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China’s Politburo wants domestic internet platforms to help fuel economic growth in the country. Photo: AP

China leaders rev up Big Tech, letting internet platforms off leash to ‘explore and innovate’

  • First formal economic assessment by new leadership line-up offers insight into how China will support growth while addressing risks
  • Control and cultivation of AI tech like ChatGPT is also firmly on Beijing’s radar, and so is raising household income to support consumption

Beijing has locked its sights on advancing China’s tech sector to fuel economic growth, with leaders also vowing to break down “hidden barriers” long lamented by foreign investors and private entrepreneurs.

At a Politburo meeting chaired by President Xi Jinping on Friday, leadership said the “threefold pressure” that haunted China in the past couple of years has been alleviated following the nation’s reopening in recent months, but it also noted that there are still worrisome concerns over investor confidence and household income that are threatening the recovery’s sustainability.

“Economic growth is better than expected, market demand is improving, and economic operations have got off to a good start,” the official Xinhua reported after the meeting.

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This marked Beijing’s first formal assessment of the economy since the new leadership line-up – including Premier Li Qiang and Vice-Premier He Lifeng – took office in March.

And their encouraging of leading internet platforms to “explore and innovate” appears to represent a sharp about-face following a regulatory storm over Big Tech that lasted nearly two years and slowed China’s economic momentum.

China’s primary decision-making body often convenes a conference after the release of quarterly data, to evaluate the state of the economy and discuss potential countermeasures to shore it up.

“The current economic improvement is mainly owing to recovery-driven growth, but the internal driving force is not strong, and demand is still insufficient,” the state-run news agency warned.

[We] must emphasise the development of artificial general intelligence, build an innovation ecosystem, and be mindful of possible risks
Politburo statement

It also said China must “break down all legal and regulatory obstacles and hidden barriers” that have hindered fair market competition and undermined business confidence – long-term grievances of foreign and private businesspeople.

“We should continuously lift the confidence of business entities and help them bounce back,” the statement said. “We must commit to fundamentally addressing the arrears that have confronted enterprises.”

Furthermore, leaders discussed the need to build strong, modern industries, with an emphasis on new energy vehicles and the accompanying energy infrastructure – including charging stations and power-storage facilities – as well as the inevitable application of artificial intelligence into both production and people’s lives.

“[We] must emphasise the development of artificial general intelligence, build an innovation ecosystem, and be mindful of possible risks,” the statement said.

The concern came as ChatGPT, developed by Microsoft-backed OpenAI, unleashed a frenzied attempt by Chinese technology firms to play catch-up, with many domestic versions of such AI bots being launched. In response, China’s internet watchdog released a circular earlier this month to regulate the fast-growing industry.

Zhang Zhiwei, chief economist at Pinpoint Asset Management, said Beijing’s acknowledgement of weak demand, and its concerns about unemployment, justified its accommodative monetary policy in the second quarter, with the central bank expanding the money supply to boost economic growth.

“It is premature to tighten monetary policy at this stage,” he said.

Major Wall Street banks have been revising up China’s 2023 growth forecast after the National Bureau of Statistics reported a surprising 4.5 per cent increase in gross domestic product during the first quarter.

For instance, Bank of America raised its full-year growth estimate for China to 6.3 per cent from 5.5 per cent; JP Morgan upgraded its guess by 0.4 percentage points to 6.4 per cent; and Citi upped its prediction to 6.1 per cent from 5.7 per cent.

This was also supported by an increase in travel and hotel bookings for the upcoming five-day May Day holiday.
Scepticism, however, remains over whether the economic recovery, particularly in terms of household consumption and overseas orders, can be sustained, even as the low comparison base with last year will make it relatively easier for Beijing to accomplish its full-year growth target of around 5 per cent.

“The key is still on the stabilisation of the national economy. There’s no reason to let down our guard,” said Ding Shuang, chief Greater China economist at Standard Chartered Bank.

The latest Politburo statement did not particularly warn about “external uncertainties” – an often-used expression referring to tensions with the US, geopolitical conflicts or weak global demand. However, Beijing’s feud with Washington continues to haunt market players.

In addition to potential recessions in developed markets, and with more protectionist measures taken against made-in-China products, there have been many discussions over producer price deflation and a large fall in the profits of industrial firms in March – sharply contrasting a huge surge in bank loans seen during the first quarter.

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China is currently bracing for yet another record outpouring of university graduates that will further flood a weak job market where the youth-unemployment rate is nearly 20 per cent.
Manufacturing jobs are also at risk from falling export totals and factory relocations to other countries. Meanwhile, debt continues to be an outsized threat to local governments across the country.
On Friday, the Politburo also emphasised that a higher priority was being placed on foreign capital utilisation, in a bid to stabilise foreign trade and foreign direct investment.

Leadership added that recovering and expanding demand was crucial for China’s sustained economic recovery, and it called for joint efforts to be taken by fiscal and monetary authorities to boost household income and unlock consumption, without going into specific details about how this might occur.

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