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