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Download this week’s newsletter as a PDF here: CPW No. 30
Dear friends and colleagues,
There will be a CPW Dinner in Beijing on Thursday, October 23, and you are all invited. If you would like to attend, please send me an email by the end of the week. Once I have an idea of how many people will be coming I will book a restaurant and send details to those who have expressed interest in attending.
This week’s newsletter is a bit short as I have several other projects going on at the moment. I will be traveling for the next three weeks and issues will likely be abbreviated over that time
I will be following the Fourth Plenum closely. If you are interested in analysis, reports and/or briefings on the outcomes of the Plenum and its implications for your sector(s) please contact me.
There were further indications this week that the top leadership is willing to accept lower growth as it carries out structural reforms. In speeches in Berlin and Hamburg Li Keqiang said that the government can accept growth below 7.5% “as long as employment is guaranteed, household income raised and quality and efficiency improved.”
Government officials seem increasingly on message on this point. PBOC Chief Economist Ma Jun made similar statements at the Institute of International Finance annual meeting in DC, and reiterated the government will not enact big stimulus while employment remains stable. Meanwhile, at a meeting in Beijing, officials from the PBOC, MOF, MIIT, NBS and Development Research Center stated that growth in 2015 would be around 7%, i.e. half a percentage point lower than this year’s target.
As I wrote in a piece published last week in the Nikkei Asian Review, China’s “new normal” isn’t necessarily bad for business:
“China’s slowdown is likely to lead to a more friendly business environment. This may come as a surprise to multinational companies operating in China that have recently been subjected to an increase in investigations under the country’s anti-monopoly law. Companies are right to complain about heavy-handed tactics by the National Development and Reform Commission, a state agency that has pursued aggressive investigations into alleged anti-competitive behavior. But the high-profile investigations of companies such as Qualcomm, the U.S. semiconductor group, and a local unit of Volkswagen, the German carmaker, should not obscure the fact that the overall trend in China is towards freer markets and less government involvement in the economy.
Since taking control in March 2013, the Xi-Li administration has been very clear in its intention to spur growth through continued economic reforms. Since that time the government has been aggressive in reducing requirements for administrative approvals, and has simplified the process of investing. Ongoing fiscal reforms are helping to remove subsidies at the local level, creating a more level playing field. The end of large-scale monetary stimulus is driving up the cost of capital, which disproportionately affects state-owned enterprises that have long received a large share of inexpensive bank loans. The removal of this indirect subsidy will benefit private enterprises by further leveling the playing field. As growth slows further, it will give added impetus to business-friendly, supply-side reforms.”
China Politics Weekly aims to keep business leaders, investors, diplomats, scholars and other China hands up to date on important trends in China. It is produced by Trey McArver, a London-based consultant providing advice and intelligence to firms and investors engaged in China and the region.
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