China’s Xi promises ‘more powerful’ tools to achieve economic goals

Written by Javed Iqbal

China is largely hosting the annual BRICS summit this year. Pictured here is Chinese President Xi Jinping speaking via video at the UN General Assembly in New York, USA, on Tuesday, September 21, 2021.

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BEIJING – President of China Xi Jinping issued a rare statement Wednesday on his country’s goal of achieving its economic goals for the year.

Investment analysts have cut their forecasts for China’s GDP growth to well below the official target, after strict Covid controls restricted business activity in the last few months. The government’s stimulus has been relatively subdued so far.

“We will step up macroeconomic policy alignment and adopt more powerful measures to deliver the year-round economic and social development goals and minimize the impact of COVID-19,” Xi said Wednesday, according to an English-language state media release.

He did not share details on what kind of measures would be used to support growth. Instead of “more powerful”, Chinese text for the speech published by state media described forthcoming measures as “more effective”, according to a CNBC translation.

Xi’s unusually direct language, however, marks a rare public mention of a senior leader of the full-year economic targets since they were set at an annual meeting in mid-March.

These targets include urban unemployment of “up to 5.5%”, an increase in the consumer price index of “around 3%” and GDP growth of “around 5.5%.”

The median GDP forecast among investment banks followed by CNBC is much lower at 3.4%.

Bank of America was the latest to cut earlier in the week, while Nomura has the lowest forecast at 3.3%. Goldman Sachs is the only major investment bank with a forecast of 4% or slightly higher.

“Although the growth recovery appears to have accelerated in June, with the exception of dramatically more policy easing, we believe the target of ‘around 5.5% GDP growth’ remains extremely challenging this year,” said Goldman Sachs analyst Maggie Wei and a team in a note Wednesday.

In May, Prime Minister Li Keqiang urged officials to one an unprecedented massive video conference to “work hard” for growth in the second quarter. Economic figures in April and May indicated the slowest growth since the first shock of the pandemic in early 2020.

Xi spoke on Wednesday at the opening ceremony of the BRICS – Brazil, Russia, India, China and South Africa – Business Forum. China is hosting the annual gathering of developing countries almost this year.

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During his speech, Xi said that China has coordinated both Covid control and economic development and will protect people’s lives and stabilize the economy as much as possible.

Xi said China’s 20th National Party Congress in the second half of the year would “set the course for the next phase of China’s development.” He added that China will continue to open up its economy and welcome foreign investment.

The ruling Communist Party of China reshuffles its top leadership at national congressional meetings every five years. Xi is expected to continue as president for an unprecedented third term.

Increases car sales

Separately on Wednesday, Premier Li chaired a meeting of the Council of State – the supreme executive body – which noted the importance of spending to drive economic growth.

In particular, the meeting called for measures to support car sales and estimated a boost of 200 billion yuan ($ 29.85 billion) for auto-related sales this year as a result.

That’s about 0.5% of China’s total retail sales in 2021, according to Goldman Sachs.

Correction: This story has been updated to reflect that Bank of America was the latest bank to trim its China GDP forecast. An earlier version did not take this cut into account.

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Javed Iqbal

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