China hits back at economic fatalists during gathering of policy heavyweights

At a conference bringing together some of its top players in economic policymaking, China issued a stern rebuke against what it deemed a “malicious” effort to defame its economic prospects.

Officials briefed reporters on China’s economic performance and planned stimulus policies on Wednesday morning, following months of sluggish growth and massive sell-offs of Chinese equities and yuan which have led to speculation over a broader crisis in the making.

This kind of rhetoric has never been successful

Cong Liang, NDRC

Cong Liang, deputy head of the National Development and Reform Commission (NDRC), had harsh words for critics. “We hear noises both internally and externally that talk down on China,” he said.

“This kind of rhetoric has never been successful and will not succeed, now or in the future.”

While admitting China’s economy is facing “a number of challenges and difficulties”, Cong said there is “every reason” to maintain confidence.

Citing trying moments from the past – the 1997 Asian financial crisis and the 2007-08 global financial crisis – Cong said China has not only weathered those critical periods but has “grown even stronger” in their wake.

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The NDRC – China’s primary economic planner – held the joint briefing with representatives from the People’s Bank of China, Ministry of Commerce, and the Ministry of Industry and Information Technology (MIIT). Throughout, they attempted to address issues that have diminished confidence among consumers and businesses from both home and abroad.

In recent weeks, China has faced falling prices as deflation sets in, a 16-year low for the yuan, soft global demand for Chinese exports and mounting debt in its property sector, all of which have come despite a flurry of stimulus measures from Beijing.

Zou Lan, head of the monetary policy department at the People’s Bank of China, said while the yuan has depreciated against the US dollar, the Chinese currency has “maintained its strength against other non-dollar currencies”, a point which he said illustrates a more “all-rounded view” in assessing the yuan.

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The central bank, Zou added, still has “ample policy room to react to challenges” and will “avoid overshooting risks in the exchange rate”.

The official from the commerce ministry stressed the central government’s monetary backing as a bulwark against domestic debt concerns, while the MIIT representative talked up the recovery of China’s official manufacturing purchasing managers’ index (PMI) last month – although the metric was still below 50, indicating an overall contraction.

The conference was held at a time when other state entities have also taken up a defensive posture. Since Sunday, state news agency Xinhua has published a series of long commentary pieces titled “Taking a broader view on China’s economy”.

The columns have taken aim at those who have talked down the country’s performance in the near term, attacking prominent media outlets for “selective reporting”.

Despite Beijing’s upbeat talk and repeated declarations of policy commitments, market responses have remained conservative.

At least six international financial institutions – including Barclays, JPMorgan Chase and UBS – have dropped their 2023 China growth forecasts below Beijing’s annual target of “around 5 per cent” due to falling export demands and a persistent slump in the property sector.

Confidence in the stock market has also been weak. Overseas investors have sold 17.5 billion yuan of onshore stocks so far in September after a record outflow of 89.7 billion yuan in August via the Stock Connect schemes which link the mainland’s markets to Hong Kong’s.

Foreign direct investment in China has also dropped by 5.1 per cent year on year in the first eight months of 2023 to 847.2 billion yuan, according to official figures.

South China Morning Post