are indispensable, but structural reforms should not be neglected. Currently, structural reforms are often viewed as “distant water won’t put out a nearby fire,” and suggestions for reforms are rarely seen in the advice given by some renowned scholars. In their eyes, perhaps advocating for structural reform seems overly idealistic, while focusing on fiscal stimulus or monetary easing is the pragmatic realist’s approach. However, as informed observers point out, structural reforms can also yield immediate results. The key is to identify the right breakthroughs. Equalizing basic public services for the rural population migrating to cities should be a top priority. Significant change in just one or several areas could potentially boost both supply and demand, yielding unexpectedly positive effects on regional and even overall development. The deepening system reform issues China faces, from another perspective, represent growth opportunities that developed economies no longer have. This is the true “latecomer’s advantage.” The key is how to harness it effectively.
This year marks the 10th anniversary of the passage of the Decision on Some Major Issues Concerning Comprehensive and Far-Reaching Reforms by the Third Plenary Session of the 18th Central Committee . The decision’s proposal to “allow the market to play a decisive role in resource allocation and better play the role of the government” was once hailed with jubilation by experts, scholars and the business community. A swift decade has passed since. At this juncture, it is necessary to revisit the spirit of the plenary session. As long as we adhere to the path of reform with unwavering resolve, the waves and twists on the road ahead will be minimized to the greatest extent, further solidifying the foundation for long-term growth.
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