China, prompted by Premier Li, hones in on exports amid economic slowdown

By Riyaz ul Khaliq

ISTANBUL (AA) – After identifying measures to help stabilize the economy, China’s Premier Li Keqiang has reportedly told officials at the local government level to ramp up efforts to boost exports.

The world’s second-largest economy is witnessing a slowdown that, according to officials, has put it on course to miss its annual growth target of 5.5%.

Premier Li has urged government officials to “take steps to expand exports,” Japan’s Kyodo News reported, citing unnamed sources.

The decision, if true, challenges Beijing’s policy of “dual circulation” to bolster domestic demand while trying to increase exports.

Home to over 1.4 billion people, China’s five-year economic plan through 2025 lays emphasis on increasing domestic consumption.

The slump in economic growth comes amid President Xi Jinping’s “zero-COVID” policy, under which several cities, including financial hub Shanghai, were placed under stringent lockdowns since March as infections boomed.

The situation has now eased, prompting a gradual return to normal life and controlled lifting of virus restrictions.

Einar Tangen, a Beijing-based China analyst, agreed with Li’s plan, saying the premier was “being practical.”

“The Chinese economy needs a fast-acting jolt to get the wheels of consumption going, before it can get back on track with its ‘dual circulation’ strategy,” Tangen told Anadolu Agency.

At a meeting of the State Council last week, the Cabinet of the Chinese government, Li offered a rare acknowledgment that the country was “facing difficulties” in its developmental policy.

“The government is facing difficulties in development, some of which are more serious than those in 2020, when the COVID-19 pandemic hit,” Li said as he sought solutions from top officials.

Tangen said tariffs, technology embargoes, logistics, inflation, debt, COVID-19 and the Ukraine war “have combined to decimate China’s small and medium enterprises, and thereby employment and disposable income.”

- ‘Li’s role again in focus’

Among the 33 measures that officials were required to identify by the end of May, China will roll out a historic $21 billion tax cut and more bonds to fund infrastructure spending.

Creating employment is another area which Li has emphasized in his directives to officials as China’s unemployment rate among people aged 16 to 24 has reached a historic high of 18.2%.

While Xi is believed to be seeking a historic third term at a summit of the Communist Party of China – held twice in a decade – later this fall, the role of Premier Li, whose term ends next year, is again in focus as he takes charge of efforts to get China back on track for its ambitious aim of surpassing the US economy by 2030.

To hit the target, British consultancy Center for Economics and Business Research said China needs to maintain gross domestic product (GDP) growth at 5.7% per year through 2025 and then 4.7% annually until 2030.

With the figure languishing at 4.8% during the January-March period, Beijing seems set to miss this year’s objective.

This also comes after Xi unveiled his “common prosperity” initiative last year, which he said would “raise incomes of low-income groups, promote fairness, make regional development more balanced, and will stress on people-centered growth.”

However, amid the economic slowdown, China later announced that it would “suspend the full promotion of ‘common prosperity’ policy for the time being.”

​​​​​​​ - ‘Xi agrees with Li’s proposal’

The unnamed sources told Kyodo News that Li conveyed to Xi that “it is difficult to stimulate domestic demand under the zero-COVID policy and China should implement measures to jack up exports to other countries, whose economies are recovering from the coronavirus shock.”

“Xi has agreed with the proposal by Li,” according to the report.

After the president’s nod, Li has directed local government officials “to prohibit companies from suspending operations at their factories.”

Officials at the local government level have “already begun to increase tax refunds on exports,” the report added.

“To get the economy restarted, China needs to quickly increase jobs and disposable income,” Tangen said, emphasizing that “this does not mean China is making a major economic shift away from a consumption-based economy.”

Tangen predicted “good opportunities” for Chinese exports over the next few years.

“China is the largest supplier of intermediate goods in the world. Given the global slowdown ... China’s low-cost manufacturing base and efficient logistics will continue to be in demand, as real incomes fall, due to food shortages and inflation,” he explained.

“The combination of little new competition, backlogs and favorable logistics rates will increase prices and profits for Chinese goods, allowing firms to maintain competitive market position while increasing wages.”​​​​​​​