China announced a string of reforms after its third plenum in November. This was followed soon after by the Central Economic Work Conference (CEWC) in December, an annual meeting that lays out the agenda for the next year.
Yale professor and former chairman of Morgan Stanley Asia, Stephen Roach, thinks that there is a disconnect between the long-term “strategic” focus of the Plenum, which is aimed at rebalancing China’s economy. And the “tactical focus” of the CEWC which emphasises stable growth.
While rebalancing the economy and slowing growth should be expected, that the CEWC “failed to consider China’s growth slowdown in this strategic context, placing considerable weight instead on the macro-stabilisation imperatives of ‘proactive fiscal and prudent monetary policies,'” writes Roach in a new Project Syndicate column.
He describes these efforts as “kitchen-sink” policies, a mishmash that makes the agenda of policymakers unclear.
“In fact, only two of the six major economic tasks identified by the Work Conference fit neatly with the Third Plenum’s strategic agenda. The call for enhanced social security is consistent with the Third Plenum’s proposal to allocate 30% of state-owned enterprises’ profits to fund safety-net programs such as pensions and health care. Likewise, the emphasis on markets’ “decisive role” in upgrading China’s industrial structure and eliminating excess capacity is compatible with the Third Plenum’s goal of achieving a market-based shift to a consumer society.
“What emerges from all of this is yet another example of the timeworn “kitchen sink” approach to Chinese economic policymaking — countless proposals, initiatives, and goals that are loosely connected at best, and that are often plagued by internal inconsistencies. A new approach is needed, and it will require three key changes to China’s economic-policy framework.”
There seems to be a huge disconnect between what policymakers are saying and doing.