By Joe Cash and Liangping Gao
BEIJING- Chinese officials acknowledged on Friday the sweeping list of economic goals re-emphasized at the end of a key Communist Party meeting this week contained “many complex contradictions,” pointing to a bumpy road ahead for policy implementation.
Pressure for deep changes in how the world’s second-largest economy functions has risen this year, with consumer and business sentiment near record lows domestically, and global leaders increasingly concerned with China’s export dominance.
Following a four-day, closed-doors meeting led by President Xi Jinping, which takes place once in roughly five years, officials made a raft of seemingly contradictory pledges, from modernizing the industrial complex while also expanding domestic demand to stimulating growth and simultaneously curbing debt risks.
The initial summary of the meeting, known as plenum, did not contain details on how Beijing plans to resolve the tensions between policy goals, such as how to get consumers to spend more while resources flow primarily to producers and infrastructure.
Concerns are growing that without a structural shift that gives consumers a greater role in the economy, debt will continue to outpace growth in order to finance Beijing’s industrial modernization and global prominence goals.
That raises the stakes. Some analysts warn the current path fuels risks of a prolonged period of near-stagnation and persistent deflation threats as seen in Japan since the 1990s.
“High debt levels plus increasing deflationary pressures eventually could result in a Japan-style … low growth and very low inflation,” said Julian Evans-Pritchard, head of China economics at Capital Economics.
“That, I think, would force them to change course on their current policies. But that might not happen straight away. That might only happen in a few years’ time.”
Contradictions in Chinese policy efforts have been present for decades, as were goals to increase manufacturing value added, enhance social security, liberalize land use and improve local government tax revenues.
