Editorial: Three Principles Should Guide China’s Economic Future

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Economic growth is now the central task of the Chinese Communist Party.

This is the message that came out of a recent meeting of the Financial Stability and Development Committee (FSDC) of the State Council, chaired by Vice Premier Liu He, a member of the central committee of the political bureau of the CCP.

During the meeting, it was stressed that in the current complex situation, it is crucial for the party to make development its top priority in governance, with economic development as its central task. The steps include deepening reform and opening up, adhering to the principles of market orientation and the rule of law, adhering to the principle of “two steps of irresolutions” (no irresolution on the consolidation and development of the public sector and no irresolution on the encouragement, support and orientation of the development of the non-public sector) and by taking concrete measures to protect property rights.

The meeting also addressed many capital market concerns. Some have seen this meeting as the announcement of a government bailout, but that seems somewhat inaccurate. Although the meeting said the government will “actively introduce market-friendly policies and remain cautious about introducing measures with contractionary effects” and that “all policies that have a significant impact on capital markets should be coordinated in advance with the financial management services”. to maintain stability and consistency of political expectations”, the essence of this meeting can be summarized by the three principles of market orientation, rule of law and internationalization. Principles and directions for future development are more important than specific policies. There is a need for governments at all levels to put the old policies in order: anything that violates the three principles should either be abolished or reformed.

It is imperative to respect the three principles. China’s national economic statistics – including industrial production, investment, consumption and exports – for the first two months of this year show that the Chinese economy has recovered better than expected. However, some analysts pointed out that the published data is somewhat contradictory and also inconsistent with other high-frequency data, especially in real estate. Additionally, the Chinese economy, particularly the service and manufacturing sectors, may not be doing as well as the data suggests due to the base effect caused by the Covid-19 pandemic.

Overall, domestically, China faces a number of difficulties and challenges that could hamper its economic growth. There are new pressures on growth, the most important being a contraction in demand, supply shocks and weakening expectations, not to mention sporadic outbreaks of Covid-19. Internationally, the pandemic continues to ravage the world, while geopolitical crises, such as the Russian-Ukrainian war, drag on. Coupled with interest rate hikes in the US and EU, the global economy is slowing, with commodity prices soaring and stabilizing at high levels. All of this has led to a more complex and uncertain global environment. Given these circumstances, both at home and abroad, the Chinese stock market has been on a rollercoaster ride.

When the meeting announced that China would continue to follow the three principles, it stabilized market expectations and restored business confidence. However, for expectations to remain stable in the long term, governments at all levels must implement the decisions of the meeting by taking practical steps and institutionalizing them. The FSDC also said it would “strengthen coordination and communication, and hold relevant parties accountable where necessary.” We need a strong accountability system with strong implementation.

To follow the principle of market orientation, it is crucial to protect property rights while encouraging entrepreneurship. This is an essential precondition for ensuring the stability of employment and investment. The meeting emphasized that government departments must shoulder their respective responsibilities. It is well known that property rights can be expressed as a “bundle of rights”. Restrictive policies could affect entrepreneurs’ expectations and undermine their confidence, which would not only harm the economy, but would also be seen as a violation of property rights. Policies that affect business operations and production should be rectified, while wrongly convicted cases that have damaged the legitimate rights and interests of entrepreneurs should be corrected as soon as possible. In essence, adhering to the principle of market orientation means that China will continue to let the market play a decisive role in allocating resources.

Adhering to the principle of the rule of law is key to clarifying the relationship between government and the market and enabling government to play a more effective and appropriate role. The platform economy is a good example. In recent years, the Chinese government has fought chaos and strengthened supervision of the Internet industry. This is imperative to promote the healthy development of the platform economy. However, rectification work must comply with the law. Any sanction must be based on the law. The meeting said governance of the platform economy should adhere to the principles of market orientation, rule of law and internationalization. Monitoring of platform economies should be carried out in a regulated, transparent and telegraphed manner, and rectification work on large platform companies should be implemented as soon as possible. He also called for setting up “red lights” and “green lights” to promote the steady and healthy development of the platform economy and improve its international competitiveness. These statements are both incisive and realistic. The principle of rule of law should be present throughout the process of platform economic governance and we should avoid confusing “red light” with “political correctness”.

Adhering to the principle of internationalization is a prerequisite for China to deepen its opening-up. The meeting also reported that Chinese and US regulators have maintained communication and made progress in regulating Chinese concept stocks. The two parties are working on a concrete plan of cooperation. The Chinese government will continue to support companies wishing to register overseas. This sends clear political signals and clarifies many previous misunderstandings.

Adhering to the principle of internationalization is not only decisive for China’s economic growth but also for China’s future development. China, a permanent member of the UN Security Council and one of the greatest beneficiaries of economic globalization, has a responsibility to actively contribute to the maintenance of the international politico-economic order and to assume the responsibility of a great country. During President Xi Jinping’s recent call with US President Joe Biden, at this crucial moment in the Russian-Ukrainian war, it was made clear that world order can only be achieved through united efforts. China should and can make a difference.

China’s remarkable achievements over the past 40 years are, to a large extent, the result of adhering to these three principles. In contrast, countries that have gone against these principles and isolated themselves from the international community have suffered the consequences on many levels – politically, economically, in science and technology, and in foreign and military affairs. . The experiences accumulated by different countries – both positive and negative – have taught us that China’s position on the three principles is correct, as they help the country to develop and promote the construction of “a community with a shared future. for Humanity”. Therefore, there is an urgent need to implement what was decided at the meeting. It is essential to maintain stability and policy coherence, which helps to stabilize entrepreneurs’ expectations and restore their confidence. Thus, they will not need repeated reassurances in the future, and the Chinese economy will be on the path of steady growth to finally achieve its long-term goals.

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