Chinese political leadership shows growing concern about the economy

12:28 by Hubert Fromlet, Kalmar

The state of the Chinese economy has been worsening in recent quarters. There is no doubt about this – despite all statistical shortcomings. Which statistical indicators should I use? Despite many years of China research, I cannot discover any economic indicator that really could help me practically to come to applicable conclusions. May be with one or two exceptions in bad times coming from the central bank PBoC: cuts of the deposit reserve ratio for the commercial banks (which actually happened lately in April: https://www.ceicdata.com/en/indicator/china/reserve-requirement-ratio ) or

cuts of the (over-five-year) loan prime rate (LPR, http://en.people.cn/n3/2022/0521/c90000-10099686.html).

Sure, the current economic problems are not only “Made in China”. However, the corona lockdown in Shanghai and some other metropolitan megacities caused a lot of economic losses. The lockdowns were/are certainly based on decisions by China’s political leadership, headed by President Xi Jinping.

Instead of statistics, in my view, the best information about the economy can (currently) be obtained by China’s two main politicians, President Xi Jinping and particularly Prime Minister Li Keqiang, by their comments on the Chinese economy in general terms. Two fresh examples underline this analysis approach.

The Politburo, chaired by President Xi, on April 29: “We will strengthen macroeconomic policy adjustments to stabilize the economy, and strive to achieve the expected economic and social development goals for the full year”.

Prime Minister Li on April 14: “Since the announcement of the policy package, government departments have all taken proactive steps. We must redouble our efforts, in particular to accelerate policy implementation.”

The two examples above demonstrate that the two strongest political leaders sent clear signals of concern already six à eight weeks ago. On May 31 came the answer with 33 measures summarizing the needed stimulation of the economy by applying fiscal, financial, investment and industrial policies (https://www.reuters.com/markets/commodities/china-unveils-detailed-stimulus-policies-support-virus-hit-economy-2022-05-31/).

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

PS: After having dealt with a major project and having benefited from the enjoyable and relaxing Swedish summer, I will be back at the end of August. All the best to you all, Hubert

 

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