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China's Financial Leaders Convene To Revitalize Economy
China's leadership gathers at the National Financial Work Conference to address critical economic challenges, including the property market downturn and unemployment.
China's top leadership has convened in Beijing for the National Financial Work Conference, a significant financial gathering usually held every five years. The primary objectives include addressing the fragmented property market, generating employment opportunities for the vast number of unemployed youths, and accelerating economic growth.
Strengthening Xi Jinping's Control
The conference is anticipated to further solidify President Xi Jinping's authority over China's colossal $61 trillion financial domain. This move comes in the wake of the announcement to issue bonds worth 1 trillion yuan ($137 billion) to pay for infrastructure initiatives and disaster mitigation.
By increasing the deficit, the intention is to counterbalance the drastic deceleration in the housing sector. The challenge that economists highlight is the careful balance of sustainable growth while methodically addressing the immense debt accumulated by property developers, local administrative bodies, and regional banking institutions.
Takehiko Nakao, the ex-president of the Asian Development Bank, commented on the necessity to address urgent issues, particularly the property sector, while at an international finance symposium in Guangzhou. "Overall, the financial sector in China has made progress but at this moment it faces challenges," he said.
Historical Context And Leadership Transition
The previous conference took place in 2017, but the 2022 event was postponed due to COVID. The unexpected demise of the former Premier, Li Keqiang, an economist well-versed in Western liberal ideologies, is perceived by many as reflecting an emblematic shift towards intensified party control.
Since the leadership realignment, Xi has undertaken a comprehensive reorganization of economic and fiscal leadership roles, establishing the Central Financial Commission, a move perceived to weaken other regulatory bodies.
Despite China's economy growing by 4.9% annually in the first three quarters of this year, the IMF has voiced concerns about the escalating debt of local governments, which has pushed total government debt close to 150% of GDP. With a 20% unemployment rate among the youth earlier this year and restrained demand, the strategy to issue bonds aims to combat the slowdown in housing construction.
The Property Crisis And Its Ripple Effects
Evergrande, the Chinese property giant, is among several developers that recently defaulted on their bond payments. Its overseas debt reorganization endeavors are impeded by the detention of its chairman, Hui Ka Yan, due to investigations into alleged unspecified crimes.
Another significant developer, Country Garden, missed its interest payment deadline for a dollar bond last week. The government has since introduced multiple strategies to limit the repercussions of the property downturn, including supporting private sectors, tax reliefs, and more, to stabilize the economy.
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