While US President Barack Obama was locked in a bullfight with Republicans over the federal debt limit and the resulting government shutdown, China’s leaders stole the limelight this week at two regional summits, using the events to bolster political and economic ties with neighbors.
And as President Xi Jinping and Premier Li Keqiang charmed leaders at the Asia-Pacific Economic Cooperation summit in Bali and the Association of Southeast Asian Nations (ASEAN) in Brunei, two pieces of economic news helped boost the feel-good sentiment towards China’s economy and reform policy.
At the ASEAN summit on Thursday, Li told delegates that China’s gross domestic product growth exceeded 7.5 percent in the first three quarters. The official GDP figure will be released next week but Li’s comments dispelled fears that the nation’s economic engine had slowed.
The same day, the People’s Bank of China (PBoC) sealed an agreement for a currency swap line with the European Central Bank (ECB), following a similar deal between the PBoC and Britain’s central bank in July. Under the agreement, China’s central bank can channel up to 350 billion yuan (US$51.2 billion) to the ECB, which can direct up to 45 billion euros (US$60.7 billion) to the PBoC. The agreement marked a significant step in the renminbi’s entry into the European market and an acceleration of the pace of internationalization of the Chinese currency.
The positive mood on the economic and political fronts comes as the Communist Party leaders put the final touches to plans for the central committee’s third plenum next month. The senior delegates are expected use the plenary session to set the course and lay out the tasks in the nation’s next stage of reform.
Back at the summits, and Obama’s absence gave an unexpected boost to Beijing’s latest drive to strengthen ties with its neighbors and promote a regional free trade pact, the Regional Comprehensive Economic Partnership (RCEP).
The US president had originally planned to make a personal push at the APEC summit for the Trans-Pacific Partnership (TPP), an agreement championed by the United States and which does not include China.
In a move seen as countering the TPP, Li urged Asian nations to stick to their plan and complete talks on the RCEP by the end of 2015.
Beijing’s promotion of the RCEP is an attempt to play a bigger role in regional economic development, a move that has prompted the central government to moderate its rhetoric, if not political stance, on territorial disputes in the region.
The longstanding row with some ASEAN countries, in particular the Philippines and Vietnam, over the sovereign rights of some South China Sea islands did not figure prominently at the latest regional leaders’ summit.
Instead, Li repeated Beijing’s wish to settle the disputes through talks while calling for mutual understanding and respect between China and ASEAN countries.
Along with championing the regional economic partnership, China’s leaders turned the diplomatic platform into a stage to reassure jittery international investors over the health of the Chinese economy.
Xi told APEC leaders China is bracing for a slower pace of economic growth to correct structural flaws in the economy so that it can upgrade activity.
At the ASEAN summit in Brunei, Li said the latest economic data from China, including the purchasing managers’ index, reflected signs of stronger momentum and more stable growth in the economy.
Most economists predict China’s third-quarter GDP will range between 7.7 percent and 7.8 percent. Taking into account the GDP in the first two quarters (7.7 percent and 7.5 percent respectively), analysts share the official view that China can meet its forecast GDP growth of 7.5 percent this year.
Concerns about a sharper-than-expected slowdown in the summer aggravated by a credit crunch and the chronic problem of local government debts stoked fears of a hard landing for the Chinese economy.
Following a series of modest stimulus measures, there are increasing signs that the mainland economy is back on the path of steady growth ahead of the November party central committee plenum and the annual economic work conference scheduled for the end of the year.
Quoting a source close to the National Development and Reform Commission, the 21st Century Business Herald reported on Thursday that China is likely to set its growth target for next year at 7 percent, down from 7.5 percent this year.
Next year’s GDP target remains anybody’s guess. It is clear, however, that slower growth will create more room for bolder economic reforms, which are likely to go on the agenda of the party meeting next month.
Chris Yeung is deputy chief editor of the Hong Kong Economic Journal. This column appears every Friday.
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