China's leaders decide to place strong emphasis on higher quality growth for 2018

Delegates at the closing of the 19th Communist Party Congress at the Great Hall of the People in Beijing on Oct 24, 2017.
Delegates at the closing of the 19th Communist Party Congress at the Great Hall of the People in Beijing on Oct 24, 2017.PHOTO: AFP

BEIJING - China's top leaders have decided that for next year the nation should emphasise quality of growth rather than its speed and shift from "made in China" to "created in China".

They also listed curbing major risks, eradicating poverty and fighting pollution as top economic priorities for the next three years as the country aims to shift from high growth to high quality development.

These pledges were laid out on Wednesday (Dec 20) at the close of the three-day Central Economic Work Conference chaired by President Xi Jinping.

The closed-door annual conference, attended by top officials from the central government, ministries, provinces and the military, is keenly watched by investors for clues on China's policy directions for the year ahead.

State media reported that "Xi Jinping Thought on Socialist Economy with Chinese Characteristics for a New Era has taken shape", an apparent off-shoot of the "Xi Jinping Thought" that was enshrined in the party charter at the 19th National Congress of the Chinese Communist Party in October.

The leaders decided that preventing financial risks would be the main focus of the government in the next three years, saying that all "illegal financial activities" would be stamped out and supervision strengthened over "weak areas".

This comes as Beijing take steps to deal with a massive debt overhang, especially in the state sector, which stood at nearly 170 per cent of gross domestic product by the end of 2016.

On eradicating poverty, China would not "lower standards" nor "overstretch its targets". It would focus its attention on targeted groups and step up efforts in reaching out to far-flung poor areas to live up to Mr Xi’s promise of wiping out extreme poverty by 2020, ahead of centenary of the founding of the Chinese Communist Party.

As for fighting pollution, the key would be to restructure industries, eliminate backward production capacity, restructure the energy and transport mix, as well as to improve energy conservation.

The Central Economic Work Conference usually decides the growth target for the new year, and will be formally announced by the premier at the annual parliamentary session next March.

Analysts expect the target to be slightly lowered from this year's level of around 6.5 per cent.

China's economy beat the government's target to grow at 6.9 per cent in the first three quarters of this year.

But this is unlikely to be sustainable given the top leadership's emphasis on fighting a three-prong battle against financial risks, poverty and pollution. Already, Beijing's war on the winter smog has caused a drag on the economy.

Official data showed that factory output rose at a slower pace of 6.1 per cent in November compared with a year earlier.

This comes as thousands of factories across northern China, especially heavy polluting ones such as those in the steel industry, have been forced to shut or cut production by as much as half to ensure the the blue skies seen in the capital this winter.

The strong emphasis on higher quality growth also saw the top-level meeting make wide-ranging promises to deepen supply-side structural reforms, speed up state-owned enterprise reforms, further open up the Chinese markets for private and foreign investors, improve social services such as education and healthcare and speed up work on environmental protection.

UOB economist Ho Woei Chen noted that these policy measures are a reiteration of what the government has said before. “The important message here is that the government is placing less emphasis on high growth rates going forward,” said Ms Ho. 

OCBC economist Tommy Xie said the tone of the statement indicates that China will continue to downplay its growth targets.

"One of the key changes this year is that China omitted the phrase 'appropriately expand aggregate demand'. This shows that policy in 2018 is likely to be less stimulative. And China has a higher tolerance for slower growth," he said.