Home' Trinidad and Tobago Guardian : December 24th 2015 Contents DECEMBER 24 • 2015 www.guardian.co.tt BUSINESS GUARDIAN
INTERNATIONAL | BG21
Chinese leaders promised
Monday to promote eco-
nomic growth by cutting
business costs and reducing
surplus production capacity
in some industries as they
try to reverse an unexpectedly sharp down-
After an annual planning meeting, Com-
munist Party leaders also promised to
reduce financial risks and rein in rising
debt that has prompted concern about
possible threats to China s financial sys-
The leadership under President Xi Jinping
is in the midst of a multi-year effort to
nurture slower, more sustainable growth
based on domestic consumption instead
of trade and investment. Growth has slowed
more abruptly than expected over the past
two years, forcing the party to juggle com-
peting demands of shoring up the expan-
sion while keeping reforms on track.
The pledges in Monday s brief statement
weren t new, but they indicate where the
ruling party s priorities will lie in 2016.
The statement also gave no details of
how key issues such as the status of state
companies that dominate industries from
banking to energy to telecoms would be
Economic growth decelerated to a six-
year low of 6.9 per cent in the quarter
ending in September and the International
Monetary Fund and private sector fore-
casters expect it to fall as low as 6.0 per
cent next year. Communist leaders insist
they are comfortable with slower growth
after the last decade s explosive double-
digit expansion but face pressure to avoid
a spike in job losses.
In 2016, the party will "reduce the burden
on enterprises," the statement said. It prom-
ised to promote "mass entrepreneurship
and innovation," but gave no details.
The party has taken steps to help entre-
preneurs by reducing regulatory approvals
required to start a business. In November,
Beijing cut costs for entrepreneurs by reduc-
ing interest rates charged by credit unions
and other small lenders that serve the pri-
Beijing will "resolve excess capacity,"
the statement said, a reference to indus-
tries including steel, cement, glass and
solar panels in which supply exceeds
That glut has led to price-cutting wars
that threaten the financial health of com-
panies. Regulators want to promote con-
solidation through mergers but face resist-
ance from local officials who are reluctant
to lose jobs and tax revenue. Monday s
statement suggested local leaders might
come under increased pressure from Bei-
jing to cooperate.
The ruling party unveiled plans in Sep-
tember to inject more competition into
industries controlled by state companies
and to force them to become financially
self-reliant. But it stressed the ruling
party would retain its dominant role in
Reform advocates complain the ruling
party is dragging its feet on promises to
open industries dominated by politically
favoured state companies that benefit
from monopolies, low-cost loans and
Party leaders also "vowed to take further
steps to guard against and defuse financial
risks," the statement said.
Financial analysts have warned China s
financial system faces mounting risks due
to soaring levels of debt. A largely unreg-
ulated industry of private sector finance
companies that flourished over the past
decade has suffered rising defaults as eco-
nomic growth slows, causing losses for
depositors and a spate of protests.
Chinese regulators say banks are finan-
cially healthy but they have tightened
control over private finance companies.
Last week, an Internet-based lender,
Ezubo, that news reports said collected
billions of dollars in deposits, was raided
by police who seized a bank account and
China will make its monetary policy more
flexible next year to create conditions for
structural reforms, while expanding its
budget deficit, Xinhua news agency said
on Monday, citing decisions made at a
The annual Central Economic Work Conference is
keenly watched by investors for clues on policy priorities
and main economic targets for the year ahead.
"The prudent monetary policy needs to be more
flexible so as to create appropriate monetary conditions
for structural reforms," Xinhua said, citing a statement
after the conference.
China s proactive fiscal policy needs to be more
forceful, Xinhua said, adding that the top-level meeting
called for an expansion of China s fiscal deficit ratio
The Xinhua report came after a source with direct
knowledge of the meeting, which began on Friday, said
China would keep its economic policies accommodative
in 2016 to help support the slowing economy.
The government will take steps to expand aggregate
demand while pushing forward "supply-side reform"
next year, said the source who briefed a small group
of reporters about the meeting.
"We need the economy to grow at a certain pace
in order for structural reform to be carried out," said
the source, who requested anonymity.
The People s Bank of China has maintained a prudent
monetary policy since 2011, raising or cutting interest
rates in line with shifts in the economy. The pro-active
fiscal policy has been in place since the depths of the
The PBOC has cut interest rates six times since
November last year and reduced the amount of cash
that banks must set aside as reserves, while the gov-
ernment has stepped up spending on infrastructure
projects and eased restrictions on home buying to
boost the sluggish property market.
The source said both China s and the world s eco-
nomic recoveries are expected to be "L-shaped", imply-
ing a sustained period of modest growth that follows
a sharp slowdown.
"Because we realise that will be an L-shape , you
cannot only use demand-side policy to drive the econ-
omy," the source said.
Chinese leaders have pledged to keep the country s
economic growth in a "reasonable range" in 2016 by
expanding domestic demand and making supply-side
The government will expand its budget deficit next
year and cut tax to help reduce burdens on companies,
said the source.
Steps will be taken to reduce overcapacity and prop-
erty inventories, the source added.
The government has been struggling to reach its
economic growth target of about seven per cent this
year, despite a raft of policy easing steps in recent
President Xi Jinping has said China must keep annual
average growth of no less than 6.5 per cent over the
next five years to hit a goal of doubling gross domestic
product and per capita income by 2020 from 2010.
Premier Li Keqiang recently pledged to step up "sup-
ply-side" reforms to generate new growth engines in
the economy while tackling factory overcapacity and
so-called zombie firms. Reuters
Coal miners work at a coal mine in Huaibei in central China's Anhui province Monday December 21, 2015. Chinese leaders have promised
to cut costs for businesses to promote economic growth next year, reduce financial risks and eliminate excessive production capacity
that is a drag on some industries.
Chinese leaders promise lower
business costs to boost growth
China to make
more flexible in
2016 to support
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