EDITORIAL: The Straits Times says China’s prudent economic goals

Eschewing a growth target is a good move during these difficult times as it keeps the government focused on what needs to be done to retain as many people as possible in jobs and prevent those who have lost theirs from falling into extreme poverty. It also gives the government some room to respond to contingencies during a time of great uncertainty. There are other reasons for doing so. With an already high national debt, Beijing is wary about incurring too much new debt by setting a growth target that may be politically acceptable but could mean throwing fiscal discipline to the wind and risking inflation, asset bubbles and inefficient government investments.

So the Chinese government has come up with a modest stimulus at under 9 per cent of nominal gross domestic product. It is a mix of investments and measures such as reductions in taxes and government fees, interest rates on loans, utility charges and social insurance contributions to stimulate business activity. Particular attention has been paid to keeping afloat small and medium-sized firms that hire more than 80 per cent of the workforce. There are investments in traditional infrastructure like railways but the emphasis is on new infrastructure such as 5G networks and charging points to encourage new-energy vehicles. New digital infrastructure has long-term benefits for the economy as it will not just stimulate new consumer demand but, together with technological innovation that the government has pledged to support, also help China move up the value chain towards high-tech and clean industries.

Other more far-reaching aspects of the people-centred economic agenda are reforms and social programmes. One is to level the playing field for private companies in a system that favours state-owned firms and distorts the market – a much-needed reform the government has been slow to implement. Others aim to improve the public health system, build a more equitable education system and strengthen the social safety net. These will serve to improve living standards and encourage people to spend more, thus speeding up the transition to a consumption-led economy. If the Chinese government carries through with these changes as pledged, it would not have wasted the Covid-19 crisis.