The 20th Third Plenary Session of the Chinese Communist Party, which ended on July 18th, is considered to have not proposed effective solutions to the economic difficulties. Even a consultant to the People’s Bank of China couldn’t help but criticize the authorities’ policies. Huang Yiping, a member of the Monetary Policy Committee of the People’s Bank of China and Dean of the National Development Institute at Peking University, openly stated that the policy of “emphasizing investment over consumption” should be changed and called for “directly giving money to the people.”
In an article titled “China’s Macro Economic Policy Framework with Chinese Characteristics” published on Caixin’s website on July 30th, Huang Yiping called for a shift in the policy of “emphasizing investment over consumption,” pointing out that China’s total demand, including consumption, exports, and even investment, is no longer as robust as before, posing new challenges to macroeconomic policies.
He mentioned that this year, despite continued economic recovery in China, it remains arduous, with weak consumer spending and unexpectedly slowing economic growth to the lowest level in five quarters. For several months, consumer prices have been hovering around zero, indicating continued deflationary pressures.
Huang criticized the Chinese authorities for being too conservative in their policies, advocating for stronger fiscal stimulus and higher inflation to stimulate consumption. He suggested measures such as allowing migrant workers to settle in cities and directly giving money to the people, warning of serious consequences if the country falls into a low inflation trap.
Following the lifting of the “zero-COVID” lockdown policies in China, the economy continued to stagnate, with insufficient domestic demand. Topics such as “downgrade in consumption,” “middle-class returning to poverty,” “deflation,” and “sudden salary cuts” frequently trended on the internet. Official data showed that consumer spending softened in the first six months of the year, with a mere 3.7% increase in total retail sales of consumer goods and a 10.1% contraction in real estate investment. New home sales dropped by 26.9%. According to the Ministry of Finance of the Chinese Communist Party, personal income tax revenue from January to June decreased by 5.7% year-on-year. These figures are constantly questioned as potentially falsified official data.
Huang Yiping recommended that the decision-making authorities set a rigid policy target for consumer price index (CPI) growth between 2% and 3%.
He expressed the need for the government to inject money directly into the economy to boost consumption and alleviate debt burdens on households, private enterprises, and local governments. He emphasized the urgency of taking swift and decisive actions similar to pouring water on dry land to improve the soil.
On July 30th, the Politburo of the Chinese Communist Party held a meeting, acknowledging the “divergence” in economic performance and reiterating the rhetoric of “economic enlightenment.” Since the beginning of 2023 when the pandemic restrictions were lifted, Chinese authorities have continuously emphasized the narrative of “economic enlightenment.”
Commentator Li Linyi previously stated to Epoch Times that the Chinese authorities have had to acknowledge some crises but are also attempting to shift blame to external factors, portraying the difficulties as temporary. The so-called “divergence in economic performance” mentioned by the authorities actually signifies severe economic downturn. The concept of economic enlightenment is becoming increasingly difficult to promote as the public can visibly see the economic stagnation.
Unlike the official narrative of promoting “economic enlightenment,” Huang Yiping, in his aforementioned article, though noting the importance of guiding market expectations, criticized the authorities for consistently highlighting “living frugally,” salary cuts, and tax increases.
Before the Third Plenary Session, various regions in China had already set up “Tax Enforcement and Composite Operations Centers” to conduct tax inspections, leading to significant controversies. Post the session, the authorities announced fiscal and tax measures, including gradually reducing local consumption taxes and integrating additional local taxes. It was also confirmed that the management authority for non-tax revenues primarily collected by local authorities will be appropriately decentralized, including toll fees on highways. However, many mainland Chinese netizens expressed concerns about the large-scale tax hikes and decentralization of revenue collection to local governments, labeling it as “money grabbing.”
Sinologist Li Hengqing believes that as people are now short of money, increasing consumption taxes in China would only reduce spending. Implementing harsh measures like consumption taxes at this moment is definitely not ideal.
After Xi Jinping entered his third term, the authorities have tightened control over speech. Economic scholars and financial analysts in China have generally avoided discussing sensitive topics publicly, even when mildly questioning Beijing’s policies.
Bloomberg reported that China’s emphasis on manufacturing and driving economic growth through exports may lead to a global overproduction crisis. Huang Yiping’s article, released after the Third Plenary Session of the Chinese Communist Party, appears to question the lack of clear solutions provided at the meeting to address economic development issues and the continued emphasis on manufacturing as the core of economic growth.
In his remarks, Huang Yiping carefully maintained a constructive tone, only describing the authorities’ policies as “too mild” and attributing the “new situations in the economy” to specific measures. He pointed out that the support policies of the central government for economic growth in the past two years have been very limited in their practical effects, primarily due to the actions of local governments restricting expansion instead of supporting it.
Bloomberg believes that Huang Yiping avoided touching the sensitive nerves of the Beijing authorities to avoid facing a situation similar to Hu Xijin, the former chief editor of the official media Global Times, who was “completely silenced” on the internet. Even after retiring, Hu Xijin remains extremely active on Chinese social media platforms and is still considered as a mouthpiece for the Beijing authorities.
It was pointed out that Hu Xijin’s interpretation of the Third Plenary Session back in 2013 distinctly stated in the reform “decision” of the 18th Third Plenary Session about the “dominance of public ownership,” whereas this year’s session omitted such wording, indicating that “non-public and public economies have genuinely reached equal status.” Subsequently, Radio Free Asia quoted scholars analyzing that Hu Xijin’s statements crossed the Communist Party’s red line.
Over the past year, several Chinese economic scholars have been shut down for expressing views that counter the official stance, including Dan Bin, Chairman of Shenzhen Eastern Harbor Investment Management Company, financial blogger Hong Rong, founder of the investment research institute Gelonghui Chen Shouhong, renowned commentator Shuipi, economist Ma Guangyuan, financial writer Wu Xiaobo, and former senior investment advisor at Zhongjin Fortune Securities Xu Xiaoyu. Liu Jipeng, Dean of the Capital Finance Research Institute at China University of Political Science and Law, was banned for advising stock investors not to enter the market and later resigned.