23 February 2019
There are doubts that China will meet its growth target of 7.5 percent this year. Photo: Bloomberg
There are doubts that China will meet its growth target of 7.5 percent this year. Photo: Bloomberg

WEEKENDER: Leaders hard on graft, soft on economy

President Xi Jinping {習近平} and Premier Li Keqiang{李克強} have two major battles on their hands. On the political front, Xi is leading a nationwide crusade against corruption, vowing to hit not just flies but tigers. On the economic front, Li has the task of keeping economic growth steady while eradicating structural deficiencies. This week saw interesting changes on both battlefields.

Start with the anti-graft war. On Monday, after two years of detention, former People’s Liberation Army deputy logistics chief Gu Junshan {谷俊山} was formally charged over a range of alleged crimes, including corruption, embezzlement and abuse of power. His former boss and ally, former Central Military Commission (CMC) vice-chairman Xu Caihou {許才厚}, was detained.

Also on Monday, official media reported that the CMC has completed its inspection of the leadership in the Beijing and Jinan military zones. Inspections have and will be launched in the remaining military jurisdictions.

The reports said CMC members have examined the activities of the military zones, including self-education, officer promotions and appointments, construction work and land deals. “[The inspection teams] have uncovered some important clues,” they said.

On Wednesday, official newspapers gave prominent coverage to speeches given by 18 PLA generals, who all swore allegiance to Xi, the commission’s head. Experts said that such a large-scale show of loyalty by top military brass has been rare since the launch of the reform policy in the early 1980s.

These events are a clear signal of the start of a new phase of the anti-corruption drive, a phase that will venture into the highly sensitive military area. Analysts say it demonstrates Xi’s determination to beat corruption in the PLA, ensuring ideological purity and greater fighting capacity in the ranks. Long a symbol of stability, a strong and clean PLA is seen as critical in ensuring social and political order.

It looks certain more PLA generals will face military courts on corruption charges. This is despite speculation that Xi’s anti-graft battle has met resistance from conservatives in the party.

As Xi’s anti-corruption campaign rolls on through the military, other arms of the central government are working to stop the decline in the nation’s economic growth. On Wednesday, the State Council unveiled a mini-stimulus package to build railways, renovate shantytowns and help small and medium-sized businesses.

China has set a gross domestic product target of 7.5 percent for 2014 but analysts predict GDP figures in the first and second quarters will fall below that benchmark.

The mini-stimulus has raised concerns about a sharp slowing of the world’s second-largest economy and, also importantly, the leadership’s vow to deepen economic reform. As it stands, the measures are limited and targeted. While reflecting the leadership’s determination not to again go down the road of massive stimulus and investment-led growth, the measures are aimed at killing two birds with one stone by also striving to tackle structural problems such as rehabilitation of slum areas and urbanization.

The measures came after the premier met provincial officials last week to discuss the economy. Li has given early notice that Beijing will introduce targeted, effective measures to maintain economic growth within a reasonable zone. With gloom overseas about China’s economic outlook, Li’s remarks fueled expectations that the central bank will loosen its monetary policy to boost growth through greater liquidity.

There are more doubts that China will be able to achieve its target GDP growth of 7.5 percent, or the bottom-line 7.2 percent. But the People’s Bank of China gave a vote of confidence in the economy in a statement on its regular quarterly meeting on Thursday. “The economy has been operating within a reasonable range. The financial sector is stable. Prices are basically stable,” the central bank said.

The central bank stuck to its pledge to maintain prudent monetary policy, giving no hint of policy adjustment in the near term. Mainland media quoted analysts as saying the central bank is likely to keep reasonable market liquidity through open-market operations, and that it sees no need to lower the deposit reserve ratio.

It falls in line with an upbeat note struck by Li at last week’s meeting. He said: “We have the capability, confidence and conditions needed to keep economic growth within a reasonable range.”

Despite the feel-good assessment, jitters about the Chinese economy are unlikely to dissipate with such mixed signals as a mini-stimulus and weakened currency.

Chris Yeung is deputy chief editor of the Hong Kong Economic Journal. This column appears every Friday.

– Contact the writer at [email protected]



He was editor-at-large at the South China Morning Post and, more recently, deputy chief editor of the Hong Kong Economic Journal.

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