China struggled with trade in 2021. Xi Jinping will play safely this year

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Add to that some other problems in the world’s second largest economy, and you face some serious risks that the Chinese government faces in 2022.

Although China is set to become the only major economy to grow that year from 2020, growth has slowed faster than expected in 2021, and has been offset by repeated Govt-19 eruptions, supply chain disruptions, the power crisis and the real estate crisis.

All of those headaches make Beijing reconsider its policy approach. During a major economic meeting earlier this month, top leaders of the ruling Communist Party of China made “stability” their top priority for 2022. It was a major focus of last year’s meeting on “preventing the irregular expansion of capital”.

“The emphasis on stability suggests that top leaders are increasingly concerned about the risk of instability,” said Larry Hu, chief economist at Macquarie Group, in a recent study.

“One year of regulatory austerity has hurt business confidence,” he added. “Now is the time for policymakers to step back.”

Despite the challenges, China is expected to record significant growth in 2021. Many economists predict growth of around 7.8%, which is higher than the 6% base target set by Chinese authorities earlier this year.

But 2022 is a different story. Many large banks have cut their growth forecasts to between 4.9% and 5.5%, the slowest growth rate since 1990 – the year in which international sanctions tightened economic activity following the 1989 Tiananmen Square massacre.

“The preoccupation with the Chinese government’s disciplinary and anti – monopoly repression is made possible by China’s skyrocketing economic growth,” said Craig Singleton, a deputy ally of the Foundation for the Defense of Democracy, a DC-based think tank.

“Now, the growth drivers of China’s economy are rapidly evaporating.”

Controls, now twists

Private sector repression began in late 2020 following the eruption of Alibaba co-founder Jack Ma – easily recognizable among China’s business elite. The country’s financial system during the controversial speech.
The initial public offering for his financial technology company Ant Group was soon discontinued. Since then, life has become more difficult not only for the Ant Group but also for other companies.
Alibaba (Baba), Tencent (TCEHY) Others were fined or prosecuted for misconduct. China has also taken steps to punish companies for data collection and national security, including Didi, a right-hailing operator. The company was attacked by regulators shortly after it went public on Wall Street, eventually announcing that it would be listed and transferred to Hong Kong.
China's 'unprecedented' repression stunned the private sector.  A year later, it will have to slow down the business a bit

There is justice behind Beijing’s tough stance on such companies. According to Xi, the solution to addressing long-standing concerns about consumer rights, data privacy, excessive debt and economic inequality is to control the private sector. In other words, it is about controlling the excesses of capitalism and embracing the country’s history of socialism.

But a balance must be reached. Now facing an economically difficult landing opportunity, Beijing seems to be reversing its tough stance on the private sector. At Their latest At the meeting, Chinese leaders praised the positive role of private capital in the economy – a blatant change in tone compared to what they had said a year ago.

“In a socialist market economy there will inevitably be capital in various forms,” ​​they said in a statement after the meeting. “Capital must play its positive role as a factor of production, while its negative share must be effectively controlled.”

The message is, “The peak of the rules is behind us,” says Hu from Macquarie. “Government control is important, but neither party wants to kill the bourgeoisie,” he said.

More focus on jobs

When Chinese policymakers try to stabilize the economy in 2022, some key factors will come to mind.

According to a report released after this month’s meeting, unemployment has been re-listed as one of the most important areas Beijing wants to focus on.. (Other goals include securing food and energy security and stabilizing supply chains.)

As the outlook for employment in China continues to deteriorate, emphasis is being placed on job creation. Educational technology companies have laid off thousands of employees following a government crackdown on tuition in July. Other technology companies are reportedly planning to cut staff due to repression of their businesses.

The real estate crisis is also a contributor. Non-cash asset developers, such as Evergrande, have lost their jobs and relocated.

Evergrande cannot pay his debts.  China is trying to control the fall

The worst fixed unemployment rate, released by the government every month, has been steady this year, fluctuating only between 4.9% and 5.5%. But top leaders have repeatedly called on various occasions to strengthen employment, saying there could be a bigger problem than data displays.

“I think employment is bigger sensitive than GDP right now,” said George Magnus.

Magnus said business repression was a significant factor, while many challenges, including the Govt explosions and the real estate crisis, dragged down employment. According to government statistics, the private sector contributes 80% of employment.

The Singleton Party “focused on laser unemployment, fearing that mass layoffs could jeopardize the party’s position.”

Xi’s game for power will pave a difficult path ahead of him

Xi’s mind certainly has the desire to keep the country running smoothly ahead of a historically significant third term.

It is widely expected that the Chinese leader will extend his rule at the 20th Party Congress next year, confirming his position as the country’s most powerful leader after Mao Zedong.

“Xi’s message of ‘stability’ is aimed at the political establishment in China, which must absorb the burdens of a historic power play in addition to the business sector,” said Alex Capri, a research fellow at the Heinrich Foundation.

G has taken a number of steps to show that he is more focused on domestic issues than any major international aspirations. The Chinese leader has not left the country since the outbreak, and has taken dramatic steps to protect his country’s borders and lock down entire regions to control even a single corona virus – a “govt-zero” approach abandoned by most. The world.

China doubles down on zero-govt as it fights the widest eruption since Wuhan

But Capri noted that Xi needs to consider the outside world to an extent. The news of Xi’s stability was aimed at easing growing concerns within Wall Street and other corporate and financial centers, with China relying more on its interest in investment, technology and trade.

This is a dangerous balancing act – and an Xi will have to think carefully in the coming year.

“Like other countries, China wants a future based on high levels of innovation and productivity, but is politically motivated to create conditions that prevent both,” Magnus said.

“The main challenge for China is going to be, with Xi being in charge for a decade, are course revisions possible?” Singleton said. “Unfortunately, the historical record there is that absolute power generally does not lead to a very practical, flexible approach.”

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