China to keep its ‘all about production’ economic playbook

Reuters:

China’s Communist Party meets this month to map a five-year vision that prioritises high-tech manufacturing in its quest to upgrade its sprawling industries and project global power as its rivalry with the US intensifies, analysts say.

Known as a plenum, the meeting is also likely to pledge strong measures to lift household consumption and curb deep, historical supply-demand imbalances that threaten long-term growth in the world’s second-largest economy.

The two goals are decades old and pull in opposite directions, a policy challenge that has become acute now with US-China tensions worsening, making it hard for Beijing to pivot to demand-side policies, analysts say.

Industrial prowess demands maintaining the status quo of channelling state resources to producers, while boosting consumption requires funds be redirected to households, leaving less for business and government investment.

China’s growth over the past decade was driven by the pursuit of the first goal at the expense of the second.

But this action is now fanning deflationary pressures and creating unsustainable debts.

The intensifying rivalry between the US and China, underlined by US President Donald Trump’s renewed threats of triple-digit tariffs last week, has complicated matters for policymakers in Beijing, analysts say.