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Xi on China's Economic Challenges and Policy Responses

On February 15, the Communist Party journal Qiushi published an article by Xi Jinping: "Major Issues in Current Economic Work" (当前经济工作的几个重大问题). A translation of the article is below.

The article is based on Xi's speech at the Central Economic Work Conference in December. It identifies China's most significant economic challenges and calls for a suite of policy initiatives and measures to address them, as outlined in its subsection headings (bold by me):

1. Strive to expand domestic demand

2. Accelerate the development of a modern industrial system

3. Implement the “Two Unswervings” earnestly

4. Attract and utilise foreign investment with greater efforts

5. Prevent and resolve major economic and financial risks effectively


Major Issues in Current Economic Work

Author: Xi Jinping

Published: February 15, 2023

Source: http://www.qstheory.cn/dukan/qs/2023-02/15/c_1129362874.htm

The following year’s economic work will be complex. We must take a strategic and comprehensive approach, focusing on critical challenges and starting with specific measures to improve social and psychological expectations for development. We must prioritise the major elements below and ensure they are thoroughly planned and successfully executed across the board.

1. Strive to expand domestic demand

Currently, the Chinese economy faces a prominent contradiction: insufficient aggregate demand. To address this challenge, we must vigorously implement the strategy of expanding domestic demand and take more effective measures to ensure a positive cycle of social reproduction.

China successfully responded to the Asian Financial Crisis of 1998, the Global Financial Crisis of 2008, and the impact of COVID-19 since 2020 by expanding domestic demand. Drawing on this experience, we must now optimise our policy initiatives and fully tap the fundamental role of consumption and the critical role of investment.

First, we must prioritise the recovery and expansion of consumption. China has made significant progress in industrialisation, informatisation, urbanisation and modernising agriculture. Consumption is increasingly becoming the primary driver of economic growth. We must enhance consumers’ purchasing power, improve the conditions for consumption, and create innovative ways for people to consume goods and services so that the potential of consumption can be fully realised.

Since consumption is closely tied to income, we must increase the income of urban and rural residents through various means. In particular, we must focus on increasing the purchasing power of those people with lower and middle incomes who have been severely affected by COVID-19.

Moreover, we must prudently increase access to consumer credit and support spending on housing improvement, new energy vehicles, senior care, education, medical services, culture, sports, and other areas.

Second, we must effectively stimulate private sector investment through government investment and policy incentives. Currently, private investment expectations are low, so government investment must play a guiding role in responding to cyclical economic fluctuations.

We should increase government investment to build infrastructure, generate long-term benefits, address shortcomings, and adjust the economic structure. This includes accelerating major projects under the 14th Five-Year Plan (2021-2025), strengthening transportation, energy, water conservancy, agricultural, and information infrastructure, improving inter-regional infrastructure connectivity, supporting the construction of modern infrastructure systems in urban clusters and metropolitan areas, and implementing urban renewal and rural construction initiatives.

We must also increase investment in science and industry and rapidly build major scientific and technological infrastructure and R&D capacity for core technologies in key fields. Policy finance should play a role in counter-cyclical adjustment and provide significant support for major projects that align with the national development plan and industrial policy guidance while balancing economic and social returns.

We should also relax market access restrictions for private investment and encourage private capital to participate in major national projects and projects that address gaps and deficiencies. Finally, we must improve the project pipeline and planning work and ensure the availability of factors of production.

Exports should continue to play a vital role in supporting the economy. To achieve this, we must diversify our export markets by stabilising our trade with developed countries and expanding our trade with emerging economies.

We must upgrade the processing trade, increase the added value of our exports, expand trade in services, and develop digital trade. We must consolidate and expand our export advantages in new industries such as new energy vehicles. Moreover, we must actively accelerate the importation of specific products, including advanced technologies, vital equipment, and energy resources, and make the most of the China-Europe Railway Express.

We must accelerate the building of a strong trading nation.

2. Accelerate the development of a modern industrial system

We must build the internal foundations to stand firm on our own. China has the world’s most comprehensive industrial system and a domestic market with enormous potential. We must ensure the resilience and security of our industrial and supply chains, address any weaknesses, and further develop our strengths.

First, we must ensure the smooth functioning of China’s national economy to guarantee national security, maintain basic livelihoods, and keep critical infrastructure and industries running. We must put considerable effort into ensuring food and energy resource security. In particular, the food we eat must be firmly in our control. To achieve this, we will implement a new round of initiatives to increase China’s grain production capacity by 50 million metric tonnes. We need to yield more food from our land resources through advancements in science and technology.

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