Economy Aug 04

China Politburo: Top priority now is to expand domestic demand

Top leaders say the economic situation is still severe, so officials need to prop up market players and stimulate business via innovation and activities that work on the micro-level

China Politburo: Top priority now is to expand domestic demand
A job seeker talks with a recruiter of a company during a career fair in Zhengzhou, in China's Henan province. China's economy may have rebounded sharply after a historic contraction from the coronavirus outbreak, but millions of job seekers face a bleak situation, with businesses still reeling and household savings on the decline. Photo: Wang Zhao / AFP.

(ATF) On August 3, the People's Daily announced measures issued by the Politburo, from their meeting on July 30. Besides the usual maxims, structural reform has been pushed as the "main line" for the next six months. But the strategic focus is on expanding domestic demand, and protecting and stimulating market players – because the economic situation is still "severe".

A list of key points were given to help achieve this – propping up struggling companies, improving employee rights and pushing innovation and turning macro-economic policy into activity that works on the micro level in the real economy.

The top priority of party officials is boosting domestic demand – to stimulate consumers and expand investment demand.

“China’s external environment has undergone significant changes, and it is urgent to build a new development pattern to solve the problem,” Li Jiangtao, deputy director of the Public Administration Teaching and Research Department at the Central Party School, said.

He An, head of the Economic and Trade Office at the Industrial Economic Research Center of the China Federation of Industrial Economics, said that total retail sales of consumer goods in China last year exceeded 40 trillion yuan. "The total amount is huge but the per capita level is still relatively low. China needs to expand into new space for domestic demand."

In terms of investment, there were still huge opportunities in the level of urbanisation, he said, which appeared to be lagging in a sense, as the gap between the eastern, central and western regions "need to be narrowed.”

Tremendous pressure

Yu Jing, director of the Enterprise System Office at the Chinese Academy of Social Science's Institute of Industrial Economics, said from the perspective of development status, “in the first half of this year, due to the impact of the epidemic and external uncertainties, many market players in China are facing tremendous pressure on their production and operations.”

Given this, "the development of more than 100 million market entities in our country must continue to digest and solve the old problems accumulated in the past, but also face the new problems that have emerged under the new situation. It is especially necessary to stimulate vitality, give full play to the entrepreneurial spirit of innovation, and force oneself from the adverse environment – and accelerate the transformation and upgrading of enterprises."

A series of relief policies to benefit enterprises has been introduced to help businesses reduce costs and increase income, solve financing problems, and strive to ensure the stability of the industrial supply chain.

Yu Jing believed that in the second half of the year, it is necessary to ensure that macro policies are implemented and effective, and to properly resolve the issue of effective links between macro policies and micro policies. Specifically, it is necessary to support market entities and continue to implement the enterprise policy that has achieved results. At the same time, improve the regulatory system for the flow of new financing to ensure that funds are used by industries, so that market entities, especially small, medium and micro enterprises, have a real sense of policy gains.

“Many market players, especially small and medium-sized enterprises, are a viable force to ensure employment, benefit the people’s livelihood, and promote healthy operation of the economy. Especially in the context of the epidemic, ensuring market players is to ensure social productivity, which is the achievement of the annual economic and social development goal. A strong cornerstone of the mission.”

Fu Baozong, director of the Industrial Research Office at the Institute of Industry of the China Macroeconomic Research Institute, believes market entities are also important participants and promoters of technological innovation. Quality development would inject vitality, he said.

Foreign trade

The Ministry of Commerce said it fully supports foreign trade companies expanding online channels for foreign trade and the development of new business formats such as cross-border e-commerce, overseas warehouses, and comprehensive foreign-trade service companies. It also backed expanding pilot market procurement trade methods, and the exports of small, medium and micro enterprises. 

The ministry encourages the central, western and northeastern regions to utilise their advantages and undertake labor-intensive foreign trade industries. It said: “Give full play to the role of foreign trade transformation and upgrading the trade base, and enhance the leading role of large-scale backbone foreign trade enterprises.”

The Foreign Investment Law and its regulations have been formally implemented this year. Officials believe they have reduced the "negative factors" which led foreign companies to leave China or reduce investment.

Relief fund for migrant workers

China's official statistics data only give figures on urban unemployment and does not document the number of rural unemployed or migrant workers, thought to number in the tens of millions. But it is clear that officials at a number of levels are concerned about the well-being of such people who have lost their job because of the economic downturn caused by the coronavirus.

Liu Yuanchun, vice president of Renmin University of China, said that by keeping the bottom line of the “six guarantees”, the basic economic situation can be stabilised – by laying a solid foundation for building a well-off society in an all-round way. 

“The Party Central Committee and the State Council attach great importance to the work of stabilising employment and protecting the people’s livelihood,” Liu said. 

This week, all over China, different regions have announced regulations for workers, such as mandatory holidays and health benefits. Each region has a different approach to the issue.

Jiang Wei, deputy director of the Department of Social Assistance of the Ministry of Civil Affairs, said that security work in the second half of the year would focus on "covering, connection, and emergency", moderately expanding the coverage of the minimum living security, and strengthening the assistance for uninsured people in difficulties.

“Especially for uninsured workers such as migrant workers who are unable to return to work due to the epidemic, have no labor income for three consecutive months, have difficulty living and cannot be covered by unemployment insurance policies – they can be included in the minimum insurance coverage upon their own application. The local or habitual residence will issue a one-time temporary relief fund to help them tide over life difficulties."