BANGKOK — China’s leadership is preparing for potential economic turbulence due to increased tariffs anticipated under U.S. President-elect Donald Trump’s administration. In a bid to rejuvenate an economy struggling from a real estate crisis and pandemic-related disruptions, the ruling Communist Party is implementing various measures designed to stimulate spending among Chinese consumers and businesses. This comes in response to a downturn in the value of the Chinese yuan and declining stock market indexes.
Among the key initiatives China aims to implement ahead of 2025 are subsidies aimed at spurring consumer spending. The government plans to broaden its cash for clunkers program and appliance recycling efforts to motivate citizens to purchase new, energy-efficient products. Since launching recycling efforts last year, approximately 6.5 million traditional fuel vehicles have been replaced with electric and hybrid alternatives. Moreover, officials have reported significant growth in sales of new appliances over the last few months. As part of these efforts, the government will offer subsidies up to 20% on the sales prices of various appliances, including mobile devices. Additionally, the upgrade of outdated factory machinery will also receive government financial support.
In terms of regulatory measures, local officials are now cautioned against conducting unwarranted inspections that disrupt business operations. Hu Weilie, a vice minister of Justice, disclosed that new regulations are designed to prevent the misuse of authority, unauthorized seizures of property, and illegitimate production halts. These adjustments aim to cultivate a more favorable business climate in China, as stated by Premier Li Qiang. These reforms come after numerous reports of local governments aiming to exploit businesses struggling financially, resulting in many executives facing detention or asset confiscation.
While China has refrained from employing an extensive stimulus package, opting for a more phased strategy, officials have indicated that larger long-term treasury bonds will soon be introduced to support such spending initiatives. Zhao Chenxin, leader of the National Development and Reform Commission, mentioned that further specifics regarding the financial plans would be revealed at the upcoming annual session of the national legislature.
Concerning monetary policy, China’s central bank has committed to maintaining the stability of the yuan and ensuring financial market stability. The renminbi, or “people’s money,” has recently depreciated against the dollar and other currencies, putting increasing pressure on the financial sectors. Following a brief surge in late September, where the Shanghai Composite index reached nearly 3,700, the index has since decreased to just over 3,200. Currently, the yuan is trading at approximately 7.3278 per dollar, compared to a level closer to 7 in early October. While a weaker currency could enhance the competitiveness of Chinese exports, it also carries the risk of straining relations with trade partners.
In terms of economic discourse, the Communist Party remains stringent on public expressions of dissent, with restrictions tightening around discussions concerning economic matters. Authorities have suspended the social media accounts of economists whose views challenge existing policies, as part of a campaign to bolster support for President Xi Jinping’s leadership. There are reports indicating the necessity for fostering a narrative of “correct public opinions” that align with a vision of collective progress and unity.
However, emphasizing economic optimism may overlook underlying challenges, as highlighted by the Rhodium Group’s recent analysis, which estimates China’s growth rate last year to be between 2.4% and 2.8%, notably lower than the official figure of around 5%. The lower growth is attributed to ongoing financial constraints affecting consumer demand, such as declining housing prices and stagnant wage growth. The report further suggests that the absence of meaningful policy initiatives raises concerns for future employment and wage trends.
