China Ready to Double Down on Economy  12/13 06:20

   Chinese leaders met this week to plot economic policy for the coming year, 
sketching out plans to raise government spending and relax Beijing's monetary 
policy to encourage more investment and consumer spending.

   BANGKOK (AP) -- Chinese leaders met this week to plot economic policy for 
the coming year, sketching out plans to raise government spending and relax 
Beijing's monetary policy to encourage more investment and consumer spending.

   Leaders of the ruling Communist Party wrapped up their two-day Central 
Economic Work Conference on Thursday with praise for President Xi Jinping's 
guidance and a pledge to "enrich and refine the policy toolbox" and defuse 
risks facing the world's second-largest economy. One of the biggest: threats by 
President-elect Donald Trump to sharply raise tariffs on imports from China 
once he takes office.

   Here's a look at the priorities outlined in this week's meetings in Beijing 
and their potential implications.

   A focus on fundamentals

   Analysts said the broad-brush plans from the annual Central Economic Work 
Conference and an earlier meeting of the 24-member Politburo were more of a 
recap of current policy than any ambitious new initiatives.

   China's economy has been growing slightly more slowly than the "about 5%" 
target leaders set for this year as a prolonged crisis in its real estate 
sector has weighed on business activity. Weaker housing prices and job losses 
during the COVID-19 pandemic have left many Chinese unable or unwilling to 
spend as much as they may have in the past. That has meant supplies of many 
goods outstrip demand, causing prices to fall or at least remain flat.

   The government began rolling out a range of initiatives earlier this year 
that included paying subsidies when people turn in old appliances and vehicles 
to buy new ones, expanding access to affordable housing and cutting interest 
rates to make mortgages more affordable.

   According to a readout by the official Xinhua News Agency, the leaders 
agreed this week to put "greater emphasis on ensuring and improving the 
people's well-being and giving people a growing sense of fulfilment, happiness 
and security."

   That includes policies to stop people from relapsing into poverty, providing 
a stronger healthcare system and expanding care for older people, it said. It 
could also include subsidies to families to encourage them to have more 
children, now that the population is declining.

   Who pays, and how?

   The leaders committed to raising China's deficit, which has been long capped 
at 3% of its GDP, and to doing more to encourage consumer spending by bringing 
wage increases in line with the pace of economic growth. The government will 
issue more special ultra-long-term bonds to do that, state media said without 
giving any dollar amounts.

   At the national level, China can afford to do that. Its national debt-to-GDP 
level is about 68%, compared with Japan's 250% and 120% in the United States. 
At the local level, huge amounts of debt remain a problem, with many Chinese 
workers going under- or unpaid. City and regional governments are deeply in 
debt after their tax revenues fell due to the property crisis and the pandemic, 
while spending continued to rise.

   Details of any increased spending may emerge later, possibly during the 
national legislative session in March, analysts said.

   Easier credit for investment and housing purchases

   Earlier this week, the Politburo endorsed plans to pursue "moderately loose" 
monetary policies, rather than the "prudent" stance that had prevailed for the 
past decade.

   The last time China adopted that approach was in 2008-2010, when the central 
bank eased credit aggressively as an antidote to the shocks of the global 
financial crisis, noted Tao Wang of UBS.

   Earlier this year, the People's Bank of China began cutting interest rates 
and the required reserves banks must keep on deposit, and is expected to cut 
rates further in coming months, Wang said.

   Cheaper credit would make it easier to finance purchases of housing and 
other investments as the central bank plays a growing role in helping keep 
markets stable and boosting the economy.

   Expectations of lower interest rates have caused bond prices to soar. But 
overall, investors who were hoping for more details of planned policies 
appeared disappointed with the outcome of the week's meetings. On Friday, the 
Shanghai Composite index fell 2%, while Hong Kong's Hang Seng sank 2.1%.

   Overall, a cautious approach as China awaits Trump's second term

   Xi's longer-term blueprint for building an innovative, high-quality modern 
economy remains the framework for China's future course as leaders fine-tune 
policy details while watching to see what Trump does once he takes office.

   As the U.S. and o ther trading partners have imposed ever tighter controls 
on China's access to advanced technology, such as the latest computer chips and 
the tools and materials to make them, Beijing has retaliated with its own 
targeted measures.

   Economists say China's leaders are holding back on more drastic moves to 
support the economy, which is growing at a reasonably fast pace despite its 
chronic weaknesses, as they wait to see what happens.

   'Chinese authorities have been stuck in a more reactionary policy mode, as 
the uncertainty of U.S. tariff plans makes it difficult for policymakers to 
make any commitment just yet," Yeap Jun Rong of IG said in a report. "There may 
still be room for positive surprises, but much will lie in any upcoming policy 
specifics."