MNI INTERVIEW: China To Hold Policy Course As Economy Grows

China is likely to be "highly flexible" in its macroeconomic policy in the face of a pandemic flare up, but authorities will be cautious about further major monetary or fiscal stimulus while growth remains at acceptable levels, a high-ranking advisor to the central government told MNI.

While the appearance of new Covid-19 variants and fresh outbreaks in several provinces contributed to a worse-than-expected economic performance in July and have complicated policy making, officials are determined to maintain their focus on developing a socially equitable, high quality economy, Tang Min, counsellor at the State Council, said in an interview.

"There is only a slim chance of a big [monetary] easing, since the central bank has to take inflation into consideration, and the current high rate of producer price inflation would inevitably feed through to CPI later," he said, adding that the scope for additional fiscal stimulus is also constrained by sluggish revenues.

"In these circumstances, macro policy must be very flexible in reflecting changes to the domestic and international economies and at the same time prevent the side effects of excessive easing and stimulus," Tang said.

SOCIAL FAIRNESS

Economists expect China to grow by around 8% this year, taking its average over 2020 and 2021 to above 5%, the highest of any major economy, he noted. Barring further negative surprises, it should not be difficult to keep expanding at rates above 5% in 2022, Tang said, adding that policymakers will persist in straining for "high quality" development during the 2021-2025 five-year plan rather than simply try to push growth higher. (see MNI EXCLUSIVE: China To Beat 2021 Growth Target, Advisors Say)

Tang's comments came as President Xi Jinping on Tuesday called for a drive for "common prosperity", including redistribution of income. The government detailed new strategies to "strengthen the regulation and adjustment of high income, protect lawful income, reasonably adjust excessive income, and encourage high-income groups and enterprises to give back to society more," according to a summary of meeting with the president published by state-owned Xinhua.

China's increasing emphasis on sustainable growth in recent years is now leading policymakers to concentrate on new areas as they strive for common prosperity and social fairness, Tang said.

"Its focus over the past few years has been eliminating poverty," he said, "Now we are shifting to other fields."

Officials will work to narrow the gap between urban and rural areas, as well as deal with other issues of social concern, such as the expense of education and widening wealth gaps, Tang said. Property bubbles, monopolies and a "disorderly internet environment" are also of concern, he said, speaking after authorities launched regulatory crackdowns targeting some online companies.

China has significant potential for upgrading its abilities in high-tech manufacturing, 5G, artificial intelligence, as well as digital transformation of services and low-carbon growth, as China upgrades its industrial chain, Tang said, pointing to a pilot scheme for new development policies being established in the eastern province of Zhejiang.