China’s leaders are bracing for shocks to the economy from higher tariffs threatened by US President-elect Donald Trump once he takes office. Millionaires, meanwhile, are relocating.
China’s ruling Communist Party is rolling out a slew of measures to get Chinese consumers and businesses to spend more money and counter a slump in the Chinese currency and stock prices in a bid to help rev up its economy, bogged down by a property crisis and disruptions during the pandemic.
Meanwhile, some 13,800 high-net-worth individuals have left the country since 2022 as a result of its economic challenges, according to a report by Henley & Partners.
Here are some of the top items on China’s list of priorities for 2025 to turn its fortunes around:
Subsidies for spending
China plans to expand its cash for clunkers and appliance recycling programs to encourage more purchases of new, energy-efficient models. The recycling that began last year has led to the replacement of 6.5 million fuel-powered vehicles with electrics and hybrids since June, officials of China’s main planning agency said Wednesday. They also cited a double-digit growth in the past several months in sales of new appliances.
Subsidies of up to 20% of sales prices will now apply to a dozen types of appliances and also include digital products such as mobile phones, they said. The government is also subsidising the upgrading of outdated factory equipment.
Crackdown on shakedowns
Local officials have been warned not to conduct unjustified “arbitrary inspections” that interfere with normal business, Hu Weilie, a vice minister of Justice, told reporters Tuesday according to state media reports.
The official Xinhua News Agency said new rules are meant to prevent abuse of power, arbitrary seizures of assets and unjustified orders to halt production. The effort is part of a campaign aimed at improving China’s business environment, according to Premier Li Qiang. The moves follow complaints that dozens of executives have been detained or assets seized by cash-strapped local governments trying to shake down companies.
More money is on the way
So far, China has not unleashed a big bazooka of stimulus spending, choosing a more targeted and incremental approach. However, Zhao Chenxin, head of the National Development and Reform Commission, China’s main planning agency, said the government plans to announce “significantly larger” scale long-term treasury bonds to finance such spending. But specific figures won’t come until the annual meeting of the national rubber-stamp legislature, due to be held in early March.
Protecting the ‘people’s money’
China’s central bank said it resolved at a meeting over the weekend to keep the value of the yuan steady and stabilise financial markets.
The Chinese currency, also called the renminbi, or “people’s money,” has weakened against the US dollar and other currencies, putting pressure on its financial markets. Its stock market has languished again after a brief revival in late September, when the Shanghai Composite index jumped to nearly 3,700, falling back to just over 3,200. The yuan was trading at 7.3278 to the dollar on Wednesday. It was trading near 7 yuan to the dollar in early October.
A weaker yuan can make Chinese exports more competitive but also risks angering Chinese trade partners.
Talking up the economy
China’s ruling party allows very little leeway for public dissent, and even the scope for talking about the economy has narrowed.
Authorities have shut down the social media sites of economists challenging policies as they try to rally support for President Xi Jinping’s leadership. A recent report by Xinhua called for ensuring “correct public opinions” that are aligned with creating “a mainstream public opinion of unity and progress.”
But talking up the economy can obscure hard realities, said a recent report by the think tank Rhodium Group, which estimated China’s actual economic growth last year at 2.4% to 2.8%, well below the official estimate of about 5%.
One big factor behind the lower-than-hoped-for growth is pocketbook issues that crimp demand, such as falling housing prices and smaller paychecks. The report also said: “No substantial policy measures have been announced that will substantially change the employment or wage outlook.”
