The facts: Strengthening science and technology, supply chain independence and the prevention of “disorderly expansion of capital” are among the eight key missions of China’s economic policy in the coming year. The annual Central Economic Work Conference (CEWC), a high-level CCP meeting led by president Xi Jinping and premier Li Keqiang, discussed economic goals and priorities. The leadership used the meeting to make the point that China is the only major economy in the world to achieve positive economic growth in pandemic-ridden 2020. They also made crystal clear that it was them that deserved the credit for China’s swift recovery. For 2021 the CEWC outlined eight priorities:
- Strengthen national science and technology
- Achieve independence in China’s supply and industrial chains
- Expand domestic demand
- Promote reform and opening up
- Promote agriculture and seeds
- Strengthen anti-monopoly policies and prevent disorderly expansion of capital
- Address the housing problem
- Work towards achieving carbon neutrality
What to watch: One priority proposed by the CEWC is to boost demand-driven growth. Policymakers want to raise household’s purchasing power, and various ministries have already jointly issued a notice to encourage rural consumption. Local governments are being pushed to abolish administrative hurdles (such as license plate restrictions) for consumer goods like cars. In the quest to free up households’ financial resources housing costs are also a key issue. The CEWC’s readout even hints at rent controls and SOE’s providing free housing. Yet new tasks for 2021 keep piling up.
MERICS analysis: Strengthening national science and technology has, for the first time in years, been catapulted to the top spot on the list of priorities for 2021 – in its response to US sanctions that have led to Chinese companies such as Huawei losing access to global supply chains. Stronger regulation of private financial service providers such as Ant Financial also shows that limiting uncontrolled capital expansion and anti-monopoly policies will range high on the agenda. The lack of control over private digital financial providers worries the government, also with regards to overall stability risks in the financial system that were exposed after a series of debt defaults shook the sector in 2020. China’s total debt to GDP ratio has increased sharply and now stands at 280 percent.
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This article first appeared in the January 14, 2021 issue of MERICS China Briefing.