Chinese Officials Expect Bumpy Ride for Economy

A woman holding a Chinese flag walks along a street in Beijing, China, 19 July 2024.  EPA/ANDRES MARTINEZ CASARES
A woman holding a Chinese flag walks along a street in Beijing, China, 19 July 2024. EPA/ANDRES MARTINEZ CASARES
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Chinese Officials Expect Bumpy Ride for Economy

A woman holding a Chinese flag walks along a street in Beijing, China, 19 July 2024.  EPA/ANDRES MARTINEZ CASARES
A woman holding a Chinese flag walks along a street in Beijing, China, 19 July 2024. EPA/ANDRES MARTINEZ CASARES

Chinese officials acknowledged on Friday the sweeping list of economic goals re-emphasised at the end of a key Communist Party meeting this week contained "many complex contradictions," pointing to a bumpy road ahead for policy implementation.
Pressure for deep changes in how the world's second-largest economy functions has risen this year, with consumer and business sentiment near record lows domestically, and global leaders increasingly concerned with China's export dominance, Reuters reported.
Following a four-day, closed-doors meeting led by President Xi Jinping, which takes place once in roughly five years, officials made a raft of seemingly contradictory pledges, from modernizing the industrial complex while also expanding domestic demand to stimulating growth and simultaneously curbing debt risks.
The initial summary of the meeting, known as plenum, did not contain details on how Beijing plans to resolve the tensions between policy goals, such as how to get consumers to spend more while resources flow primarily to producers and infrastructure.
Concerns are growing that without a structural shift that gives consumers a greater role in the economy, debt will continue to outpace growth in order to finance Beijing's industrial modernization and global prominence goals.
That raises the stakes. Some analysts warn the current path fuels risks of a prolonged period of near-stagnation and persistent deflation threats as seen in Japan since the 1990s.
"High debt levels plus increasing deflationary pressures eventually could result in a Japan-style ... low growth and very low inflation," said Julian Evans-Pritchard, head of China economics at Capital Economics.
"That, I think, would force them to change course on their current policies. But that might not happen straight away. That might only happen in a few years’ time."
Contradictions in Chinese policy efforts have been present for decades, as were goals to increase manufacturing value added, enhance social security, liberalize land use and improve local government tax revenues.
But making tough choices is an increasingly urgent task. China grew at a slower than expected pace in the second quarter, leaning hard on industrial output and external demand, but showing persistent domestic weakness.
Speaking at a media briefing on Friday along with other Party officials, Tang Fangyu, deputy director of the central committee's policy research office, acknowledged the challenges.
"The deeper the reform goes, the more complex and acute the conflicts of interest it touches," Tang said.
"Pushing forward Chinese-style modernization faces many complex conflicts and problems, and we must overcome multiple difficulties and obstructions."
The European Union Chamber of Commerce in China said it was "positive that China’s leadership has again acknowledged many of the headwinds facing the country’s economy," but noted the outcome was largely "a reiteration of points."
"There appears to be no deviation from (China's) immediate priority, which is to balance its economic recovery against national security concerns, while maintaining social stability."

China is expected to publish a document with more detailed policy plans in the coming days.
But the fact that the initial post-plenum announcement borrowed heavily from China's existing playbook disappointed some economists.
“Nothing new under the sun: the same industrial policies, the same sense of things," said Alicia Garcia Herrero, chief economist Asia-Pacific at Natixis.
"Really no change in direction, no consumption-led growth, nothing. No sentence on the power of market forces, nothing. So, it’s really disappointing.”
Chinese stocks, not far above the five-year lows hit at the start of 2024, were flat on Friday, suggesting the plenum did little to improve sentiment.



Honda, Nissan and Mitsubishi Drop Talks on Business Integration

This combination of pictures created on February 13, 2025 shows the logo of Honda Motor (L) taken on February 6, 2025 at the company's showroom in Tokyo and the logo of Nissan Motor (R) being displayed at the company's showroom in Tokyo on February 13, 2025. (Photo by Kazuhiro NOGI / AFP)
This combination of pictures created on February 13, 2025 shows the logo of Honda Motor (L) taken on February 6, 2025 at the company's showroom in Tokyo and the logo of Nissan Motor (R) being displayed at the company's showroom in Tokyo on February 13, 2025. (Photo by Kazuhiro NOGI / AFP)
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Honda, Nissan and Mitsubishi Drop Talks on Business Integration

This combination of pictures created on February 13, 2025 shows the logo of Honda Motor (L) taken on February 6, 2025 at the company's showroom in Tokyo and the logo of Nissan Motor (R) being displayed at the company's showroom in Tokyo on February 13, 2025. (Photo by Kazuhiro NOGI / AFP)
This combination of pictures created on February 13, 2025 shows the logo of Honda Motor (L) taken on February 6, 2025 at the company's showroom in Tokyo and the logo of Nissan Motor (R) being displayed at the company's showroom in Tokyo on February 13, 2025. (Photo by Kazuhiro NOGI / AFP)

Japanese automakers Honda, Nissan and Mitsubishi said Thursday they are ending talks on business integration.
Nissan Chief Executive Makoto Uchida said the talks had changed focus from setting up a joint holding company to making Nissan into a subsidiary of Honda, The Associated Press reported.
“The intent was to join forces to win in the global competition, but this was not going to realize Nissan's potential, so I could not accept it,” he told reporters. He said that Nissan was going to aim for a turnaround without Honda instead.
Honda Chief Executive Toshihiro Mibe said in a separate news conference that Honda had suggested a stock swap to speed up decision-making.
“I am really disappointed,” Mibe told reporters. “I felt the potential was great, but I also knew actions that would bring pain were necessary to realize that."
The automakers agreed to end their agreement regarding the consideration of the structure for a collaboration, a joint statement said.
Honda Motor Co. and Nissan Motor Corp. announced in December that they were going to hold talks to set up a joint holding company. Mitsubishi Motors Corp. had said it was considering joining that group.
From the start, the effort had analysts puzzled as to the advantages to any of the companies, as their model lineups and strengths overlap in an industry shaken by the arrival of powerful newcomers like Tesla and BYD, as well as the move to electrification.
Honda and Nissan initially said they were trying to finalize an agreement by June and set up the holding company by August.
The three automakers will continue to work together on electric vehicles and smart cars, such as autonomous driving, they said Thursday.
In recent weeks, Japanese media had various reports about the talks breaking down, citing unidentified sources. Some said Nissan balked at becoming a minor player in the partnership with Honda.
Mibe denied he knew or heard anything about the media speculation that Taiwan's Foxconn was considering taking a stake in Nissan.
Honda is in far better financial shape and was to take the lead in the joint executive team. Honda reported Thursday that its April-December 2024 profits declined 7% to 805 billion yen ($5 billion).
Nissan reported a loss for the July-September quarter as its vehicle sales sank, prompting it to slash 9,000 jobs. At that time, Uchida took a 50% pay cut to take responsibility for the results.