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China to Revitalize Real Economy in 2017, Introduce New Mechanisms for Real Estate Market


(YicaiGlobal) Dec. 12 – A recent meeting of the Politburo of the CPC Central Committee on economic operations in 2017 called for more active efforts to revitalize the real economy and foster new economic growth drivers. For many experts, the decision of the meeting sends out a strong signal for robust efforts to boost industrial development.

In China, the last meeting of the Politburo each year focuses on economic operations for the following year and is of particular importance in that it sets the tone for the upcoming central economic working conference, which is considered to be the main indicator for the upcoming economic trends in the new year. The central financial working conference is held every five years, and the next one may take place later this year or early 2017, according to an informed source.

Real economy revitalization

“Manufacturing is the main battlefield for revitalizing the real economy. The existing manufacturing businesses are a critical factor, and innovation is the central task,” said Li Beiguang, deputy director of the planning department of the ministry of industry and information technology (MIIT), during an interview with the state-run Xinhua News Agency. Efforts will be made to promote emerging industries and, more importantly, to boost the progression of traditional industries through innovation.

China already takes on some of the challenges. According to the Intelligent Manufacturing Development Plan (2016-2020) issued by MIIT on Dec. 7, production will be digitalized in key traditional manufacturing industries by 2020, and the transition toward intelligent manufacturing will be completed in most key industries by 2025.

Upgrading the Chinese manufacturing sector is an issue closely linked with state-owned enterprises – the largest manufacturers in China. The central government has started mergers and business reorganizations of major SOEs this year in a bid to improve their competitiveness. Furthermore, the State-Owned Assets Supervision and Administration Commission (SASAC) of the State Council is actively deliberating and developing implementation plans for SOE reforms in 2017, said SASAC vice chairman, Zhang Xiwu.

Keeping assets bubble in check

Although only less than 600 Chinese characters were used in declaring the outcome of Politburo discussions about economic operations in 2017, they convey a significant amount of information and messages, Xinhua reported. It made a special reference to the preservation of stability, saying that making progress while ensuring stability is an important principle for state affairs management in China, and is particularly relevant to economic operations next year. We should strive for breakthroughs in key areas, while maintaining social stability.

“Making progress while ensuring stability will remain the main theme. Fiscal and monetary policies will continue to focus on economic growth stabilization, which is described as the top priority for 2017,” Xu Hongcai, deputy chief economist at China Center for International Economic Exchanges, told Yicai Global.

Ensuring stability involves “keeping assets bubbles in check,” and guarding against financial risks. The term was first proposed during the Politburo meeting in July 2016; and the requirement was reiterated at the level of monetary policymaking during the October meeting. It stressed, “While ensuring reasonably accommodative liquidity, attention should be paid to curbing assets bubbles and preventing economic and financial risks.”The central government clearly intends to tighten its grip over financial risks.

Since the launch of the crackdown on financial risks in internet finance businesses last April, the overall level of risks associated with the internet finance has been curbed, and the upsurge in the frequency of risk incidents has been contained, said a PBOC official on Dec. 9. Currently, the focus of the crackdown is to clean up high-risk businesses and rectify issues discovered.

The real estate sector is considered to be the main battlefield for the fight against assets bubbles. Many local governments have introduced new regulations in property markets. As an indication of the future trends for the real estate industry, the politburo meeting asked efforts should be made to speed up the introduction of a long-term mechanism to ensure steady and healthy development of the real estate sector in line with the actual situation in China and the relevant laws of the market economy.

Conditions for stabilization of the Chinese economy have gradually improved, but particular attention needs to be paid to risks in the real estate and financial sectors to prevent them from building up or spreading further; and the risks should be gradually reduced through deepening structural reforms, said Wang Yiming, deputy director of the Development Research Center of the State Council.

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