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President Xi admits ‘uncertainty’ in China’s economy
BEIJING, Nov 2, 2018 (BSS/AFP) – President Xi Jinping sought to reassure
Chinese entrepreneurs at a meeting Thursday with promises to prop up private
firms with lower taxes and more funding, as he acknowledged uncertainty in
China’s economy.
Xi held the meeting amid signs that the world’s second largest economy is
losing steam as it faces a trade war with the United States, a massive debt
buildup and a weakening currency.
Though China’s overall economic status is stable, “uncertainty in our
country’s economic development has clearly increased, downward pressure has
grown, and companies are facing more difficulties,” said Xi, according to the
official Xinhua news agency.
Xi, who has voiced his support for private firms multiple times this year,
made several policy suggestions, including lowering corporate taxes and
resolving funding challenges faced by companies.
He also proposed that provincial governments raise their own “rescue
funds” to bail out companies.
Xi also emphasised creating a fair and competitive business environment
and tasked local governments with “correcting” the behaviour of certain
government departments, as well as large companies that use their dominance
to “bully” smaller firms.
-Sapping confidence-
US tariffs on half of what China exports to the United States have sapped
confidence in Beijing’s ability to maintain current growth levels.
Analysts say that the country’s overleveraged companies and local
governments are likely to put a further drag on expansion.
It was the second meeting this week in which Chinese leaders vowed to
protect the economy.
Xi presided over a conclave of the Politburo on Wednesday, with the
leadership saying China had “achieved overall economic stability with steady
progress” in the first three quarters but more work needed to be done to help
the private sector.
A key indicator on Wednesday showed that Chinese factory activity slowed
in October, the latest sign that the economy is losing momentum.
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The Purchasing Managers’ Index (PMI) came in at 50.2 for the month, down
from 50.8 in September, the National Bureau of Statistics said.
A separate survey calculated independently by the Caixin media group
showed factory activity at 50.1 in October, up from 50 a month earlier, which
had been its lowest level for 16 months.
A number under 50 indicates a contraction.
Further complicating the picture is the falling price of the yuan against
the dollar, with the unit at its lowest level in a decade.
A weaker yuan makes Chinese exports less expensive overseas, offsetting
some of the higher costs brought by the US tariffs. But it has also driven up
the cost of importing critical raw materials from abroad and threatened
domestic confidence in the currency, driving some investors to move assets
overseas.
As the trade war rages on, China is also trying to build business
alliances with other countries and entice more foreign enterprises into its
markets.
Next week, China will host an enormous import fair in Shanghai featuring
thousands of international companies, including General Motors, Ford,
Microsoft, and Foxconn.
Xi has called it “no ordinary exhibition” and a sign of China “actively
opening up markets”.
But the playing field is far from level for international firms in China,
critics say.
In an annual report released by the European Chamber of Commerce in
September, foreign companies listed a myriad of woes, including preferential
treatment for monopolistic state-owned companies, market access barriers and
government red tape, as well as intellectual property protection and forced
technology transfer.
“China’s old economic order is still lingering in society,” said Mats
Harborn, president of the EU Chamber, noting that the Communist Party’s
determination to make state-owned enterprises “stronger bigger and better”
was actually detrimental to the development of China’s economy.
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