World Economy

Xi: China Economy “Big, But Not Strong”

Xi: China Economy “Big, But Not Strong”Xi: China Economy “Big, But Not Strong”

President Xi Jinping has outlined his economic strategy for China, warning bureaucrats that although it may be the world’s second largest economy, it was “big, but not strong”, stating that China still faced “outstanding problems of unwieldiness, puffiness and weakness.”

He also pointed out that the Achilles heel of China’s macro economy was its limited innovation. He said that China’s supply-side structural reform was more than an issue of taxes or tax rate, adding that it was a slew of structural measures to seek innovation, prosperity and well-being, IBTimes reported.

In a speech to principal ministerial and provincial officials made in January 2016, and only published in the People’s Daily on Tuesday (10 May), he made it clear that China’s economic future will be based on supply-side structural reforms, although this is not the same as the supply-side economics school in the West.

There will not be any western-style supply-side economics strategy for China, he stressed. “We must prevent some people from using their interpretations [of supply-side reform] to promote ‘neo-liberalism,” he said.

He made it clear that his economic policies were different from those made popular by former US president Ronald Reagan and the UK’s Margaret Thatcher in the 1980s.

Xi said that China could not rely on “stimulating domestic demand to address structural problems such as overcapacity. The problem in China is not about insufficient demand or lack of demand, in fact, demands in China have changed but supplies haven’t changed accordingly.”

The president said that the key problem for the Chinese economy was on the supply side, although he did point out that the country could not completely neglect managing demand. He said the structural supply-side reform would involve “cutting capacity, reducing inventory, cutting leverage, lowering costs and strengthening the weak links.”

 Growth Goal

China’s economy faces downward pressure but will be able to meet its economic growth target for the year, China’s Vice Premier Zhang Gaoli said at a forum in Beijing on Wednesday.

Growth in M2 money supply slowed in April versus March, Zhang said at a meeting on tax administration hosted by the OECD. M2 money supply grew 13.4% in March. (M2 is a key economic indicator used to forecast inflation.)

China has set a target for 6.5% to 7% GDP growth in 2016, after growth fell to a 25-year low of 6.9% in 2015.

Zhang said that China will reduce leverage in the economy through efforts including bankruptcies, and is not resorting to large-scale stimulus.

The global economic recovery is weak and faces uncertainties, but the Chinese economy remains resilient, Zhang said.