Anxious Chinese Economy... Chinese Authorities Encourage Achieving Economic Growth Rate

China's Producer Price Index Surges in September... NDRC Strengthens Market Monitoring
Calls for Accelerated Introduction of Fiscal and Financial Policies Including Local Bond Issuance

[Asia Economy Beijing=Special Correspondent Jo Young-shin] The National Development and Reform Commission (NDRC), which oversees China's economic policy, is encouraging 31 provinces, municipalities, and autonomous regions to achieve the annual economic growth target. As unexpected variables such as power shortages, rising international raw material prices, global logistics bottlenecks, and floods have occurred, the NDRC is directly urging economic and related institutions to take action, analysts say. Attention is focused on the Chinese authorities' measures given that China's economic growth rate impacts the global economy.

[Image source=Yonhap News]

According to Chinese media including the People's Daily on the 14th, the NDRC recently held a symposium analyzing the economic situation to understand the status of China's major industries. Prior to this, the NDRC held an economic seminar for a group of economic experts to hear about problems and proposals to overcome them, the People's Daily reported.

The Ministry of Industry and Information Technology, which oversees China's industrial policy, also recently held a separate symposium to check the operating status of major industries. The Ministry is strengthening market monitoring by dispatching investigation teams for each industry to accurately grasp market conditions, the People's Daily added.

These moves by the Chinese authorities are due to risk signals being detected in various places. The manufacturing Purchasing Managers' Index (PMI) is a representative example. The PMI for last month, released by the National Bureau of Statistics of China, was 49.6. This is the first time in 19 months since February last year, when it was 35.7, that the manufacturing PMI has fallen below the baseline of 50. A figure below the baseline indicates economic contraction. The Producer Price Index (PPI) is also unstable. Last month, China's PPI surged 10.7% year-on-year, the largest increase in 25 years since 1995.

The power shortage caused by coal scarcity is also serious. Power rationing directly affects corporate productivity. Concerns are emerging across China that the power shortage, which has shortened operating hours for manufacturing companies, will lower the economic growth rate in the fourth quarter.

[Image source=Yonhap News]

Pan Ruoying, a researcher at the Bank of China Research Institute, diagnosed, "Since the third quarter, all economic indicators have been declining," adding, "Macroeconomic control policies are necessary for stable economic growth."

Gao Ruidong, chief analyst at China Guangda Securities, said, "Despite adverse factors such as sporadic COVID-19 outbreaks, abnormal climate phenomena, and rising international raw material prices, the third-quarter economic growth rate is estimated to be stable," but emphasized that preparations for the fourth quarter are necessary as domestic and international adverse factors still exist.

Summarizing the words of Chinese economic experts, it is estimated that the Chinese economy achieved its initial target until the third quarter. In fact, last month, China's exports recorded $305.74 billion (KRW 366 trillion), an increase of 28.1% compared to the same month last year. Since the power shortage began in earnest after mid-September, it seems that September exports were not significantly affected.

The problem lies in the fourth quarter. Since the coal shortage is unlikely to be resolved in the short term, global economic forecasting institutions are lowering their economic growth forecasts for China one after another. Goldman Sachs has lowered its forecast for China's economic growth rate this year from 8.2% to 7.8%, Nomura Securities of Japan from 8.2% to 7.7%, and Fitch from 8.5% to 8.1%.

The possibility that the Chinese government will use the financial policy card of lowering the reserve requirement ratio (RRR) to boost economic growth has also increased. The People's Bank of China lowered the RRR by 0.5 percentage points in July. Lowering the RRR increases the lending capacity of Chinese financial institutions.

Wang Zigang, a researcher at the Macroeconomic Research Center of the Chinese Academy of Fiscal Sciences, argued, "To achieve the annual economic growth target, China must sprint in the fourth quarter," adding, "Fiscal support policies to alleviate cost pressures on small and medium-sized enterprises and stable investment policies through the issuance of local special bonds must be implemented simultaneously."

This content was produced with the assistance of AI translation services.