In 2016, an unnamed “official” rose to international prominence by pushing the long-term economic thinking of China’s top leaders, telling state media that the government should prioritize leveraging cuts rather than juicing GDP growth. needed.
The man, widely considered to be President Xi’s right-hand man – China’s Deputy Prime Minister Liu He and his team – has remained relatively calm since then. But in a lengthy interview with Xinhua over the weekend, the “official person” reappeared. As with “official” government bodies, the mysterious figure projected confidence in the economy, despite growing pessimism among economists. If there is still any hope of massive policy easing, this mysterious figure made it clear that it is probably unlikely.
In a Xinhua article titled “Ten Questions on the Economy”, official data said policymakers are determined not to flood the economy with stimulus while cutting reliance on assets and debt. The article underestimated growth risks, saying that job creation, consumer prices and international trade also paint a picture of a stagnant economy. Rather than fueling the economy, supply-side reforms to eliminate overproduction in polluting industries and curb the housing market remain the main focus.
While this did not rule out policy reform – the article indicated that more measures were coming to boost internal demand – the tone of the interview was rather optimistic. This contrasts with the more pathetic view of economists who pegged China’s growth below 5 percent next year amid power outages, housing restrictions and a periodic covid outbreak.
The hawkish stance – focusing on long-term structural issues, rather than reacting more to short-term changes – is in line with the tone of the “authoritative” when they first emerged a few years ago. In May 2016, as the economy bounced back from the bursting of the stock bubble, the People’s Daily published a full-page interview with an “official person”, warning that an L-shaped recovery (U- or V-shaped) Instead of) rebound) is the new normal. The person said China should put deleveraging ahead of short-term development and needs to be proactive in tackling rising bad debts rather than delaying or hiding them.
The previous article briefly sank the stock market. By the second half of 2016, the PBOC began raising interbank rates to tighten policies. After a low of about 2.7 per cent in August 2016, ten-year yields rose steadily, rising to over 4 per cent by November 2017.
This time, while hopes of an immediate RRR cut have subsided, most economists still expect some form of relaxation in the coming months.
The risk, however, to consensus thinking is that Beijing’s tolerance for slow growth may be greater than previously thought. The fact that China is moving forward with a property tax despite the housing slowdown underscores Beijing’s focus on quality over quantity of GDP. And the official person made sure the message was coming out.
(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)