China’s plan to spur growth: A new slogan with familiar ideas

BEIJING — From the top of the government, China is heavily promoting a plan to fix the country’s stagnant economy and offset the harm from a decadeslong housing bubble.

The program has a fresh slogan, presented foremost by Xi Jinping, the country’s top leader, as “new, quality productive forces.”

But it has features that are familiar from China’s economic playbook: The idea is to spur innovation and growth through massive investments in manufacturing, particularly in high-tech and clean energy, as well as robust spending on research and development. And there have been few concrete provisions for how the government hopes to persuade Chinese households to reverse a prolonged slowdown in spending.

Premier Li Qiang, the country’s No. 2 official, laid out the plan Sunday in a speech to CEOs from around the world, who had gathered in Beijing for the country’s annual China Development Forum. “We will accelerate the development of new, quality productive forces,” he said at the forum’s opening ceremony.

Started in 2000, the China Development Forum is designed to explain to corporate leaders the economic plan laid out each year by the premier on March 5.

In previous years, the forum featured a lengthy, closed-door discussion with CEOs where the premier entertained many questions. But the premier’s conversation, usually on the event’s final day, was canceled this year without explanation, prompting some CEOs to skip Monday and schedule their private jets to fly out Sunday evening.

The China Development Forum also used to include a fairly open discussion of economic policies by Chinese corporate leaders and ministers a day before the opening ceremony, but that, too, did not take place this year.

China has moved toward fewer and more scripted public events involving its top leaders. The annual news conference by the premier at the closing of the legislature in mid-March was also canceled.

Evan Greenberg, chair and CEO of the Chubb Group, a large American insurer, co-hosted the opening of the conference Sunday. The list of attendees included Tim Cook, the CEO of Apple, who has been in China the past week trying to reinvigorate iPhone sales, as well as Mike Henry, the CEO of BHP, the Australian mining giant.

In his speech, Li called for enhanced manufacturing and increased services and consumption. He repeated calls for Chinese households to replace old cars and household appliances, but did not say whether the government would provide money to help them do so.

Consumer spending in China has been lackluster as apartment prices have fallen by one-fifth in the past two years, according to semiofficial data. The number of housing transactions has also plummeted. Homeowners complain that they must cut prices by up to half if they want to find buyers.

Real estate represents 60% to 80% of household assets, a much larger share than in most countries. So the near collapse of the housing market has left many families feeling less affluent and struggling to meet mortgage payments.

Li mentioned real estate and a related problem, local government debt, only briefly, during a discussion of risks. Over the past four decades, he said, “risks and challenges have not defeated us.”

The mantra of “new, quality productive forces” is aimed partly at allaying worries in China and abroad that American-led restrictions on high-tech exports to China might stunt its growth. In briefings before the forum, officials emphasized that manufacturing represents a large part of the country’s economy — more than double the share in the United States.

“In China, you can see it is consistently on the rise and far higher than in other countries,” Shi Dan, a director general of economics at the Chinese Academy of Social Sciences, a government ministry, said at a briefing.

China’s trade partners are worried that more manufacturing will likely lead to more Chinese exports. The European Union is preparing to impose tariffs on electric cars from China. The European Union Chamber of Commerce issued a report Wednesday warning that the policy could lead to deindustrialization in Europe, as European companies may not be able to compete with government-backed Chinese businesses.

Companies that have depended on selling commodities to China for housing and infrastructure construction have been watching closely the redoubled emphasis on high-tech manufacturing.

But Andrew Forrest, the executive chair of Fortescue Metals Group, an Australian iron ore mining giant, said that China will inevitably continue spending a lot on new roads, rail lines and other infrastructure.

“The situation on infrastructure won’t actually be a switch away from it, it’ll be just an emphasis on manufacturing,” he said in an interview.

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Chinese officials have made numerous promises to stabilize the housing market, but have offered few details on how.

Li Xuesong, another director general of economics at the Chinese Academy of Social Sciences, said at a briefing that local governments could provide more apartments for public sector workers. But he did not address how local governments, many of which are laboring under heavy debts, would pay for these apartments.

After a recent collapse in sales of public land to real estate developers, many local governments have had to cut pay for municipal workers and have needed assistance from Beijing to make interest payments. The Chinese finance ministry has begun a program to help some cities with their debts, provided they curtail costly but popular programs to build infrastructure.

Helping consumers to afford more spending is crucial, said Wang Dan, the chief China economist in the Shanghai office at Hang Seng Bank, at an online conference hosted by the International Finance Forum, an affiliate of China’s central bank. “A direct cash transfer would still be the most effective way,” she said.

For now, the emphasis in China is on strengthening the supply and quality of goods, and not on worrying about demand.

“The growth momentum of investment in new driving forces is good,” said Liu Sushe, deputy head of the National Development and Reform Commission.

This article originally appeared in The New York Times.