BEIJING, China – Chinese leaders promised Monday to promote economic growth by cutting business costs and reducing surplus production capacity in some industries as they try to reverse an unexpectedly sharp downturn.
After an annual planning meeting, Communist Party leaders also promised to reduce financial risks and rein in rising debt that has prompted concern about possible threats to China’s financial system.
The leadership under President Xi Jinping is in the midst of a multi-year effort to nurture slower, more sustainable growth based on domestic consumption instead of trade and investment. Growth has slowed more abruptly than expected over the past two years, forcing the party to juggle competing demands of shoring up the expansion while keeping reforms on track.
The pledges in Monday’s brief statement weren’t new, but they indicate where the ruling party’s priorities will lie in 2016.
The statement also gave no details of how key issues such as the status of state companies that dominate industries from banking to energy to telecoms would be affected.
Economic growth decelerated to a six-year low of 6.9 per cent in the quarter ending in September and the International Monetary Fund and private sector forecasters expect it to fall as low as 6 per cent next year. Communist leaders insist they are comfortable with slower growth after the last decade’s explosive double-digit expansion but face pressure to avoid a spike in job losses.
In 2016, the party will “reduce the burden on enterprises,” the statement said. It promised to promote “mass entrepreneurship and innovation,” but gave no details.
The party has taken steps to help entrepreneurs by reducing regulatory approvals required to start a business. In November, Beijing cut costs for entrepreneurs by reducing interest rates charged by credit unions and other small lenders that serve the private sector.
Beijing will “resolve excess capacity,” the statement said, a reference to industries including steel, cement, glass and solar panels in which supply exceeds demand.
That glut has led to price-cutting wars that threaten the financial health of companies. Regulators want to promote consolidation through mergers but face resistance from local officials who are reluctant to lose jobs and tax revenue. Monday’s statement suggested local leaders might come under increased pressure from Beijing to co-operate.
The ruling party unveiled plans in September to inject more competition into industries controlled by state companies and to force them to become financially self-reliant. But it stressed the ruling party would retain its dominant role in the economy.
Reform advocates complain the ruling party is dragging its feet on promises to open industries dominated by politically favoured state companies that benefit from monopolies, low-cost loans and other favours.
Party leaders also “vowed to take further steps to guard against and defuse financial risks,” the statement said.
Financial analysts have warned China’s financial system faces mounting risks due to soaring levels of debt. A largely unregulated industry of private sector finance companies that flourished over the past decade has suffered rising defaults as economic growth slows, causing losses for depositors and a spate of protests.
Chinese regulators say banks are financially healthy but they have tightened control over private finance companies. Last week, an Internet-based lender, Ezubo, that news reports said collected billions of dollars in deposits, was raided by police who seized a bank account and detained executives.