Chinese Premier Li Qiang, the second-ranking official in the ruling hierarchy, called for revitalizing the economy through credit expansion and boosting domestic demand ahead of the weeklong National Day holiday starting October 1 and the fourth quarter. The move could be seen as an indirect acknowledgment of difficult economic conditions this year.

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An editorial cartoon from a media outlet illustrating that the Chinese economy currently faces downward pressure, underscoring why Beijing has good reason to emphasize boosting domestic demand. / Xinhua News Agency

According to a report on the 28th by China's state-run Xinhua News Agency, Premier Li chaired an executive meeting of the State Council that day to discuss work related to enhancing the effectiveness of macroeconomic policies and spurring effective investment. He first stressed that "in response to issues that have emerged during current economic operations, we must intensify counter-cyclical adjustments in macroeconomic policy, push forward continuous economic innovation and improvement, and strive to accomplish the annual economic development targets and tasks."   

Counter-cyclical adjustments refer to managing policies counter to economic trends to foster stable growth. Under this approach, easing measures such as interest rate cuts are enacted during downturns, while tightening policies are applied when the economy overheats. Amid China's current economic sluggishness, this can be interpreted as a signal to expand the scale of stimulus policies.

China set an economic growth target of 4.5% to 5% early this year. The year got off to a relatively solid start with a 5.0% growth rate in the first quarter, but momentum slowed to 4.3% in the second quarter. That marked the lowest level since the 2.9% recorded in the fourth quarter of 2022, when the economy was battered by the spread of COVID-19.   

Currently, the Chinese economy continues to see strong performance in exports and industrial production. However, slumps in domestic demand, investment, and real estate persist. Due to these headwinds, retail sales in August rose just 0.4% year-on-year, missing market expectations. Fixed-asset investment for January through August also fell 7.2% year-on-year, marking the steepest decline since April 2020.

The meeting thus concluded by determining that "vitality must be injected into private investment, and the efficiency of investment approvals must be improved." 

It added, "We must continuously study and build a policy pipeline to boost domestic demand, explore more high-impact work plans, and encourage qualified local governments to take the lead in implementation."

                                                                                                            Hong Soon-do