18 January 2020

The Big Picture: EXECUTION GAP

After engineering a soft-landing for the economy in the third quarter, China has managed to buy some time to closely examine the efforts made by local governments and authorities to implement the reforms that Beijing has pushed forward. The State Council, led by Premier Li Keqiang, has apparently given a rap on the knuckles of local authorities and departments as they were not doing their work properly. They have been told by the bosses to check their implementation of the reform and restructuring policies which have been introduced to foster the nation’s economic transformation. The 7.8 percent economic growth achieved in the third quarter does give some time for top leaders to take a deeper look at the execution of the reform measures. There is some disappointment that economic growth was still mainly driven by investment — especially government-led fixed asset investment, instead of domestic consumption – sparking concerns that the economic rebound is still fragile. After mapping out a series of initiatives to prop up the economy, we believe Beijing will pay more attention and push local authorities to fully implement the existing policies for the remainder of the year, instead of rolling out more measures.

Tourism: Foreign visitor arrivals in the Chinese mainland totaled 19.36 million in the first nine months of 2013, down five percent over the same period last year, official data showed. The disappointing data is in contrast with the government’s plan to make tourism a pillar industry. We believe the appreciation of the renminbi, the worsening air pollution and food-safety scares could be the main reasons for the fall in the number of tourists. That said, the new tourism law that was rolled out on Oct. 1, the efforts in pollution fight and the offer of 72-hour visa-free stay for foreign travelers in more cities and provinces are likely to win tourists back. According to official figures, China hosted about 133 million overseas tourists last year. Under the country’s tourism development plan, tourism will become a strategic pillar industry by 2015 and the nation is estimated to have 200 million overseas tourist arrivals by 2020.

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