China's Xi calls for pivot to domestic economy as recovery continues

[BEIJING] Chinese President Xi Jinping called for a greater push on reforms to stimulate domestic demand as the economy continues its steady recovery from the coronavirus slump.

Speaking at a Politburo meeting on economic policy, Mr Xi said China should speed up its "dual circulation" growth model that is primarily driven by domestic demand, while drawing in foreign investment and stabilising trade, the official Xinhua News Agency reported Thursday.

Data released Friday showed the manufacturing outlook improved for a second month in July.

Mr Xi's remarks come ahead of a series of high-level political meetings that will chart the development path of the world's second-largest economy. Top current and retired leaders typically spend early August huddled in the resort of Beidaihe to discuss policy direction. The Communist Party's Central Committee will meet in October to outline the next five-year plan and a longer term vision to 2035, Xinhua said.

While Thursday's Politburo meeting kept the overall stance for fiscal and monetary policy unchanged, it added fresh emphasis for policy to be more targeted. It also called for lower financing costs for the real economy and reasonable credit growth.

"Beijing confirmed that cyclical policy is on cruise control: ongoing rollout of fiscal stimulus, neutral monetary policy," economists including Robin Xing at Morgan Stanley in Hong Kong wrote in a note. "It emphasised structural initiatives beyond Covid-19 to tackle external challenges: pivoting to the domestic market, speeding up new urbanisation, and economic opening."

Chinese policy makers have been trying to avoid the formation of asset bubbles in the stock and property markets as the economy recovers. Thursday's meeting called for more balanced growth, with efforts to boost consumption, make supply chains more stable and competitive, and help young people and migrants from rural areas find jobs.

Earlier this week, Mr Xi said China would be able to ride out the coronavirus pandemic with stronger growth in the second half of 2020.

"We have strong will, firm determination and solid strength to tackle the challenges, and enough drive, capacity and wisdom to overcome all kinds of risks and tests," he said, according to state broadcaster CCTV. "No countries or individuals can stand in the way of the country's great rejuvenation."

BLOOMBERG