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(Bloomberg) — Chinese President Xi Jinping has pledged to breathe life into economic momentum and project creation, acknowledging that some businesses and citizens have endured a difficult 2023, a rare admission of the domestic headwinds facing the country.
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While China’s toughest leader since Mao Zedong used his annual New Year’s address to tout his country’s achievements, he also claimed that some “enterprises have fallen on hard times” and that “people have struggled to find employment and meet their fundamental needs. “
“We will consolidate the momentum of economic recovery and achieve sound and long-term economic development,” Xi said in Sunday’s televised address to his country’s 1. 4 billion people. China’s long-awaited post-pandemic economic boom will not materialize in 2023.
The government’s purpose is to “offer a better life to the people,” he added, promising greater schooling and career opportunities for young people, as well as physical care for the elderly. Youth unemployment in China hit an all-time high over the summer. , before the government stopped releasing figures.
Improving the well-being of citizens is a key component of the social contract that the Communist Party has relied on for decades to govern. A new year full of demanding economic situations will test that pact: China is entering a crucial era as policymakers try to stabilize the housing market crisis and prevent the world’s second-largest economy from falling into deflation.
Beijing is expected to once again aim for an expansion target of around 5% in 2024, avoiding the self-fulfilling negative cycle that a lower figure could create. This will likely be more complicated due to a superior basis of comparison.
Building trust in China will be very important this year. Concerns about the opacity of Beijing’s policies have spooked investors into 2023, while rising interest rates have fueled capital outflows. A recent crackdown on the gaming industry has triggered an $80 billion collapse, stoking new considerations about policy changes as foreign investors recorded their smallest annual purchases of Chinese stocks.
Signs of weakness in the economy persist. Hours before Xi’s speech, it emerged that factory activity fell in December to its lowest level in six months, increasing pressure on policymakers to act urgently to revive the economy. Analysts said Xi’s speech did not move the needle, and the market still expects a rate cut. through the central bank to stimulate the economy in the first quarter of 2024.
Xi on Sunday highlighted China’s “industrial prowess” and drew up a list of local projects, adding the locally-built C919 airliner, a Chinese-made cruise ship, the country’s programs, manned submersibles and electric cars.
Xi used his speech to reiterate the ruling Communist Party’s position that China “will surely be reunified,” referring to Taiwan, the self-governing island that Beijing considers its own and has vowed to reclaim it, by force if necessary.
His comments come just weeks before Taiwan’s voters go the polls to pick their next president, as a looming US election also brings fresh geopolitical risks. Turmoil is still rumbling through the upper echelons of China’s military leadership, with more senior figures purged from top bodies last week.
That raises questions over how ready China’s military would be for any invasion of Taiwan, with the rocket force that manages the nation’s missiles under the spotlight. Beijing also abruptly removed its foreign minister last year, without explanation, adding to the instability.
Taiwan’s hotly-contested election on Jan. 13 will decide how the island of more than 23 million people will respond to Beijing’s moves. The incumbent Democratic Progressive Party seeks to strengthen Taipei’s ties with Washington, while the opposition Kuomintang — an increasingly close second in the most recent polls — is Beijing’s preferred negotiating partner on the island.
“All Chinese on both sides of the Taiwan Strait should be bound by a common sense of purpose and share in the glory of the rejuvenation of the Chinese nation,” Xi said.
–With those of Josh Xiao and Zhu Lin.
(Updates with analyst commentary. )
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