Why is China mixing its economic messages when business confidence is so low?

hora de lançamento：2024-04-28 05:12:58 fonte：blackjack blaze autor：apostas caixa

Why is China mixing its economic messages when business confidence is so low?

• Regulator reversals and empty government rhetoric will make it even harder to restore near-term business confidence, analysts say
• Beijing’s ‘twists and turns’ raise questions about government alignment as pressure mounts to shore up economy

As a property crisis drags on and geopolitical tensions flare with the United States and other Western countries, private and foreign investment have contracted, falling to their lowest levels in more than a decade. Private investment shrank 0.4 per cent year on year, while foreign investment dropped by 8 per cent from 2022.

Adding to the pessimism is Beijing’s unclear stand on domestic policies. After years of prioritising security over development, and severe crackdowns on the property, financial, private tutoring and internet technology sectors to rein in “blind expansion” of private capital, Beijing signalled that it would fine-tune policies last year to aid the country’s faltering post-pandemic economic recovery. Various government documents were issued calling for more support for the private sector.

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But according to observers, the government’s vague and mixed messages have generated widespread uncertainty about Beijing’s priorities, making it even harder to restore near-term business confidence.

Still, officials and insiders familiar with Beijing’s economic policymaking have dismissed the confusion and shrinking confidence, pointing to China’s multiple policy goals, a lack of communication between departments, and an intense geopolitical environment as reasons for the hazy perceptions. The message of support for growth, they say, has been clear all along.

“The mixed messages revolve around where the government wants to be on the continuum between economic development and growth on the one hand, and security and stability on the other,” said George Magnus, a research associate at Oxford University’s China Centre.

“The government is supposed to keep a balance between the two, but in his rhetoric and actions, [Chinese President] Xi [Jinping] consistently favours the latter.

“[Premier] Li Qiang and some other officials, including the NDRC [National Development and Reform Commission] on the other hand, seem to have a different slant but as everyone has to line up behind Xi, we sometimes get the impression the government itself is not aligned.”

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It was the first time since 1984 that the party had not convened the plenary session in the year following the five-yearly party congress, usually held in October or November.

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“The absence of an announcement likely suggests disunity within the party. Thus the work focus down the road will not be clear to all stakeholders,” Chen said.

“Under such circumstances, government departments will maximise their own interests, shirk their responsibilities or behave irresponsibly, which is expected to further dampen business confidence.”

Three sources from the central government and SOEs pointed to “moving forward amid twists and turns”, a quote by Xi from July’s Politburo meeting, as the main theme for economic recovery in 2024.

A government source who spoke on condition of anonymity said the incident over tech gaming rules was only caused by some department which has “limited understanding on macroeconomics or the potential impact of its proposed regulations”.

An SOE executive said it was partially due to Beijing’s emphasis on driving the “real economy”, which the gaming industry was not considered a part of.

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The government contact also noted that a personnel assessment system that did not directly correlate with economic performance could be a factor in the seemingly conflicted signals.

“As civil servants, we are dealing with a different assessment system for our work. Despite the fact that we are working on managing the country’s economy, its performance does not directly translate into our career advancement or promotion,” the source said.

The sources generally played down the impact of mixed signals on business confidence. Instead, they named the Taiwan issue and China’s longer-term economic problems – an ageing population and a tech sector held back by US sanctions – as the main concerns for business investors, justifying Beijing’s emphasis on security and science and technology development.

Closer to the front lines of China’s economic troubles, Fred Tang, an entrepreneur in the manufacturing sector in the eastern province of Jiangsu, said he has not been impressed by government rhetoric about boosting confidence and supporting the economy.

“I’ve received piles of government documents promising support in recent months. I lost interest quickly when I read the details,” Tang said.

For instance, he said, the proposed government funding for new investment projects came with many strings attached, meaning applicants were required to navigate assorted procedures and obtain various licences to qualify.

“The whole process will be time-consuming and troublesome. In the end, you have to deal with all kinds of government officials. They are the industry examiners, inspectors and watchdogs. They are watching you, instead of serving you,” he said.

While Premier Li called on his audience in Davos earlier this month to “zoom out and look from afar” to appreciate China’s economy as they would appreciate the beauty of the Alps, Tang felt more concerned about the short term.

“Industrial clampdowns are hanging over our heads like the sword of Damocles. As long as the government wants to be the big boss of everything, few would feel assured enough to invest,” he said.

Additional reporting by Jun Mai

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