BEIJING (AP) — China on Saturday cut its annual economic growth target to its lowest level in decades as Beijing struggles to reverse a slump at a time when Russia’s war on Ukraine is pushing up oil prices and roiling the global economy.
The ruling Communist Party will aim for “around 5.5%” growth this year, down from last year’s 8.1% expansion, the country’s No. 2 leader, Premier Li Keqiang, said in a report to an annual meeting of its ceremonial legislature. It noted commodity prices are surging but made no mention of the reason: the attack by Beijing’s friend, Russian President Vladimir Putin.
“Achieving this goal will require arduous efforts,” Li said during a 55-minute speech at the opening of the National People’s Congress in the Great Hall of the People in central Beijing.
Surging energy costs due to the war add to pressure from anti-coronavirus controls and a crackdown on debt in China’s vast real estate industry that caused economic growth to fall to 4% over a year earlier in the final quarter of 2021. This year’s growth forecasts by the International Monetary Fund and private sector analysts are as low as 4.3%.
Manufacturing has been disrupted by a “zero tolerance” COVID-19 strategy that has at times suspended access to some major cities, as well as weak demand for Chinese exports and shortages of power and processor chips. The premier gave no indication Beijing might relax its anti-virus strategy that has helped to keep infection numbers low but at a rising cost.
President Xi Jinping’s government has tried to distance itself from Putin’s war by calling for dialogue but refused to criticize the attack. Beijing has denounced trade and financial sanctions on Moscow and says Washington is to blame for the conflict.
Li indirectly acknowledged the war’s impact on prices of oil, wheat and other commodities, saying they “remain high and prone to fluctuation,” but gave no indication why.
“All of this is making our external environment increasingly volatile, grave and uncertain,” Li said.
His report focused on the economy, social welfare and other domestic issues, in contrast to Tuesday’s State of the Union speech by President Joe Biden, which emphasized Russia’s attack on Ukraine and international efforts to pressure Putin to stop.
The ruling party is trying to steer the world’s second-largest economy toward slower, self-sustaining growth based on consumer spending instead of trade and investment but was alarmed by last year’s abrupt slowdown.
The slide was triggered by tighter controls on borrowing by real estate developers that caused construction and housing sales to plunge.
Ruling party leaders responded by announcing a “policy pivot” in December toward shoring up growth and away from longer-term initiatives aimed at cutting debt and carbon emissions.
“We must make economic stability our top priority,” Li said. He said that should “occupy an even more prominent position.”
The premier promised to “ensure food and energy security” with adequate supplies of grain and electric power. He said Beijing will step up exploration for oil, gas and minerals and improve its system of stockpiles of essential raw materials.
Li also promised to crack down on trafficking of women and children and protect their “lawful rights.” The status of women who are mistreated and possible additional protections is expected to be discussed by the legislature following the widely publicized case of a woman who was found chained in a shed in eastern China.
No growth target was announced in 2020 after much of the economy was shut down to fight the virus. Last year’s target was “over 6%.” This year is the first time since the 1990s the official target is below 6%.
The ruling party has promised tax cuts for entrepreneurs who generate jobs and wealth. Banks have been told to lend more. The government is injecting money into the economy through higher spending on building public works.
The ruling party is promising to build more solar, wind and other renewable power resources. But it also has eased pressure on utilities to restrain growth of climate-changing carbon emissions by burning less coal.
Energy efficiency will be “assessed with appropriate flexibility,” Li said.
Turning to COVID-19, Li said China needs to “constantly refine epidemic containment” but gave no indication Beijing might ease its “zero tolerance” strategy. He called for accelerating vaccine development and “strengthening epidemic controls” in cities where travelers and goods from abroad arrive.
All the delegates attending the opening session of the legislature wore face masks. The meeting, which normally lasts two weeks, has been curtailed to one week again this year because of the pandemic.
Also Saturday, the government announced a 7.1% increase in its military budget, up from last year’s 6.8% rise. China has the world’s second-highest military budget after the United States and is investing in long-range, nuclear-capable missiles and other weapons to extend its power beyond its shores.
Li affirmed the ruling party’s insistence that Hong Kong “should be governed by patriots,” a key element in a campaign to crush pro-democracy activism in the former British colony.
The premier indicated no change in stance toward Taiwan, the island democracy that Beijing claims as part of its territory and has threatened to invade. The two sides have been ruled separately since splitting in 1949 after a civil war but have multibillion-dollar trade and investment ties.
Russia’s invasion of Ukraine has prompted suggestions Beijing might be more likely to use force against Taiwan if it sensed a lack of resolve on the part of the United States and its allies. The ruling party has offered no signs of changing its avowed approach of gaining control of Taiwan by peaceful means, without giving up the military option.
Beijing will “advance peaceful growth of relations across the Taiwan Strait and the reunification of China,” Li said. “We firmly oppose any separatist activities seeking ‘Taiwan independence’ and firmly oppose foreign interference.”
AP researcher Henry Hou contributed.
Joe Mcdonald, The Associated Press
‘Do whatever it takes’: Beijing urged to act as China’s economy falters – The Guardian
The US economy is 'nowhere near a recession this year,' says an economist—but 2023 is a different story – CNBC
With turmoil in the markets, high inflation and impending interest rate hikes that will make borrowing money more expensive, many Americans are wondering if the economy is heading toward a recession.
Goldman Sachs chairman Lloyd Blankfein said last weekend that “it’s certainly a very, very high risk factor,” and consumers should be “prepared for it.” However, he hedged his comments by saying the Federal Reserve “has very powerful tools” and a recession is “not baked in the cake.”
Although it is impossible to know for sure, the odds of a U.S. recession in the next year have been steadily rising, according to a recent Bloomberg survey of 37 economists. They have the probability pegged at 30%, which is double the odds from three months ago.
To put that number into context, the threat of a recession is typically about 15% in a given year, due to unexpected events and numerous variables.
The bottom line: “The likelihood of recession this year is pretty low,” says Gus Faucher, a chief economist at financial services company PNC Financial Services Group. However, “it gets dicier in 2023 and 2024.”
What determines whether the economy enters a recession
A recession is a significant decline in economic activity that is spread across the economy and lasts more than a few months, according to The National Bureau of Economic Research, which officially declares recessions.
A key indicator of a possible recession is the real gross domestic product (GDP), an inflation-adjusted value of the goods and services produced in the United States. For the first time since early in the pandemic, it decreased at an annual rate of 1.4% in the first quarter of 2022. Since many economists agree that 2% is a healthy annual rate of growth for GDP, a negative quarter to start the year suggests the economy might be shrinking.
Another factor is rising inflation, which has recently shown signs of slowing down. But it’s still well above the Fed’s 2% target benchmark, with a year-over-year rate of 8.3% in April, according to the most recent Consumer Price Index numbers.
With a high rate of inflation, higher prices outpace wage growth, making things like gas and rent more expensive for consumers. For that reason, the Fed imposes interest rate hikes, as they did in March and May, with five more expected to follow this year. These hikes discourage spending by making the cost of borrowing money more expensive for businesses and consumers.
While many economists still expect the GDP to grow in 2022, the rate by which inflation is decreasing is less clear.
Signs of economic strength
However, there are positive economic indicators to consider as well. Job numbers continue to look good, as the U.S. economy in April had its 12th straight month of job gains of 400,000 or more. And employment levels and consumer spending remain strong, for now, despite interest hikes and inflation.
“Ultimately, inflation in terms of rising prices needs to work its way into actual spending behavior,” says Victor Canalog, head of the commercial real estate economics division within Moody’s.
He points out that consumer expenditures in the U.S. rose by 2.7% last quarter: “People are still spending more, but at what point will they start spending less?”
Despite these positives, risks remain. The Federal Reserve is walking a fine line with its monetary policy, says Faucher, as doing either too much or too little to control inflation could further hurt the economy.
“Rising interest rates are designed to cool off growth, hopefully without pushing the economy into recession,” says Faucher. But he says that if the central bank “raises their rates too much, that can push the economy into recession.”
“That’s why I’m more concerned about 2023, or 2024, because we’ll have felt the cumulative impact of all of those interest rate increases that we’re going to be seeing over the next year and a half.”
‘Difficult to believe’: Biden’s economy plan a tough sell in Asia – Al Jazeera English
Phnom Penh, Cambodia – US President Joe Biden’s arrival in Seoul on Friday marks not only the start of his first visit while in office to South Korea and Japan, but the beginnings of an economic initiative aimed at deepening United States ties across Asia.
Though many of the Indo-Pacific Economic Framework’s details have yet to be finalised, the Biden administration has made one point clear – the plan is not a traditional trade agreement that will lower tariffs or otherwise open access to US markets, but a partnership for promoting common economic standards.
While many of China’s regional neighbours share Washington’s concerns about the burgeoning superpower’s ambitions, the IPEF’s lack of clear trade provisions could make it an uninspiring prospect for potential members, especially in Southeast Asia.
“You can sense the frustration for developing, trade-reliant countries,” Calvin Cheng, a senior analyst of economics, trade and regional integration at Malaysia’s Institute of Strategic and International Studies, told Al Jazeera. “There’s always talk about engaging Asia, the idea, but what exactly is it – and what are the incentives for developing countries to take up standards that are being imposed on them by richer, developed countries?”
Since announcing the IPEF in October, the Biden administration has characterised the initiative as a way of promoting common standards under the pillars of fair and resilient trade; supply chain resilience; infrastructure, clean energy, and decarbonisation; and tax and anti-corruption.
A fact sheet distributed by the White House in February describes the framework as part of a wider push to “restore American leadership” in the region by engaging with partners there to “meet urgent challenges, from competition with China to climate change to the pandemic”.
Nevertheless, Biden’s decision not to pursue a major trade deal harks back to the protectionist leanings of former US President Donald Trump, and, in particular, his administration’s abrupt pullout from the landmark Trans-Pacific Partnership (TPP).
Trump, whose antipathy towards traditional alliances sparked anxiety in many Asian countries, scuttled that agreement in 2017 despite sharing the deal’s aims of countering expanding Chinese economic influence.
But even without clear benefits to boost trade, Asian leaders have, for the most part, reacted favourably to the prospect of renewed US engagement in Asia.
Longtime allies Japan and South Korea are expected to be among the first to engage with the IPEF, as are Singapore and the Philippines.
From Vietnam, Prime Minister Pham Minh Chinh said at the recent US-ASEAN summit that Vietnam “would like to work with the US to realise the four pillars of that initiative”.
However, he added that Vietnam needed more time to study the framework, as well as to see more “concrete details”.
Thailand has also demonstrated interest, while leaders in Indonesia and India have yet to take a clear position.
Huynh Tam Sang, a lecturer of international relations at the University of Social Sciences and Humanities in Ho Chi Minh City, said Hanoi wished to avoid antagonising either the US or China – a common position for Southeast Asian states attempting to stay clear of great power struggles while avoiding being dominated by their northern neighbour.
“The Vietnamese government has been rather prudent not to showcase any intentions to join the IPEF or not, though I think there are many benefits to joining,” Sang told Al Jazeera, listing clean energy and reliable supply chains as common interests.
Sang said, however, that other standards, such as those related to taxes and anti-corruption efforts, could be a step too far for the Vietnamese government.
“I think Vietnam could be really reluctant to join that pillar for fear of the US intervening in Vietnam’s domestic politics,” he said.
“The anti-corruption campaign is definitely going on, but many Vietnamese are very sceptical of this view of cooperation, especially with the US when the Biden administration has prioritised democratic values when fostering ties with regional countries.”
Such concerns could undercut the renewed US engagement, particularly when China has made a point to engage in trade without such values-based strings attached. The Regional Comprehensive Economic Partnership (RCEP), a free trade deal that went into effect at the start of this year, is a testament to that hands-off approach to some observers.
China played a key role in negotiating the RCEP, which also includes Japan and South Korea, plus all 10 of the ASEAN member-states – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam – as well as Australia and New Zealand.
In total, the RCEP covers some 2.3 billion people and an estimated 30 percent of the global economy. The partnership is widely seen as being more focused on promoting trade by removing tariffs and red tape, with a less holistic approach to raising economic standards than the TPP or its successor, the reassembled Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Cheng described the CPTPP, of which the US is not a member, as the “gold standard” for trade deals in the region, noting its commitment to expanded trade access as well as provisions to safeguard labour rights, promote transparency and address environmental issues and climate change.
“So the IPEF is pretty much that, but taking out the trade deal aspect of it, leaving just the standards,” he said.
It remains to be seen how far the standards-only method will go in terms of winning acceptance across Asia.
Already, Malaysian Prime Minister Ismail Sabri Yaakob and international trade minister Azmin Ali have said the US should take a more comprehensive approach.
Ali described the framework proposal in an interview with Reuters as a “good beginning for us to engage on various issues” and said Malaysia would decide which IPEF pillars it would consider joining. At the same time, he made clear the IPEF was not a replacement for the more-comprehensive TPP.
Some of the most straightforward public criticism of the new framework on that front has come from prominent former ministers in Japan, one of the region’s most steadfast US allies.
Earlier this month, former foreign minister Taro Kono and former justice minister Takashi Yamashita spoke at an event in Washington of the new framework’s lack of hard commitments, an aspect they found glaring in the context of the abrupt collapse of the TPP. In their comments, the two maintained the IPEF would only serve to undermine the CPTPP.
“Now the Biden administration is talking about the Indo-Pacific Economic whatever, I would say forget about it,” Kono said.
Hiroaki Watanabe, a professor of international relations at Ritsumeikan University in Kyoto, said the US withdrawal from the TPP had undermined Japanese perceptions of the IPEF’s stability. Though Biden may promote his framework while in power, Watanabe said, there was no guarantee the next president would.
“Right now, it’s the Biden administration, but we don’t know what will come next – it could even be Trump again,” Watanabe told Al Jazeera.
“From a non-American perspective, it’s really difficult to believe what America is saying when it says it wants to commit itself to these plans,” Watanabe added. “There are many challenges to the logistics of this, and then the US may just throw away the kind of commitment as measured by the IPEF in the future. Practically, it’s not meaningless, but it’s not significant either.”
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