China puts aside the push to spread wealth in an important year for Shir

BEIJING – For most of last year, China’s top leader, Xi Jinping, has waged a vicious campaign to curb private capital and narrow social inequalities. Regulators have cracked down on technology giants and wealthy celebrities. Beijing claims that tycoons bring society back. And the Communist Party promised that a new era of “common prosperity” was on the horizon.

Now, the Communist Party is putting its campaign behind it. By doing so, Beijing is clearly acknowledging that the pressure to redistribute wealth has made the private sector uncomfortable – a pillar of growth and job creation – at a time when China’s economic outlook is increasingly clouded.

For Beijing, the most important thing this year is to ensure the economy is stable and growing, which is crucial for Mr. Shi. Towards the end of the year, as he prepares to claim a third five-year term, he seeks to portray China as more prosperous, stronger and more stable under his rule. Officials have shaken up in recent months to try to reverse the slowdown in growth, worsened by a lockdown in China to contain rising global oil prices, uncertainty over the war in Ukraine and a steady rise in coronavirus cases.

“General prosperity is still here, but the growth situation is quite challenging,” said Dean Huang Yiping, deputy director of the influential National School of Development at Peking University. “The highest priority is to really stabilize growth.”

The delay is more of a strategic setback than a wholesale abandonment of Mr Shir’s plan, which the party has long described as a long-term goal. Mr Shi’s “common prosperity” campaign is a promise to narrow the country’s vast wealth gap and build a middle class that can drive domestic spending and reduce the country’s dependence on debt-fuel growth. It also serves political goals: increasing public support for Mr. Shir’s leadership and championing the Chinese political system of higher centralized control than the West.

The regulators noticed what they called “chaotic expansion of capital.” They cracked down on a variety of businesses that are seen as widening the gap between post-school tutoring, internet financial products and online shopping. The move abruptly removes more than $ 1 trillion from the value of Chinese companies, forcing many companies to lay off employees or even file for bankruptcy. The campaign intimidates investors and entrepreneurs by asserting the party’s power over society and questioning the role of private business in the country’s future.

The party leadership began hinting in December that the economy was slowing down and the campaign was cooling. When the Politburo met that month to decide on economic priorities for 2022, it did not use the term “general prosperity” in its official summary; Instead, it emphasizes “stability as the highest priority.”

Beijing also sought to reassure international investors that it was still open for business, with Mr Xi himself declaring that China welcomed all forms of capital and that his campaign was not a push for egalitarianism.

“We will first raise the pie and then properly distribute it through reasonable institutional arrangements,” he said in a video speech to business leaders at the World Economic Forum in Davos, Switzerland, in late January. “As the rising tide lifts all boats, everyone will have a fair share of development.”

But investors in the country and abroad have been constantly upset by the crackdown in Beijing. Confidence in China’s economy has waned as China has imposed strict lockdowns to curb the spread of Kovid-19 and Russia’s aggression in Ukraine has pushed up commodity prices.

A sharp sell-off in Shanghai over the past few months – with the market falling 17 percent from mid-December to mid-March – has prompted a rare intervention in economic policy by Mr Shir, right-handed vice-premier Liu He.

Mr Liu vowed that Beijing would support the economy and limit the unpredictability that has engulfed markets. Mr Liu’s financial management team must first clear any new government policy that could have a significant impact on share prices and other activities in the financial markets, according to a statement released by the state-run Xinhua News Agency.

Mr Liu may have suggested that last year’s crackdowns were a form of overzealousness on the part of officials who moved too fast to implement Mr Shi’s long-term goals, a point that some economists have made.

“Under President Xi Jinping, China’s government system works like a sports car – gas pedals and brake pedals work extremely fast,” said Li Daokui, director of China’s influential center in the global economy at Xinhua University in Beijing. “When he wants to implement a policy, even a long-term policy, the car is instantly accelerated, and it may not be what it was intended to be.”

Mr Lee noted how officials had rushed to respond to Mr Shir’s announcement in September 2020 that China would reduce its net emissions of carbon dioxide to zero by 2060. Local governments restrict investment and production of coal and impose restrictions on its use. Fossil fuels, first humming activity without finding alternative energy sources. The measures led to a nationwide blackout last year and briefly shut down many factories in September because coal-fired power plants did not generate enough electricity.

Mr Shi himself condemned any premature move to abandon coal last month, using a culinary analogy to describe how officials had to lay the groundwork before making major changes.

He told a meeting of the Communist Party-controlled National Assembly in China, “You can’t throw away the food before you have a new one – it’s not right.

There are signs that Beijing is shifting its policy to other sectors to boost its economy. The Chinese premier, Li Keqiang, for example, last Thursday called on officials to provide more support for Internet companies and help them add jobs.

Mr. Shi said several years ago that “housing is for shelter, not for speculation.” But those efforts have led to massive catastrophes – as well as defaults on huge developers like Evergrand. It has hurt the construction and related industries, which account for about a quarter of China’s economy.

The government has been easing restrictions on home buying in recent weeks. The city of Zhengzhou in central China has dropped the limit on buying a home by people who already own one. Henyang, a city in southern China, has introduced a $ 5,000 subsidy to help technicians and graduate students buy their first home. More than 65 cities have moved to lower minimum payments and mortgage interest rates or relax policies, according to Hughes Search, the country’s online real estate brokerage and data services.

Beijing has also postponed plans to extend property tax trials aimed at redistributing assets. The party has long debated the introduction of a national property tax, which economists say could help the government raise money without auctioning off land, as well as punish speculators who buy houses and leave them unoccupied.

In October, Mr Shi called on officials to “actively and steadily advance the work of property tax law and reform” as part of a plan to “reasonably control excess income”. But last month, the finance ministry said this year’s conditions were not conducive to the expansion of the pilot property tax plan, an announcement seen as an attempt to encourage home buying.

The party’s priorities for growth this year are forcing it to set aside difficult changes that could solve deep-rooted problems with its economic model. China has long pressed its economy to free itself from dependence on debt for infrastructure projects that have pushed the country into trillions of dollars in debt.

This year, China is ready to pursue its biggest construction projects since the 2008 global financial crisis At the time, the national government released a wave of construction spending to keep the economic engine afloat, but companies borrowed heavily to finance local government and state-run highways, bridges and the Beijing-to-Shanghai high-speed rail line.

China is building more high-speed rail lines this year, as well as eight national computing hubs and 10 data center clusters.

“This year will be similar to 2008 and 2009, in terms of infrastructure development efforts,” Mr Lee predicted.

Li Yu Contribution research.

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