We live on these five percent – Newspaper Kommersant No. 38 (7483) dated 03/06/2023

The weakening of the regime to combat the coronavirus pandemic will allow the Chinese government to actively stimulate economic growth this year – this is proposed to be done by supporting demand and investment activity. The official GDP growth target set by outgoing Chinese Premier Li Keqiang is lower this year than last year at “about 5%” versus “about 5.5%,” but the actual performance, according to economists, could exceed this figure. while in 2022 the country’s GDP grew by only 3%. The acceleration of growth in China is also one of the main support factors for commodity markets: in many respects, the state of the Russian budget, which depends on energy exports, will be determined by the success or failure of the Chinese recovery.

The annual session of the National People’s Congress opened in China on Sunday. It will be approved new composition of the governmentincluding Premier Li Keqiang’s successor, who led the government for two five-year terms.

By tradition, on the first day of the session, the Prime Minister of the State Council presented a report on the results of the government’s work and announced new economic goals for the year. This time, China’s GDP growth target of “about 5%” turned out to be the lowest in recent years: in 2022, growth was supposed to be “about 5.5%” (but actually slowed to 3% amid an increase in the number of cases coronavirus and a new wave of tightening lockdowns), a year earlier the goal was also more ambitious – “over 6%”, before the pandemic the benchmark was closer to 6.5%.

However, other macro parameters point to more ambitious government plans to stimulate the economy – in particular, 12 million new jobs should be created this year (versus 11 million in the past), and the budget deficit should expand to 3% of GDP against 2.8%, which the authorities were guided by last year (so far only the indicator of military spending has been published from the draft budget – they will amount to 1.553 trillion yuan (about $ 224.85 billion), which is 7.2% more than a year earlier). At the same time, according to the government’s plan, the unemployment rate will remain at the level of 5.5%, and inflation will accelerate from 2% to 3%.

Note that since the end of last year, China has already removed the main restrictions that affected the sharp slowdown in growth. Then the authorities announced a significant revision of the “zero tolerance for coronavirus” policy (the new regulation banned the “arbitrary” distribution of lockdowns to entire districts and cities, and the main principle for their introduction was the minimization of “high-risk” zones, which are subject to the quarantine regime when cases are detected. infection with COVID-19), in January restrictions on entry into the country were also lifted.

Li Keqiang’s report itself speaks of increased uncertainty, but outside of China – this concerns high inflation in many countries and a slowdown in the global economy and world trade. “The lack of demand is still a tangible problem, and the expectations of private investors are not stable, we are also faced with the task of stabilizing employment,” follows from an assessment of the state of the economy. Li Keqiang also calls for “focusing on expanding domestic demand” and stimulating private investment, including attracting private capital to participate in large national projects. Local governments are expected to place 3.8 trillion yuan (about $550 billion) in special bonds this year, the kind of large-scale borrowing China has resorted to before, using these funds to finance large construction projects. The report also contains promises to increase pensions and increase the availability of medical services, which also requires an increase in government spending.

Other goals of the Chinese government for this year include stimulating technological development, digital transformation of traditional industries, continuing to reform the public sector, and improving the competitiveness of state-owned companies. The report also repeatedly emphasizes the importance of strengthening environmental policies (Li Keqiang called for “continuing the fight for blue skies, clean water and land”), reducing emissions and the energy intensity of GDP, and reiterates the need to control financial risks, in particular those associated with growth real estate market.

Separately, China’s success in expanding the access of foreign investors and facilitating trade conditions is also noted – the so-called lists of exceptions (which indicate industries inaccessible to foreign capital) throughout the country were reduced by 51% in five years, in pilot free trade zones – by 72% . Now investors are promised to expand access to the service sector. During the same time, the government signed six new trade agreements, and the share of imports and exports with partners in them increased from 26% to 35% (the average level of import tariffs is still significantly higher than in developed countries – over five years decreased from 9.8% to 7.4%). The next, judging by the report, may be an agreement with former members of the Trans-Pacific Partnership (after the US exit in 2017, 11 countries remained in it).

Li Keqiang also pointed to the success in reducing the volume of compulsory licensing, reducing the time for registering a new business, and even reducing the time of customs procedures – however, as Russian practice shows, the main restrictions that the Chinese side has introduced since 2020 related to quarantine measures, according to the same For this reason, the work of checkpoints at the border was also limited.

The lifting of restrictions and stimulus policies after the pandemic is still expected to lead to a more significant growth in China’s GDP this year – even according to the International Monetary Fund forecast, it could be 5.2% (decelerating to 4.5% in 2019). next year). Investors are also optimistic about growth prospects, according to a survey conducted by Goldman Sachs, with 44% of respondents citing the risk of increased confrontation between the US and China as the main one, which exceeded the level of fears due to high global inflation (26%), other geopolitical events ( 15%) and the risk of a recession triggered by monetary tightening (13%).

Leading indicators of business activity so far really indicate an improvement in the situation in the Chinese economy – for example, the value of the Purchasing Managers’ Index (PMI) according to Caixin in the industrial sector of China in February amounted to 51.6 points against 49.2 points in January (a value above 50 points indicates an increase in business activity). The dynamics in the commodity markets also depend on the state of the Chinese economy – first of all, this concerns the demand for oil and metals (Capital Economics expects it to grow in the first half of the year). According to the International Energy Agency, the volume of supplies of oil and petroleum products from Russia to China in January has already increased from 1.9 million to 2.3 million b/d (including oil supplies reached a record level of 2.1 million b/d) .

Tatyana Edovina