China’s economy stabilizing, but facing severe challenges

China’s economy is stabilizing, but its development will “face various challenges that should not be underestimated” next year, the Political Bureau of the Communist Party of China (CPC) Central Committee warned on Tuesday.

“China will fulfil its economic and social development tasks this year as its economy is stabilizing and positive elements are increasing,” said a statement issued after a political bureau meeting, presided over by Xi Jinping, general secretary of the CPC Central Committee.

The statement said China will “maintain continuity and stability in its macro economic policies, make them more targeted and effective, and predetermine or fine-tune these policies at an appropriate time and in an appropriate way.”

Chinese authorities will put “enhancing quality and efficiency of economic growth at the center” next year and they will deepen reform and opening-up, as well as step up efforts to pursue growth driven by innovation, it said.

More efforts are needed to improve macro economic control, boost domestic demand, adjust the economic structure, improve people’s livelihoods, and add vitality to the economic development, according to the statement.

China should also work to maintain stable consumer prices and realize continuous and healthy economic development as well as social harmony and stability, the statement said.

Efforts should also be made to promote a stable increase of investment, optimizing investment structure, boost agriculture production, advancing urbanization, optimize foreign trade structure, and push forward reforms in key sectors, it said.

Authorities will support companies leading major national scientific and technological projects with clear industrial goals, according to the statement.

China will further carry out the country’s regional development strategy by accelerating development of economically underdeveloped regions, it said.

The meeting came ahead of an annual economic work conference, one of the nation’s most important economic events. The conference will set economic policy guidelines for the coming year.

Next year will be of great importance as it is “the first year of implementing tenets of the CPC’s 18th national congress and an important year for laying a solid foundation for completing the building of a moderately prosperous society in all respects,” the statement said.

Data from China’s statistics bureau show fixed-asset investment and retail sales saw strong growth during the first 10 months of the year, indicating that the country’s economy is gradually stabilizing.

Growth of the consumer price index (CPI), a main gauge of the country’s inflation, dropped to a 33-month low of 1.7 percent in October, easing from a 1.9 percent rise in September and 2 percent rise in August.

In addition, the country’s value-added industrial output rose 9.6 percent year on year in October, picking up from 9.2 percent in September and 8.9 percent in August. This is further evidence that the country’s economy is picking up after seeing its lowest growth rate in more than three years.

Despite this, the meeting warned that development will “face many difficulties and various challenges that should not be underestimated” next year.

Members of the Political Bureau called on the CPC and the entire country to carefully observe the problems and risks, strengthen risk awareness and make preparations for upcoming challenges.

Analysts said Tuesday’s meeting indicated economic policies for the coming year.

“China has to be consistent in its macro economic policies since the foundation of the country’s stabilizing economy still needs to be consolidated and the external economic environment remains complex and changeable,” Liu Shucheng, a researcher with the Chinese Academy of Social Sciences.

Wang Tongsan, another researcher with the academy, said expanding domestic demand should focus on boosting consumption, however, investment should not be neglected.

“As there is still the haunting effect of the European debt crisis and the world economy waiting for a stimulant, China needs to overcome the negative influences by boosting its domestic demand and investment at the same time,” Wang said.

Zhang Liqun, an analyst with the Development Research Center of the State Council, a government think tank, said the meeting explicitly expressed its support for companies in leading major national scientific and technological projects with clear industrial goals.

“The key for innovation lies with the companies. They can incorporate new technologies with demand from the market. By letting companies take the lead role, innovation can finally become a driving force for the industry to upgrade,” he said.


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