‘State Companies Advance and Private Firms Retreat’ in China’s Bid to Resuscitate the Economy

After the bombshell announcement that the Chinese economy contracted by an unprecedented 6.8 percent in the first quarter of this year, the Xi Jinping administration has vowed to do whatever it takes to resuscitate growth and to stabilize employment. “We must adroitly and accurately materialize all measures to fight the epidemic and to resuscitate industry and production so that the targets and goals of this year’s economic and social development will be realized,” said Xi during an early April trip to Zhejiang (People’s Daily, April 1).

In a mid-April statement, the Politburo said it would prioritize “boosting domestic demand, encouraging consumer spending and increasing public spending.” The ruling committee said the country would raise its fiscal deficit ratio and issue special government bonds. It also urged the central bank to use tools, including interest rate cuts, to support growth (SCMP, April 17). This followed from comments by People’s Republic of China (PRC) Premier Li Keqiang in March, who reiterated that China must press forward the “Six Stabilizations” (六稳, Liu Wen): “stabilize employment, stabilize finances, stabilize foreign trade, stabilize oreign investment, stabilize investment and stabilize expectations” (PRC Government, March 3; Xinhua, March 3).

At the height of the Wuhan epidemic in January and February, the Xi administration had already asked regional administrations to come up with plans to resuscitate the economy. According to the official 21st Century Economic Herald, 13 provinces and directly administered cities (Beijing, Hebei, Shanxi, Shanghai, Heilongjiang, Jiangsu, Fujian, Shandong, Henan, Yunnan, Sichuan, Chongqing and Ningxia) had by March announced 10,326 major projects. Of these, eight provinces and cities had unveiled $4.8 trillion (33.83 trillion yuan) of plans. Another eight had disclosed that $395 billion (2.79 trillion yuan) would be spent this year alone. Furthermore, according to the First Financial Daily’s tally of large-scale regional projects, eight major provinces have announced investments close to $3.5 trillion (25 trillion yuan) (Apple Daily, March 2; Reportrc.com, March 9).

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