Caught between two worlds
It’s becoming increasingly clear that China’s leadership has no clear path out of the problems of handling the latest Covid wave, the impact on supply chains and domestic activity, the prolonged problems with the property industry, and the slowing economy. There also is significant debate about economic policy in the top levels of government.
During an April 29 Politburo meeting chaired by Xi Jinping, the State Council pledged to “enhance the strength of macro policy adjustment, stabilize the economy, strive to achieve the goals of economic and social development and keep the economy operating within a reasonable range.” But no specific measures were stated.
Two days earlier the Financial Times reported a policy clash between economics head Liu He and two important State Council members, both vice premiers, Han Zheng and Hu Chunhua. Han Zheng outranks Liu. Both sides are against a massive stimulus but Liu wants to provide some targeted help to the property industry. The vice premiers want “to maintain the pressure on developers by tightly regulating how they can use project revenues.” Just days later, on May 1, the FT reported on a meeting asking banks for solutions to tackle potential financial sanctions. "'No one on site could think of a good solution to the problem,' said a person briefed on the meeting. 'China’s banking system isn’t prepared for a freeze of its dollar assets or exclusion from the Swift messaging system as the US has done to Russia.'"
Then, on May 12 The Wall Street Journal chimed in, claiming that China’s Premier Li Keqiang, had convinced Xi Jinping to relax many of the government’s harsher measures, including the anti-tech policies, strict regulations over the property market. The article concluded that “frustrations with Mr. Xi’s leadership are building.”
The broader question is – are there signs of direction to current economic policy? Is the tide truly turning?
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