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China's provinces to get targeted policy support

China's provinces to get targeted policy support

China will be proactive and introduce policies that can support provinces feeling the pinch from economic slowdown and mitigate regional financial risks as it faces increasing headwinds both domestically and abroad.

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By Jackson Lewis 30.11.2018

China will be proactive and introduce policies that can support provinces feeling the pinch from economic slowdown and mitigate regional financial risks as it faces increasing headwinds both domestically and abroad.

The Xinhua news agency said on Thursday that the cabinet is eager to step up targeted policies in regions that could suffer economically during the next 12 months. Slower GDP growth is in the forecast for China as a whole regardless of the outcome of its trade war with the US. Some experts believe that growth could cool to levels not seen since the global financial crisis a decade ago.

Policymakers have already stated their desire to push through investments in road and rail projects, open up lending from banks for more enterprises and reduce the burden of taxes for SMEs. Further steps will now focus on regions where steady economic growth is at risk. Xinhua said that the policy should aim to keep “economic operation” within a workable threshold.

The cabinet reportedly said: “We should strengthen monitoring and early warning in areas with high leverage ratios, strengthen cooperation in local financial supervision and risk prevention and more effectively prevent and resolve systemic regional financial risks.”

Additionally, the cabinet wants closer integration of various fiscal, investment and monetary policies to make it easier to get inter-regional projects off the ground. This is important, as China could see considerable disparities between each region in terms of both economic development and competition between them.

Authorities now want to put a new mechanism in place that will coordinate regional development and support a prosperous society by the beginning of the next decade. After that, China will aim to update its development mechanism to support modernization by 2035.

China’s President Xi Jinping also confirmed in mid-week that he will look to improve market access for foreign investors and introduce better safeguards for intellectual property rights. Both of these factors are reasons for the US’ trade offensive earlier this year, and Xi said that he is ready to make changes.

"China will make efforts to open, even more, its doors to the exterior world, and we will make efforts to streamline access to markets in the areas of investment and protect intellectual property," Xi noted during a two-day trip to Spain. He added that China will look to import goods worth US$10tn by 2023.

He did not talk directly about the US-China standoff or US President Donald Trump during his visit, but trade was again at the top of the agenda. Following a meeting with Spanish Prime Minister Pedro Sanchez, China and Spain released a statement supporting the fight against protectionism and unilateralism and the need to build an “open and balanced global economy based on WTO rules.”

Xi is now heading to Argentina, where he will meet Trump after four months of rhetoric and trade blows. Analysts said on Thursday that China is in a weaker position than its primary trade rival but that both countries stand to lose in some way if they commit to a prolonged battle.

“China’s in a much weaker position, but that doesn’t mean the US is in a strong position,” independent economist Richard Duncan said. “Its economy could also be thrown into a very severe crisis through a [prolonged] trade war with China, while China’s economy could completely implode.”

Meanwhile, Standard Chartered Bank Chief Greater China Economist Ding Shuang admitted that Trump and Xi will find it difficult to come to any sort of agreement at the G20 Summit and that the confirmation of further talks is the “most likely scenario.” Trump said this week that delaying new, higher-rate levies is unlikely.

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