In the midst of a health crisis, Beijing has decided not to set a growth target for 2020. The economic uncertainty caused by the Covid-19 pandemic is at stake, but it is also a signal that China is ready to no longer play its role as the engine of the world economy. .
Zero visibility. At the opening of the 2020 session of the Chinese National Assembly on Friday, May 22, Prime Minister Li Keqiang announced that there will be no growth forecasts for this year. In memory of a Chinese statistician, this had never happened. Since 1990, Beijing has always made a point of providing a forecast for GDP growth that the country has consistently managed to exceed.
But Covid-19 changed the game. With reference to the uncertainty linked to the outcome of the health crisis and an “unpredictable economic period”, the regime’s number 2 has sacrificed sacred growth forecasts and stressed that priority must be given “to maintain employment, fight poverty and maintain living standards” for the Chinese.
The sign of a big change in attitude
In this, China is following in the footsteps of many countries that do not know in which economically troubled waters they will have to navigate in the near future. Almost all of them have also chosen to focus on financial support for populations affected by the economic consequences of the pandemic.
But this absence of growth projection is still “very surprising for a country like China”, assures Jean-François Dufour, head of the DCA Chine Analyze consultancy, contacted by France 24. First politically, the government has been trying to show since the beginning of the health crisis that the controlled situation with help with shock health measures and financial support. This time, he admits not to control the course of events. A humility that does not fit well with the image of a strong regime that President Xi Jinping is trying to project.
Secondly, and perhaps most importantly, the international community is for the first time deprived of its favorite economic drug. The annual announcement of Chinese growth forecasts well above international averages and Beijing’s ability to deliver has made China the undisputed engine of the world economy for more than a decade.
Beijing’s decision not to announce the color of its growth this year is a strong political gesture that “corresponds to telling other countries that we must not count on China this time to provide the solution to the problem. The recession”, Jean-François Dufour analyzes. For him, it is a major change in attitude from China that indicates to the rest of the world that it will put the world economy’s interests ahead of the urgency to solve its internal problems.
Call for general mobilization
This non-announcement of the annual forecasts is also a “defensive act in an international environment that is increasingly hostile to China”, states Jean-François Dufour. The stated goals of growth have “always been interpreted as a sign of arrogance, a proof that it was known to be the main beneficiary of the globalized economy”, emphasizes this specialist in China. While US President Donald Trump jumps at the slightest opportunity to make Beijing the villain of history, and several countries criticize its lack of transparency at the beginning of the Covid-19 epidemic, the regime does not want to offer any other angle attacker. After all The IMF still predicts rising Chinese GDP for 2020. Although this growth would only be 1.6%, it is still better than for most industrialized countries.
However, China’s decision to ignore its growth targets is not a warning to the international community. It is also “a call for the general mobilization of national economic operators”, assures Jean-François Dufour. The Central Government has previously taken the necessary steps to achieve its growth forecasts, even if it means compensating for the dangerous investments from regional authorities or large public companies. By not saying anything, Beijing is making everyone understand that “everyone will have to give their maximum because the central authorities, this time, are not bound by targets that would force them to compensate for some shortcomings”, the French economist summarizes.
But neither regional companies nor authorities should start spending without counting. Beijing has not yet paid the bill for the removal of 2008, when the banks provided loans to boost the economy, which affected the companies’ indebtedness.
To avoid this pitfall, the Chinese regime made a choice that surprised the observers. During his speech to the National Assembly’s 3,000 deputies, Prime Minister Li Keqiang detailed a plan to support the economy that seemed very modest compared to the crisis’s efforts. Beijing plans to devote just over 2% of its GDP to support its economy, which is far below the efforts of other major powers. By comparison, the US and France will spend almost 10% and around 5% of their GDP to revive the activity.
In reality, the state does not want economic operators to believe that something is going on. If the banks have borrowed so much in 2008, it is because the government had decided not to spend money on reviving the economy. Everyone was then convinced that no matter how much debt was withdrawn, the central government would always be there to help companies that could not repay. “This time, the authorities do not want to encourage a new wave of over indebtedness,” says Jean-François Dufour.
China’s decision not to anticipate growth for 2020 is far from a detail in Li Keqiang’s speech before the National Assembly. In a hollow, on the one hand, it indicates that the power will be less generous than 2008 to support its economy and, on the other, that China is ready to no longer play its traditional role as engine for the Mondial economy. “This is bad news because there are not many people left to take on this role,” states Jean-François Dufour. It is really hard to imagine US President Donald Trump changing his clothes as head of protectionist for the champion of happy globalization that could get the world out of the current economic downturn.