The top economic concerns of the Chinese cabinet.
Boosting private investment and providing Chinese enterprises in foreign markets with government support.
The State Council - China’s equivalent of the government cabinet - just unveiled a raft of key economic policy measures last week, at a routine policy press conference held on 11 September followed by a regular meeting convened by Premier Li Qiang on 12 September.
The two events indicate that the top economic policy priorities for Beijing at present include:
Boosting growth in China’s private investment.
Providing support to Chinese enterprises in overseas markets.
Spurring the rise of China’s biotech sector.
Nationwide reforms for the market-based allocation of factors of production.
Boosting China’s private investment
Beijing hopes to step up the role of private sector investment to help address prevailing economic challenges for China, including the headwinds of Trump’s trade war for the teeming export sector and widespread youth unemployment.
“Private sector investment plays an important role in stabilising employment and stabilising the economy,” the State Council said in its post-meeting precis.
To this end, Beijing plans to adopt measures to facilitate the investment activities of private Chinese companies, including the removal of regulatory red tape alongside legacy barriers for non-state enterprise.
“We must focus on the outstanding problems of concern for enterprises, and implement a raft of firm measures to expand entry thresholds, open up blockages, and strengthen protections,” the State Council said.
“We will operate a fair and competitive market environment, remove all hidden barriers that restrict private investment, and strengthen the support and financing of innovation.
“This will further spur private investment activity and expedite the development of private investment.”
Beijing does not appear keen on allowing private investors to allocate capital to whatever parts of the economy they deem fit.
Chinese officials will instead guide private capital to make investments in those sectors deemed to be of strategic priority by Beijing.
While the State Council called for “expanding the space for private investment,” it also pointed specifically to “supporting private capital in expanding investment in areas including new quality productive forces, emerging services sectors, and new infrastructure.”
The Chinese government will also provide expanded support to private enterprise via government contracts and procurement.
The State Council called for “strictly implementing relevant regulations for bidding and tenders, ensuring a reserve quota for government procurement from small and medium-sized enterprises, and expanding the vigour of support for private investment projects in the central government budget.
The end goal is to “enable private enterprise to have the daring to invest and enjoy returns.”
Government support for Chinese enterprises in overseas markets
Beijing has made it official policy to drive the expansion of Chinese enterprises into overseas markets ever since the start of the reform and opening era.
As early as August 1979, the State Council called for “venturing abroad to engage in business” (出国办企业) - considered the first reference to foreign investment as part of China’s national policy.
In March 2000, the landmark “Going Out” (走出去) strategy was floated at the 3rd session of the 9th National People’s Congress. The strategy was enshrined as part of official policy at the 5th plenum of the 15th Communist Party Central Committee held in October of the same year.
The latest meeting of the State Council reiterated the importance of government support for Chinese enterprises seeking to expand and compete in foreign markets.
It called for “setting our sights on providing vigorous support to enterprises venturing abroad when they participate in international cooperation and competition.”
Beijing will cultivate a network of offshore professional services provider, to give Chinese enterprises an edge in foreign markets when it comes to key areas such as financing.
“We will further improve comprehensive overseas service systems, strengthen coordination and linkage, and coordinate service resources in areas including the law, finance and logistics,” the State Council said.
The State Council also wants China to “nurture a cohort of professional services organisations with strong cross-border services capability.”
Spurring the rise of Chinese biotech
The growth of China’s biotech sector and the commercialisation of indigenous innovation is key priority area for the central government, amidst broader efforts to decouple the nation’s STEM undertakings from the US and reduce vulnerability to tech sanctions applied by Washington.
The State Council called for “driving the development of China’s biotech innovations, accelerating technological research and development and the conversion of research results into applications.”
“[We must] spur the upgrade and enhancement of the bio-pharmaceutical sector, and strive to forge new development advantages.”
Beijing will also seek to improve safety levels, by “lawfully standardising clinical research, guaranteeing the quality and safety of clinical applications, and effectively preventing various forms of risk.”
The market will allocate factors of production
Leading economists in China assert that market-based reforms for factors of production have long lagged behind the decades-long marketisation reforms for end products and final goods that have completely transformed Chinese society.
Xi’s economic policy team appears highly focused on addressing this issue, most prominently with their strategy to transform China into a “grand unified national market” (全国统一大市场).
A key component of this policy is enhancing the efficient usage of factors of production - the inputs in the process of economic value creation - by giving greater play to the role of the market in their nationwide allocation.
The State Council announced at its routine policy press conference on 11 September that it had approved the launch of 10 trial zones around China for “comprehensive reforms for the market-based allocation of factors of production.”
The zones will encompass key metropolitan centres and urban conurbations around the country, including:
Beijing.
Key cities in southern Jiangsu province.
Hangzhou, Ningbo and Wenzhou in Zhejiang province.
The Anhui province capital of Hefei.
Fuzhou, Xiamen and Quanzhou in Fujian province.
The Henan province capital of Zhengzhou.
Changsha, Zhuzhou and Xiangtan in Hunan province.
The nine mainland Chinese cities in the Greater Bay Area of Guangdong, Hong Kong and Macau.
Chongqing.
The Sichuan province capital of Chengdu.
The National Development and Reform Commission (NDRC) said the reforms will encompass a slew of sub-policies relating to factors of production, in areas including technology, land, human resources, data, capital and environmental resources.