Chinese Premier Li Keqiang chaired an economic meeting on Tuesday in which six leaders of “economically strong provinces” spoke via video. Pictured here is Li at a virtual World Economic Forum event in July 2022.
Xinhua News Agency | Xinhua News Agency | Getty Images
BEIJING — Chinese Premier Li Keqiang has called on six provinces to take the lead in supporting the country’s growth after July data showed an overall slowdown.
Retail sales, industrial production and fixed asset investment data released on Monday missed analysts’ expectations and marked a slowdown from June. It comes as China’s economy grew by just 2.5% in the first half of the year.
“Now is the most critical time for economic recovery,” Li said at a meeting on Tuesday, according to an English reading. He called for “resolute and rapid efforts” to strengthen the foundations of recovery.
Much of that responsibility falls on six “economically strong provinces” that account for 45% of national GDP, according to the reading. He said the six provinces also account for nearly 60% of the national total of foreign trade and investment.
Leaders of the coastal and exporting provinces of Guangdong, Jiangsu, Zhejiang and Shandong spoke via video in an economic meeting with Li on Tuesday, according to the reading. Leaders from the landlocked provinces of Henan and Sichuan also spoke.
The provincial-level municipalities of Shanghai and Beijing were not mentioned.
“Investment will be accelerated in the six provinces com [the] will be provided by the central government [a] green light to major investment projects,” said Yue Su, chief economist at The Economist Intelligence Unit. He said provinces could even be assigned their own targets for measures such as employment.
“Although there is no emphasis on the [national] Goal of GDP, Prime Minister still attaches great importance to growth rate mentioning development [as] the key to solving all problems,” he said.
At the high-level Politburo meeting in late July, China’s leaders indicated that the country could miss its GDP target of around 5.5% for the year.
They also said at the time that “provinces with the conditions to achieve the economic goals should make efforts,” according to a Chinese translation by CNBC.
The six provinces highlighted at Tuesday’s meeting had set GDP targets ranging from 5.5% to 6.5%, for an average growth target of 5.75%. That’s according to CNBC’s calculations of figures published by state media.
For actual growth in the first half of the year, that median was 2.65%, according to CNBC calculations of official data from the six provinces accessed through Wind Information. Provincial GDP growth rates ranged from 1.6% to 3.6% during this time.
I think the meeting reflects the fact that policymakers are disappointed with July’s economic data.
Macquarie, China Chief Economist
Tuesday’s meeting highlighted the importance of the six provinces to tax revenue.
The four coastal provinces account for more than 60% of the net contribution of all provinces to the central budget, according to the reading. “They should complete their tasks in this regard,” the statement said.
“I think the meeting reflects the fact that policymakers are disappointed with July’s economic data,” Larry Hu, Macquarie’s chief China economist, said in an email to CNBC. “Meanwhile, they are increasingly concerned about real estate.”
“Consequently, they would like to give another boost to the economy. The PBOC’s surprise cut this Monday is part of the boost,” he said.
The central bank unexpectedly cut two interest rates on Monday, prompting expectations that the People’s Bank of China will cut its main lending rate in about a week.
China’s economy has slowed this year, dragged down by the Covid outbreaks and resulting trade restrictions. The worsening downturn in the massive real estate sector has also weighed on the economy.
On real estate, Li said only that “economically strong provinces” should support the needs of basic or improved housing conditions, according to the reading.
Instead, Li stressed that provinces must increase consumption, especially of high-value items such as automobiles, the reading said.
China’s premier called for more measures to support auto sales in June. Since then, related economic indicators have experienced some of the fastest growth.
Auto production rose 31.5% year-on-year in July, according to official data. Auto exports rose 64 percent in July from a year ago and helped boost China’s better-than-expected export growth last month, customs data showed.
The official retail sales report for July said auto sales growth slowed to 9.7% year-on-year, down from 13.9% in June. Auto sales accounted for 10% of China’s retail sales in July, which grew a disappointing 2.7% last month from a year ago.
“The combination of declining auto sales growth and increased auto production growth implies a likely inventory build-up in the auto sector,” Goldman Sachs analysts said in a report monday
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