Can China’s New Premier Save the Economy? Here’s What You Need to Know
China’s new prime minister, who is the country’s second-highest-ranking official after Xi Jinping, aimed to restore confidence in the struggling economy on Monday. Premier Li Qiang, who assumed office on Saturday, pledged that private companies would receive equal treatment to state-owned enterprises and that the rights of entrepreneurs, including property rights, would be upheld.
This endorsement of entrepreneurs comes after a decade in which the state and the ruling Communist Party have increasingly dominated China’s economy, leading to criticism of big businesses. The economic slowdown of recent years, which has been exacerbated by the COVID-19 pandemic, has resulted in weak consumer spending and investment by private businesses.
The government is under pressure to revive growth, and Mr. Li emphasized the importance of preserving the vitality of the private sector. He promised a commercial environment in which businesses of all types would be treated equally, and entrepreneurs’ interests would be protected under the law. This statement represents a significant departure from recent trends in China, where the government has exerted more control over private companies and provided greater support to state-owned enterprises.
At the end of China’s National People’s Congress, a nine-day annual session controlled by the Communist Party, Mr. Xi made brief comments before Mr. Li. While Mr. Xi did not address the country’s economic issues, he emphasized the importance of security and stability. This highlighted a difference in tone and substance between the two leaders, indicating that Mr. Xi would leave economic policy details to the premier. Mr. Xi would instead play the role of a paternalistic leader who provides security but is not directly responsible for the economy’s day-to-day fluctuations.
Concerns have been raised among Chinese business leaders as Mr. Xi’s focus on national security has led to greater party involvement in private companies’ affairs and pressure on businesses to cooperate with the military under a “civil-military fusion” policy. However, Mr. Xi argued that prioritizing national security was consistent with economic progress. He said, “Security is the foundation of development, and stability is the precondition for strength and prosperity.”
In contrast, Mr. Li avoided geopolitical issues and direct criticism of the United States government, instead endorsing free trade and commercial cooperation. He even suggested that Mr. Xi and President Biden should follow up on agreements made during a November meeting in Bali, Indonesia. Mr. Li’s news conference with local and foreign journalists at the end of the annual legislative session was presented as an exhibition of political accountability. However, China’s leaders screened questions beforehand to avoid addressing any topics they did not want to discuss publicly.
To reassure investors and businesses, China’s leaders have taken several steps during the nine-day session. Mr. Xi told business leaders that the party embraces private companies as “one of us,” signaling continuity in his economic policy. The party also retained leaders of the central bank, the Ministry of Commerce, and the Ministry of Finance, debunking rumors that Mr. Xi would replace them with a less experienced generation of economic policy managers.
However, China’s youth unemployment remains high, and the housing market is in a slump. Additionally, China’s factories are facing a weakening demand from the United States and Europe, which could further hinder the economy. On Wednesday, China plans to release data on various economic activities during January and February, including industrial production, real estate development, and retail sales.