24 June 2019

Economic slowdown offers timely cover to price reforms

China’s top government and party brass will reportedly meet this week for the annual central economic work conference, which sets the economic agenda for the year ahead. 

The lead-up to the conference included President Xi Jinping’s appearance at a seminar last month to discuss economic issues with non-party members. According Xinhua, Xi was not optimistic about conditions in 2014.

It would be no surprise then if the conference ends with a cautious outlook for economic growth next year. Speculation is high that the national target for gross domestic product expansion may be cut again to 7 percent in 2014, from 7.5 percent this year. If that is the final number, it will be China ’s slowest growth since 1990.

But a bit of cooling in the economy could be a blessing. The Economic Information Daily quoted a Renmin University economist as saying that Beijing is very likely to embark on some tough reforms in 2014, including market-based pricing of water, electricity, gasoline and natural gas.

Minimizing government intervention on those essentials will inevitably lead to increases in prices and the consumer price index. But a timely slowdown in broad economic growth will cushion the economy from the bumps in headline inflation.

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