Photo: iStock
Photo: iStock

In a shift from previous statements, a top decision-making body of China’s Communist Party said on Wednesday that the government needs to take steps to bolster an economy that is facing increasing “downward pressure.”

“China should attach great importance to the current situation and be more proactive in taking measures to cope with the issues,” China’s official news agency reported, citing a meeting of the Politburo, chaired by President Xi Jinping.

The meeting coincided on Wednesday with the release of disappointing manufacturing data, which saw expansion in the sector grow at its slowest rate in more than two years, missing economist forecasts.

It also came on the heels of reports that the Trump administration is preparing to impose new tariffs on Chinese goods within the next several months.

In the statement released after the meeting, policymakers cited “profound” changes in the external environment. The acknowledgment of growing headwinds facing the economy stood in contrast to a statement months ago that there had been “noticeable” changes in the external environment.

“China will continue to promote high-quality development, implement proactive fiscal policy and prudent monetary policy, and move to stabilize employment, finance, foreign trade, foreign investment, domestic investment, and expectations to cope with external environment changes and ensure stable economic development,” the statement said.

While the comments reiterated a commitment to reform efforts aimed at restructuring the economy, placing less emphasis on rapid growth and tackling excessive debt, the language indicates that leaders are continuing to evaluate how to strike a balance between growth and reducing risks posed by excess leverage.

Policymakers have already introduced stimulus measures this year, including tax cuts, infrastructure spending and regulatory reform, but the efforts have fallen far short of action taken during previous periods of slowing growth.

For the time being, despite the renewed pledge to support the economy, it is unclear how far Beijing will stray from the current reform path advocated by the government’s top economic policy official, Vice-Premier Liu He. Liu is widely credited as being a key advocate for deleveraging policies, and he was elevated to the Politburo and named vice-premier in charge of the economy last year.

The meeting on Wednesday also stressed the need to address difficulties facing private businesses and promote capital markets’ “long-term and healthy development.”

Policymakers “will promote active and effective use of foreign investment, and safeguard the legitimate interests of foreign companies operating in China,” the statement added.

While leaders stressed the need for timely action to bolster the economy, further decisions on policy may come during the Central Economic Work Conference, an annual multi-day meeting which is traditionally held in December. The event sets the agenda for economic policy and will come after Xi Jinping’s planned meeting with his US counterpart later this month, coinciding with a possible escalation in the trade war that was signaled by the Trump administration this week.

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