Confronting a struggling economy, Chinese leader
is loosening policies that have sacrificed growth at the expense of his relentless focus on centralized control, political purity and national security.
The latest sign: Senior leaders huddling in Beijing for the Communist Party’s Central Economic Work Conference on Friday endorsed a more pro-business approach, saying China would “encourage and support the development and growth of the private economy and private enterprises.”
The scrapping of Mr. Xi’s strict zero-Covid measures after nearly three years is the most obvious of several pragmatic steps aimed at reviving flagging growth. Beijing has moved rapidly to dismantle the pandemic-control rules that have choked output, pushed up unemployment, and sapped investor and consumer confidence. Late last month, the measures triggered some of the most widespread antigovernment political protests in decades, with angry citizens taking to the streets of the capital and other major cities.
The fresh messaging, including support for China’s property sector, echoes features of an economy-centered philosophy that had waned as Mr. Xi spent the past decade elevating the importance of political ideology.
One significant caveat is that China’s abrupt move to drop many Covid testing requirements and case-tracking tools risks leading to rapid spread of the disease across the country leading to a surge in illnesses and deaths and straining the healthcare system.
Large numbers of workers out sick would weigh on the economy. And signs that infections are out of control in Beijing or other big cities could limit follow-through on the central government’s reopening efforts.
Still, the messaging is clear.
Within the past week, China’s premier-in-waiting, Li Qiang, said in an address to business leaders that the government would “create a favorable environment” for the private sector. Liu He, Mr. Xi’s top economic adviser, has said new measures are being considered to alleviate debt problems plaguing property developers that have weighed on growth.
The comments and actions in some ways cut against what had become signature policies of Mr. Xi.
On Thursday, a U.S. auditing organization said China had permitted it to examine the financial records of some of the country’s biggest companies, including e-commerce giant
In line with Mr. Xi’s stress on national security, Beijing has long said such numbers are state secrets. By granting access now, China has staved off delisting of the companies from U.S. exchanges.
The most immediately significant of Beijing’s steps to boost growth is its pivot away from Mr. Xi’s zero-Covid protocols. Suddenly, it appears Mr. Xi’s priority as he begins a third term as leader is to avert a sharp economic downturn. A slowdown could undermine support for the Communist Party.
“The Chinese system does not turn on a dime like that,” said
co-founder of Beijing analysis firm Trivium. “But one person’s view can change on a dime,” he said, maintaining that the shift must have originated from Mr. Xi, China’s supreme leader.
The three Chinese leaders who preceded Mr. Xi adopted policies viewed by analysts as pragmatic, in the sense that China’s government could be counted on to minimize threats to economic growth.
They won credit for expanding the buying power of China’s vast population, attracting large amounts of foreign investment and transforming the country into the factory floor of the world.
During his decade in power, Mr. Xi has appeared less interested in promoting business for business’s sake, and he instead sought to strengthen state control of the economy and foster income redistribution. Slower growth, fewer job prospects and less enthusiasm by foreign investors followed. China’s tough regime of Covid controls, which continued after most of the world reopened in the past year, worsened the trends.
In recent years, Mr. Xi’s exhortations against property speculators sparked a serious crackdown on property investment that manifested itself in developer bankruptcies and mortgage-payment strikes. And, based on Mr. Xi’s emphasis on national security, Chinese officials in recent years cracked down on technology entrepreneurs who were sometimes accused of putting profits before national interests.
China’s economy has suffered deep wounds from Mr. Xi’s aggressive pandemic measures, analysts say. Damage is significant to domestic consumer confidence and spending, at a time international investors are plotting ways to reduce exposure to Beijing’s opaque policy-making and the dependency some companies have on the country’s market.
for instance, is pressing suppliers to move more iPhone manufacturing outside the country, The Wall Street Journal has reported.
In recent weeks China’s leader has visited nations including Indonesia and Saudi Arabia where, maskless, he met fellow leaders who have adjusted to Covid and given priority to economic stability over pandemic control. To manage tension with the U.S., Mr. Xi huddled for three hours with President Biden.
Also, unusual street protests in China last month further demonstrated domestic public anger at Covid measures that have lasted almost three years.
Amid talk from Beijing of fresh support for the property sector and building entrepreneur confidence, Politburo member He Lifeng, who is expected to take a leading role in economic and financial policy, recently mapped out a plan for China to surpass 5% growth next year.
That rate would far outpace U.S. growth, according to the Federal Reserve’s expectation of just 0.5% economic expansion next year. Economists see China missing its own target this year of 5.5% growth, possibly by over 2 percentage points; the Fed forecasts 2022 U.S. growth at 0.5%. Mr. Xi has been pushing to outpace the U.S. in growth.
Dropping Covid controls and pushing for property market support by Beijing suggest fresh hints of pragmatism.
“Even if it fails, the costs will be limited” in comparison with the impact already on China’s society, economy and political landscape, says Guonan Ma, a senior fellow at Asia Society Policy Institute’s Center for China Analysis. “It shouldn’t be worse than not trying.”
Write to James T. Areddy at James.Areddy@wsj.com and Keith Zhai at email@example.com
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