China’s top state planner has projected a multi-billion-dollar market from Beijing’s policy pushing for industries to upgrade their equipment and citizens to trade in their old vehicles and home appliances for new ones.
The domestic consumption push, an integral part of Chinese President Xi Jinping’s latest mantra to unleash “new productive forces,” is seen as instrumental to Beijing’s efforts to revive growth.
Zheng Shanjie, chairman of the National Development and Reform Commission, also assured the media that Beijing’s 5% GDP goal is achievable.
“This goal is in line with the annual requirements of the ‘14th Five-Year Plan’ and matches the potential of economic growth, a goal that can be achieved with positivity and hard work,” he told reporters at a press conference on the sidelines of the National People’s Congress Wednesday.
Zheng said the economy is recovering and showing new results, without specifying. One such potential result could be the over 5 trillion yuan (US$694 billion) that is forecast to be created annually as industries and companies upgrade their equipment to raise development quality.
“Chinese industries and the agricultural sector last year invested about 4.9 trillion yuan in equipment. The push to raise quality development will only increase demand for equipment upgrade,” he said at the joint briefing with China’s finance minister, commerce minister, central bank chief, and head of the securities regulator.
The campaign will focus on industrial, agricultural, construction, transport, education, cultural tourism and healthcare, where the upgrade will foster reduced carbon emissions, safety, digital transformation and smart intelligence, Zheng added.
Similarly, Zheng described the trade-in market for vehicles and home appliances as “huge” and in the “trillion yuan” level, given that car and white goods ownership last year reached 336 million units and 3 billion units, respectively.
The upgrade and trade-in drives could enhance China’s efforts to build a circular economy, he noted.
“The promotion of such large-scale equipment upgrade and consumer goods trade-in is a systematic project … to be supported by fiscal, financial and tax policies.”
“New productive forces” was coined by President Xi during a trip to the rustbelt Northeast region last September, where he highlighted the need for a new economic model. In Xi’s China, the state’s role is expanding and the private sector is retreating.
Central government agencies and local governments are now focused on putting the new vision into play. Chinese Premier Li Qiang in his maiden government work report on Tuesday called for a “new leap forward” to modernize the industrial system and accelerate the development of new productive forces across sectors like electric vehicles, hydrogen power, new materials, life sciences and commercial spaceflight.
To support the domestic demand policy, Beijing will issue 1 trillion yuan of special long-term bonds this year, and more in the next few years.
The thrust of China’s economic policy direction is “seeking progress while maintaining stability, promoting stability through advancement, and in construction before destruction,” according to the Chinese premier’s work report.
As such, authorities could be banking on “new productive forces” to buffer the structural challenges that clouded the outlook of the Chinese economy, like a deepening real estate market crisis, local government indebtedness and economic issues due to demographic shifts. Li’s report offered little details on structural reforms which some analysts said are crucial to address fundamental problems.
Externally, China’s foreign trade will face a severe situation, commerce minister Wang Wentao said at the press conference.
Echoing the complexity and unpredictability of the external environment, People’s Bank of China Governor Pan Gongsheng stressed that the central bank will leverage on monetary policies and intensity macro-control policies to ensure stability.
“China’s monetary policy toolbox is still rich [with tools at our disposal], and there is still sufficient room for monetary policy [adjustments],” Pan said, adding that the bank will keep the yuan basically stable.
Edited by Mike Firn and Taejun Kang.