2024-03-18 23:02:00
Harold Thibault, Beijing correspondent of Le Monde, wrote on Monday that China is seeking a new economic development model. To achieve ambitious economic growth targets, Chinese authorities want to stabilize old economic engines like real estate or infrastructure while making large-scale investments in energy transition or artificial intelligence, he said.
Harold Thibault writes that across China, infrastructure projects like subway lines are either not approved or are on hold. However, China has not given up investing in infrastructure, it just hopes that its spending on infrastructure will be more reasonable. As the economy slows, China is seeking a new economic development model.
The just-concluded National People’s Congress still set an ambitious growth target of around 5%, similar to 2023. To achieve this goal, the Chinese Communist Party hopes to stabilize the old economic engine dominated by real estate. The government is pushing cities to formulate a “white list” of real estate projects and urging banks to provide financing for real estate projects on the “white list.” Chinese President Xi Jinping himself traveled to Shanghai at the end of November 2023 to inspect state-financed residential projects, marking the beginning of the state-backed moderate rent movement.
“Change the track”
At the same time, Xi Jinping, who has gathered all the power in one body, has shouted a new slogan-“new quality productive forces”, which is a neo-Marxist term that means supporting China’s breakthroughs in cutting-edge technological fields. “This term shows that the government really believes that the cutting-edge digital economy and energy transition can be an accelerator for economic growth,” said Wang Huiyao, founder of the Center for China and Globalization, a Beijing-based think tank.
Harold Thibault writes that China’s economy is not all black, far from it. The streets of Beijing and Shanghai have taken on a futuristic feel with the arrival of BYD’s electric cars. The design of BYD’s electric cars is in no way inferior to that of Tesla in the United States, which has become the world’s largest electric car manufacturer. Moreover, China’s electric car manufacturers are not only BYD, but also Weilai, Li Auto or Xpeng Motors. In addition, China is not satisfied with the field of electric vehicles or the field of solar panels that threaten Western competitors. China also intends to occupy a dominant position in the fields of energy transition, artificial intelligence and digitalization, and even biotechnology.
Xiang Songzuo, president of the Shenzhen Greater Bay Area Financial Research Institute, explained: “People’s consensus is that China’s economy needs to change its track, and China’s economic structure and economic growth model must move towards the high end.”
Xiang Songzuo, the former chief economist of the Agricultural Bank of China, also said: “The key to the government’s logic is that the government hopes that the transition will be smooth and controlled to avoid serious problems such as high unemployment and social dissatisfaction. Stablize”. Xiang Songzuo also said, “The government knows that the old economic engine can no longer ensure the future of the economy, so the government encourages investment in new industries.” To this end, the government plans to issue 1 trillion yuan of super bonds in 2024. Long-term bonds.
no confidence
Harold Thibault believes that this approach to supply policy will encounter problems. It will increase tensions between China and the outside world and intensify trade conflicts between China and other major economies.
In addition, this policy also means that Chinese consumers must cooperate in purchasing these new products and services. However, Chinese consumers currently have no confidence. Chinese people want to know whether tomorrow will really be better than yesterday. They need help increasing their consumption.
To this end, the central government proposed a new-for-old plan on March 13. The central government also required a 25% increase in investment spending in the heavy industry, construction, agriculture, transportation, education and health sectors, but specific details have not yet been announced. Sure.
Chinese leaders hope these measures will be enough to spark a desire to spend. But whether it can be done remains to be seen.
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