China prepares for Trump

With tariff war set to intensify, China shifts focus to the Global South, increasing competition for India

- SHYAM SARAN

China's annual Central Economic Work Conference (CEWC), usually held at the end of each year, is eagerly awaited as it indicates how the Chinese leadership is assessing the country's economic performance over the past year and how it proposes to meet the challenges that lie ahead.

This year, the CEWC met on December 11 and 12 under the shadow of the incoming Trump administration in the US. It was preceded by a meeting of the Politburo of the Central Committee of the Chinese Communist Party, which decided on the message to convey regarding the health of the economy and the policy directions for the future.

The CEWC elaborates on these, but as in the past, there were no specifics. While the report of the conference mentioned an adverse international economic environment, it made no reference to the potential risks posed by a tariff-wielding Trump in the White House.

When contrasted with the proceedings of the CEWC meeting of 2023, the following points are noteworthy:

One, recognising the seriousness of the persistent slowdown of the Chinese economy, with stagnant domestic demand and worsening external economic headwinds, the leadership has opted for a more expansive economic stimulus. Its earlier stress on "prudent monetary policy" and on "targeted intervention" than sweeping change" has now been replaced by a "moderately loose monetary policy" overall.

This means lower interest and mortgage rates, lower bank repo rates and larger issue of long-term treasury bonds. This terminology was last used during the global financial and economic crisis of 2007-08, when China had unleashed a stimulus package of nearly $600 billion, then seen as massive, to rescue the economy. But while the previous stimulus was mainly focused on infrastructure investment, the current package is targeted towards raising domestic demand and consumption expenditure.