China to meet economic targets with virus curbs: President Xi Jinping

President Xi Jinping said China will strive to hit key economic and social development targets set for this year, even as authorities maintain an aggressive approach to containing Covid-19.

In a front page article in the People’s Daily Thursday, Xi said China should push for high-quality development and better coordinated policies around development and safety. He was speaking during a visit to Chengde in the northern province of Hebei this week where he visited several projects including a farm and an elderly care facility.

In his remarks Xi stressed the importance of building “prosperous” rural areas, saying industrial development is the top priority of China’s rural revitalization efforts. Local governments should strengthen the construction of rural infrastructure and public service systems, fill the gaps in public health services, and promote a healthy and environmentally friendly lifestyle, he said.

To build a modern socialist country, China must build both a prosperous city and a prosperous countryside, Xi said. 

Policy Support
 

The comments come amid signs that China’s V-shaped economic recovery is slowing as sentiment is weighed by a broader regulatory overhaul of key sectors including education, technology and property. At the same time social distancing restrictions to curb the spreading delta variant is weighing on consumer sentiment.  

While the weakening in activity isn’t yet at a point to threaten Beijing’s relatively modest growth target of above 6% for this year, the latest signaling suggests the government and central bank will increase their support for growth, said Tuuli McCully, Singapore-based head of Asia-Pacific economics at Scotiabank.

“Consumer spending seems soft and youth unemployment has increased -- these developments will get policy makers’ attention,” she said. “Therefore, I expect additional policy support.”

That will likely take the form of targeted fiscal measures to support employment and another cut in the reserve requirement ratio for banks in order to support small and medium-sized businesses, McCully said.

Latest indicators show a weakening in the economy, aside from last year’s higher base, that will curb the growth rate in coming months. 

Even so, the economy is still operating within a reasonable range, Yu Changge, a researcher at the Chinese Academy of Fiscal Sciences, wrote in a commentary published in the official Economic Daily newspaper, which is managed by the State Council and the Party Central Committee. “Economic growth is still in line with expectations,” Yu said.

The recent slowdown in retail sales and investment reflects a higher base in the second half of last year, while exports continued to perform better than expected, he said. The government should avoid using large-scale stimulus, and make good use of the budgeted fiscal spending to effectively drive investment, Yu said.

Xi’s visit to Hebei comes on the back of his recent push to promote “common prosperity” by redistributing wealth in the country and driving down income inequality.

He chaired a high profile meeting last week that outlined plans to target excessive incomes and encourage wealthy groups to give back to society.

One way of doing that will be to “make the pie bigger and divide it well,” Han Wenxiu, a senior official at the party’s central financial and economic affairs commission, said at a press briefing in Beijing Thursday. 

Authorities will push for high-quality development, raise the income of urban and rural residents, gradually reduce the gap in distribution, and “resolutely prevent polarization,” he said.