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The Star
22-07-2025
- Business
- The Star
Enhancing economic resilience crucial in trying times
How should China strengthen the resilience of its economy? In April, the Trump administration announced a surge in global tariffs, triggering strong responses from governments around the world and causing sharp turbulence in financial markets. Within three days of the announcement, global stock markets lost over $9.5 trillion in market capitalization, and volatility intensified significantly across bond, foreign exchange and commodity markets. In the United States, stocks, bonds and the dollar all fell simultaneously. The yield on 10-year US Treasury bonds also posted its biggest weekly gain since the Sept 11, 2001 attacks. The shockwaves from the tariff moves continue to ripple across the world, with escalating confrontations on all sides. Faced with the Trump administration's high tariffs and erratic behavior, China must resolutely implement countermeasures. Any concession would only lead to further pressure from the other side. Only through firm resistance can space for negotiation and cooperation be created. On April 25, a high-level meeting for the first time proposed coordinating domestic economic work and international economic and trade struggles, aiming to use the certainty of high-quality development to cope with the uncertainty of dramatic changes in the external environment. On May 7, the People's Bank of China, the China Securities Regulatory Commission and other government authorities jointly introduced a package of incremental policies to stabilize market confidence. On May 12, China and the US released a joint statement after economic and trade talks in Geneva, in which the US agreed to remove some additional tariffs, and China reciprocated accordingly, temporarily easing tariff pressures. However, over the medium-to-long term, challenges in Sino-US economic and trade relations persist. It is worth noting that tariffs may not be the Trump administration's ultimate goal, but rather a bargaining tactic aimed at achieving the dual objectives of reducing the US trade deficit and maintaining the dominance of the greenback. In fact, since the onset of the trade conflict in 2018, the US government has been exerting significant pressure and imposing extreme restrictions on China in both trade and technology sectors. We must be fully aware of the worsening international economic and trade environment in the foreseeable future and recognize that China and the US will continue their strategic contest for a long time. So, against this backdrop, how should China enhance the resilience of its economy? We believe the most important approach is to focus on doing our own job well, remain self-reliant and persist in expanding domestic demand. At the same time, we must unswervingly expand high-level opening-up. Expanding domestic demand is the top priority for 2025. Following the directives from the Central Economic Work Conference in December 2024, expanding domestic demand became the top priority of economic work this year. This is because insufficient domestic demand is currently the main stumbling block in China's economy. In 2024, total retail sales of consumer goods grew by only 3.3 percent year-on-year, significantly lower than the 9.7 percent average between 2015 and 2019. From the perspective of the three engines of GDP — consumption, investment and exports — final consumption in 2024 contributed an average of only 2.3 percentage points per quarter to GDP growth, much lower than the 4.2-percentage point average between 2015 and 2019. Breaking down the three factors influencing household consumption — changes in income, wealth and expectations — we find that in the short term, the main constraint on consumption growth is the sharp slowdown in household income growth since the COVID-19 pandemic. In 2024, cumulative year-on-year growth in per capita disposable income was 4.6 percent in urban areas and 6.6 percent in rural areas, well below the 7.9 percent and 9.6 percent levels of 2019. Over the long term, two main factors constrain consumption: first, weak expectations and confidence about future employment and income; second, evident imbalances in income distribution across households, the government and enterprises, as well as within the household sector itself. Rising risk aversion among residents has led to an increase in precautionary savings, reflected in the sharp rise in new deposits and continued decline in new loans since 2022. In terms of income distribution, profits generated by enterprises have not been sufficiently transferred to households, and the income distribution within the household sector also needs improvement. Beyond the income gap between urban and rural residents, an even more important issue is the much wider gap in property and social security entitlements. To sum up, we believe that to stimulate consumption, macroeconomic policy stimulus is needed in the short term, while structural reform should be accelerated in the medium term. Based on the logic of moving from short-term stimulus to long-term reform, the following policy recommendations are proposed. First, a more proactive fiscal policy and a moderately accommodative monetary policy are keys to driving a rebound in China's nominal GDP growth. The main issue facing the Chinese economy is insufficient aggregate demand and a negative output gap. In the short term, to address the lack of domestic demand, central government finances should increase borrowing and spending to drive a rebound in consumption and investment. In addition to promptly implementing the expansionary policies outlined in the Government Work Report, additional stimulus measures should be planned for the second half, especially through greater issuance of special treasury bonds. To make full and effective use of proactive fiscal policy, we recommend accelerating the issuance of the remaining quota of local government special bonds and special treasury bonds in the second quarter, and issuing an additional 2 to 3 trillion yuan ($411.6 billion) in special treasury bonds for the year. Second, increasing short-term incomes for low and middle-income households through fiscal subsidies is advised. We recommend issuing universal consumption vouchers to encourage spending, especially among low and middle-income earners. To maximize the multiplier effect of consumption vouchers, they should be issued without being tied to specific products or services. Third, lifting asset prices from the bottom can also help restore consumer confidence. On real estate policy, housing prices in core areas of the largest cities should be stabilized promptly, and support should be given to leading well-managed private developers. All purchase and loan restrictions should be lifted to unleash demand from first-time and upgrading buyers. Special-purpose bonds should be issued to provide low-cost, long-term financing for high-quality developers. The government can also purchase idle commercial housing in second and third-tier cities and convert it into rental-based public housing. In the stock market, efforts should be made to cultivate a long bull market. In addition, with an aging population and slowing investment-driven growth, China's potential economic growth rate is trending downward. To reverse this trend and restore confidence among microeconomic actors, bold structural reforms are needed. These include reforms in income redistribution, education, healthcare, pensions, housing, development of a unified domestic market and support for private enterprises. The writer is deputy director of the Institute of Finance and Banking of the Chinese Academy of Social Sciences. The views do not necessarily reflect those of China Daily. - China Daily/ANN
Qatar Tribune
07-07-2025
- Business
- Qatar Tribune
China urged to take bolder steps to tackle price wars, deflation
Agencies Beijing's latest push to curb price wars may help ease deflationary pressures, but analysts warn the current measures fall short of addressing deeper structural problems facing the world's second-largest economy. China's GDP deflator – a broad measure of prices across goods and services – has been negative since the second quarter of 2023, while consumer prices have fallen for four straight months year-on-year. To stop the deflationary spiral, Chinese authorities should address the cause: weak domestic demand, analysts said. 'So far, attempts to revive inflation by trimming supply and reducing overcapacity have shown limited results,' Miao Yanliang, chief strategist at Beijing-based investment bank China International Capital Corporation (CICC), wrote in a research note. 'Weak demand remains the underlying problem.' Despite policymakers flagging cutthroat competition as a concern at the tone-setting Central Economic Work Conference last December, there are few signs of a rebound in prices, said Miao, who previously worked as a senior economist at the State Administration of Foreign Exchange for a decade. Miao attributed the current deflationary spiral to downturns in the financial and property sectors as well as diminishing income expectations among Chinese households. The warning came as the Chinese economy grapples with persistent structural challenges. Excess capacity across multiple sectors has suppressed both producer and consumer prices, while job insecurity and a prolonged property slump have made households reluctant to spend. China's consumer price index (CPI), a key gauge of inflation, declined for a fourth straight month in May – falling 0.1 per cent year on year, according to the National Bureau of Statistics. The producer price index (PPI) has continued to contract since October 2022. June price data is scheduled for release on week, China's top leadership addressed 'disorderly low-price competition' during a meeting of the Central Financial and Economic Affairs Commission, the Communist Party's highest economic policymaking body. It pledged to cut production capacity in an 'orderly' fashion, though without naming specific industries or targets. Compared to supply-side adjustments, analysts said demand-side stimulus remains the most effective lever for tackling deflation. To break the cycle, the CICC note recommended repairing 'corporate balance sheets' through capital injections, interest subsidies and corporate restructuring. This would help revive investment sentiment and employment, paving the way for a recovery in household income and assets, it added. Miao also called for raising household incomes by stabilising employment, increasing cash flow and strengthening the social safety net to ease consumer concerns and unlock spending potential. Chinese authorities have doubled down on subsidies, including a 300 billion yuan central government trade-in programme this year, to stimulate domestic consumption amid external headwinds. But there are fears the impact could be limited. 'When it comes to boosting consumption, there are few policy tools available to generate substantial traction on the demand side,' Mao Zhenhua, co-director of Renmin University's Institute of Economic Research, told a forum in Hong Kong on risks have been exacerbated by falling investment returns and mounting pressure on income and employment, with external headwinds also weighing on prices, he warned. The trade war with the United States would have 'a lasting impact on China's medium- to long-term economic fundamentals' and could further intensify the country's 'involutionary' dynamics, Mao added – a term used by officials to describe intense and self-defeating domestic competition.
South China Morning Post
07-07-2025
- Business
- South China Morning Post
China urged to take bolder steps to tackle price wars, deflation and weak demand
Beijing's latest push to curb price wars may help ease deflationary pressures, but analysts warn the current measures fall short of addressing deeper structural problems facing the world's second-largest economy. China's GDP deflator – a broad measure of prices across goods and services – has been negative since the second quarter of 2023, while consumer prices have fallen for four straight months year-on-year. To stop the deflationary spiral, Chinese authorities should address the cause: weak domestic demand, analysts said. 'So far, attempts to revive inflation by trimming supply and reducing overcapacity have shown limited results,' Miao Yanliang, chief strategist at Beijing-based investment bank China International Capital Corporation (CICC), wrote in a research note. 'Weak demand remains the underlying problem.' Despite policymakers flagging cutthroat competition as a concern at the tone-setting Central Economic Work Conference last December, there are few signs of a rebound in prices, said Miao, who previously worked as a senior economist at the State Administration of Foreign Exchange for a decade. Miao attributed the current deflationary spiral to downturns in the financial and property sectors as well as diminishing income expectations among Chinese households.
Mint
01-07-2025
- Automotive
- Mint
Xi Jinping's futile war on price wars
When firms raise prices, 'gouging" their customers, many governments complain. Some cannot resist intervening. But in today's China, the opposite is happening. In May the state reprimanded carmakers not for raising prices, but for cutting them. 'There are no winners in this price war," it said, blithely ignoring the happy customers who can now buy a zippy electric car for less than $8,000. In wars, the methods are sometimes as shocking as the results. Many Chinese manufacturers sell cars cheaply to dealers, who resell them as 'used" vehicles, even though they have zero miles on the clock. The ploy, perverse as it sounds, lets carmakers split their market, offering pre-owned but undriven vehicles to price-sensitive customers, and identical, higher-priced vehicles to everyone else. 'This disguised method of reducing prices disrupts the market order," complains the People's Daily, an official newspaper. Carmaking is not the only part of the economy suffering: factory-gate prices fell year on year in May in 25 out of 30 major industries. In eight, including coal-mining and steelmaking, the drop was even steeper than for cars. Across China's vast industrial machine, average prices have now fallen for 32 months in a row (see chart). Manufacturing investment, especially in high-tech ventures, has been a bright spot for China's struggling economy in recent years as it weathers a prolonged property crisis. But the rapid decline of industrial prices and profits has raised doubts about the sustainability of even this capital-expenditure boom. Industries such as electric cars, lithium-ion batteries and solar panels were supposed to be new engines of growth that would fill the yawning gap left by the property sector. Now they have also become engines of deflation. The government has a new word for the problem: 'involution". This has long referred to arms races between students or workers, for whom extra effort brings no extra reward, because it obliges everyone else to try harder, too. In the past year the same term (neijuan in Chinese) has been applied to cut-throat competition between firms. It appeared in a statement from the Politburo, which comprises the 24 most powerful people in China's ruling Communist Party, in July 2024. In December it reappeared in the conclusions of the Central Economic Work Conference, which sets the tone for economic policy. 'Rectifying 'involutionary' competition is something that everyone is very concerned about," said a spokesperson for China's planning agency in May. Which industries are most involutionary? According to Zhao Wei of Shenwan Hongyuan, a Chinese securities firm, the problem most severely afflicts electrical machinery, steelmaking and non-metallic mineral products, such as cement, ceramics and glass, where prices fell faster than the national average last year. These parts of the economy also suffer from unusual amounts of idle capacity. And, by his reckoning, another 15 industries, from cars to tobacco, show some involutionary tendencies, such as weak profit growth, rapid increases in debt, falling prices or low rates of capacity utilisation. Although the term 'involution" is new, the problem is not. From 2012 to 2016 China suffered four and a half years of falling factory-gate prices. In response, Xi Jinping, China's ruler, introduced a policy called 'supply-side structural reform". Its original aim was to raise prices and restore profitability, not by increasing demand, but by curbing supply. China had prepared two tables of food for only one table of guests, according to an unnamed source in the People's Daily. However hard the guests ate, they could not finish it all. To clear the tables, China's planning agency imposed production quotas and capacity cuts on oversupplied industries such as steel. It sought mergers and acquisitions to reduce competition. Coal mines were instructed to operate for only 276 days a year. Officials also strictly enforced standards for energy efficiency and pollution, forcing older, dirtier plants to shut. The policy is considered a success. Steel prices and profit margins increased. Across industry as a whole, factory-gate prices stopped falling in September 2016 and rose by more than 7% in early 2017. Is the government trying to repeat this trick? As well as rebuking carmakers for giving customers too good a deal, it has told the solar-panel industry to exercise 'self-discipline". At the end of last year, 33 panelmakers duly pledged to set a ceiling on production and a floor under prices. The government has also tried to prevent the 'blind expansion" of steelmaking by insisting on the 'three don'ts": don't produce anything without an order, don't sell at a loss and don't ship without sure payment. E-commerce platforms have been encouraged to reduce pressure on merchants. They have, for example, phased out refund policies that allowed customers to get their money back without returning the goods. Local governments have also been told not to go too far in their efforts to promote investment or shield local champions from competition. According to Thomas Gatley of Gavekal Dragonomics, a consultancy, listed firms on China's mainland (which number over 6,300) reported receiving 195bn yuan ($27bn) in subsidies last year, some 13% less than the year before. These interventions are less bold than those of the 2010s. The campaign may be more tentative because many of its targets are different, says Robin Xing of Morgan Stanley, a bank. In 2015-17 the industries suffering from excess capacity were dominated by large state-owned enterprises. They were easy to boss about. And they were often the biggest winners from the eventual shake-out, emerging with a bigger share of a less crowded industry. The smaller enterprises squeezed out by production limits and pollution standards were often scrappy private firms, relying on cheaper, dirtier technologies. Many industries now suffering from involution are led by less biddable private firms. Electric cars and solar panels, for example, are dominated by sophisticated commercial enterprises, using cutting-edge technology. Some of the industries, indeed, represent the new engines of growth for which the original supply-side reform was meant to make room. 'New driving forces are being strengthened," said the anonymous sources interviewed by the People's Daily in 2016. But 'if the old does not go, the new will not come." Moreover, some excess capacity is an inevitable result of Mr Xi's desire to maintain China's industrial might. He wants to preserve manufacturing's share of China's output whether or not anyone wants to buy it all. The problem is made worse by local governments scrambling to fulfil his wishes, thereby duplicating each other's efforts. At a symposium of economists and business leaders held last year, Mr Xi was warned his call to cultivate 'new productive forces" could result in involution, as each local government strived to ensure the cultivation happened on their patch. Demanding problems Some of China's struggles with involution also reflect a persistent shortfall of demand in the economy. Consumer confidence is low; the household saving rate (more than 31% of disposable income) is high; and a smaller share of that saving is flowing into the property market. In the first five months of this year households spent less than half as much on new homes as they did in the same months of 2021. Mr Xi's 2015 reforms owed a lot to other policies that lifted demand. These included an expensive effort to replace so-called shantytowns with modern flats. If the government could once again stabilise the property market, restore consumer confidence and lift spending, some of China's overcapacity problems might disappear. Others would be easier to bear. Rising prices in booming industries could offset deflationary pressures elsewhere, and hiring in sunrise sectors could ease the pain of firings in industries that overextended themselves. 'Without a strong demand-side anchor, even the best designed supply-side measures risk falling short of delivering reflation," argues Mr Xing. Many Chinese industries have prepared two tables full of food. The government needs to invite more guests to the party.
Borneo Post
30-04-2025
- Automotive
- Borneo Post
China's zero-carbon industrial parks light way to greener future
Photo shows a charging station powered by the solar array at an industrial park in Liyang, a county-level city under Changzhou in east China's Jiangsu Province on April 17, 2025. – Xinhua photo NANJING (May 1): Along a nearly-500-meter asphalt road shaded by a glimmering canopy of photovoltaic panels, new energy vehicles travel back and forth. Some pull over at the roadside charging station powered by the solar array. This eco-friendly scene, especially fitting on April 22, the 56th Earth Day, is part of a broader zero-carbon initiative at a 100-hectare industrial park in Liyang, a county-level city under Changzhou in east China's Jiangsu Province. Since beginning operations in June last year, the park has installed around 77,000 square meters of photovoltaic panels, generating 5.2 million kilowatt-hours of green electricity annually. To achieve net-zero carbon emissions, the park is diversifying its clean energy sources to include wind and hydro power, according to Li Jie, general manager of State Grid Liyang Electric Vehicle Service Company, one of the park's key developers. Carbon-free industrial parks aim to achieve zero carbon emissions by integrating clean energy, green architecture, smart management systems and circular economy practices. China's Central Economic Work Conference, which outlined the national priorities for 2025, called for ramped-up efforts to promote a green transition across all sectors, including the establishment of a group of zero-carbon industrial parks. According to Wu Wei, an associate professor at the China Institute for Studies in Energy Policy at Xiamen University, such parks not only drive low-carbon development but also enhance enterprises' innovation capability, energy efficiency and informatisation level, serving as a key engine for China's high-quality economic growth. Zero-carbon practices power ahead According to the city's action plan, Changzhou aims to build more than 10 near-zero-carbon parks and more than 15 near-zero-carbon factories from 2024 to 2026. Among the pioneers in this plan is Nari-Relays Electric (NR Electric), a local power electronics company. By leveraging AI and cloud computing to monitor and optimise energy use in real time — from water and electricity consumption to photovoltaic output and environmental conditions — the company has cut over 21,000 tonnes of carbon dioxide emissions and saved nearly 7,300 tonnes of standard coal since 2023. Thanks to these efforts, the cost reduction and efficiency improvement have saved NR Electric nearly 20 million yuan (about US$2.77 million), according to the company. As microgrids are a cornerstone of zero-carbon parks' operation, Changzhou has completed 39 microgrid projects with a total investment of 1.18 billion yuan and plans to construct more such projects in the coming years. An aerial drone photo taken on March 16, 2025 shows the photovoltaic devices on the roof of the BFA International Conference Center and a BFA hotel in the Boao zero-carbon demonstration zone in Boao, south China's Hainan Province. – Xinhua photo Beyond Changzhou, moves to go carbon-free are gaining momentum across China. In 2022, Shanghai released an action plan for a zero-carbon demonstration park in its Minhang District. In 2024, a plan was unveiled to build a zero-carbon park in Beijing's Daxing District. Provinces and regions like Guangxi, Yunnan and Fujian have included zero-carbon park construction in their 2025 government work reports. China has pledged to peak carbon emissions by 2030 and reach carbon neutrality by 2060. With the advancement of the dual carbon goals, it is expected to see a surge in zero-carbon parks in 2025, said Ding Hong, vice president of Jiangsu's provincial society of the urban economy. 'Advances in distributed solar photovoltaics, energy storage and smart energy management platforms will significantly lower costs of zero-carbon parks' construction and operation, and profoundly change China's energy utilization mode,' Ding said. Low-carbon innovations go global In Jiangsu's Suzhou Industrial Park, a joint China-Singapore zero-energy building fitted with rooftop photovoltaic panels, small wind turbines and an AI-controlled lighting and climate system showcases the possibilities of future urban architecture. Built using sustainable materials, the structure is part of the China-Singapore Green Digital Hub, a 6.7-billion-yuan project launched last November to boost green industries and emerging services. According to Li Wenjie, deputy director of the institute of urban development at Suzhou Industrial Park, the zero-energy building has been certified by standards organisations in both the United States and Singapore. 'This highlights that China's carbon reduction technologies have gained worldwide recognition,' he noted. Photo taken on July 13, 2024 shows a joint China-Singapore zero-energy building in Suzhou Industrial Park in Suzhou, east China's Jiangsu Province. – Xinhua photo China's green technologies are now reaching global markets. NR Electric, for example, has provided energy storage solutions to over 30 countries, including Britain, Japan and Saudi Arabia. At Britain's Richborough Energy Park, its technology has helped reduce carbon emissions by over 10,000 tonnes — the greatest reduction among all battery energy-storage projects in the country in 2024. Currently, China is collaborating on green energy projects with over 100 countries and regions. According to the International Renewable Energy Agency, the average global cost per megawatt-hour for wind power has plummeted over the last decade by over 60 per cent, and by 80 per cent for solar power. China has made remarkable progress in its green transition and technologies, said Erik Berglof, chief economist at the Asian Infrastructure Investment Bank, during this year's Boao Forum for Asia held in late March. He noted that its journey offers a blueprint for sustainable development that other countries can follow. – Xinhua China green industrial parks sustainable Xinhua zero-carbon
