Must-Read China Economic News (Nov. 2-Nov. 9)
Local gov't debt ceiling, EV tariffs, CPI, first energy law, demographic shifts...
Greetings and welcome to the latest edition of Peking Ensight! We're thrilled to have you join us once again as we navigate the ever-evolving landscape of the Chinese economy.
⭐Under the Spotlight
China's top legislature approves bill to raise local gov't debt ceiling
Chinese lawmakers have approved a State Council bill on raising the ceiling on local government debt by 6 trillion yuan (about 840 billion U.S. dollars) to replace existing hidden debts, according to a press conference.
Xu Hongcai, deputy head of the financial and economic affairs committee of the National People's Congress (NPC), China's top legislature, revealed the approval to the media after the Standing Committee of the 14th NPC concluded its 12th session in Beijing on Nov. 8.
Under the new arrangement, the debt ceiling for special local government debt will be increased to 35.52 trillion yuan from 29.52 trillion yuan by the end of 2024.
Also starting from 2024, China will set aside 800 billion yuan from each year's new special-purpose bonds for local governments for five consecutive years, thereby providing debt relief to replace 4 trillion yuan of hidden debts, according to Minister of Finance Lan Fo'an.
The new measures will add a combined 10 trillion yuan to China's debt relief resources, Lan told the press conference.
Meanwhile, the 2 trillion yuan of hidden debts resulting from housing improvement projects in run-down areas due by 2029 and beyond will be paid in accordance with the original contracts.
As a result, the amount of hidden debts that China's local governments need to deal with by 2028 is expected to drop from 14.3 trillion yuan to 2.3 trillion yuan, said the minister.
⭐Bilateral Relations
China, EU on EV Tariffs
China's Commerce Minister Wang Wentao has called on France, as a key European Union (EU) member, to play an active role in pushing the European Commission to show sincerity and meet the Chinese side halfway to secure a solution concerning the EU's anti-subsidy probe into Chinese electric vehicles (EVs).
Wang made the remarks during a meeting with French Minister Delegate for Foreign Trade and French Nationals Abroad, attached to the Minister for Europe and Foreign Affairs, Sophie Primas, in Shanghai on Nov. 3, according to the Ministry of Commerce (MOC).
The EU's anti-subsidy probe into China-made EVs has severely hindered cooperation between EU and Chinese auto industries, currently a critical concern for industries on both sides, Wang said, noting that technical teams from China and the EU are presently engaged in a second round of consultations.
Wang said that unlike the EU's anti-subsidy probe initiated without industry applications, China's trade remedy investigations targeting certain EU goods, such as brandy, pork and dairy products, were launched at the request of domestic industries in full compliance with WTO rules and Chinese laws and regulations.
China on Nov.4 appealed to the WTO against the EU's final ruling of countervailing measures on Chinese EVs.
China firmly opposes the final measures of the EU to impose high countervailing duties on Chinese-made EVs, despite a barrage of objections raised by relevant parties, including the governments of EU member states, the industry and the public, said a MOC spokesperson.
To safeguard the development interests of the EV industry and global cooperation on green transformation, China decided to make the appeal to the WTO dispute settlement mechanism, the spokesperson said.
The complaint followed China's previous appeal to the organization against the EU's initial anti-subsidy measures for Chinese EVs.
China believes that the EU's ruling, lacking factual and legal basis while violating WTO rules, is an abuse of trade remedy measures and a practice of trade protectionism in the name of countervailing, the spokesperson noted.
China has urged the EU to face up to its own mistakes, immediately correct its illegal practices, and jointly safeguard the stability of the global EV industrial chain and supply chain as well as the overall China-EU economic and trade cooperation, the spokesperson said.
A spokesperson with the MOC said on Nov. 8 that China and the EU have made progress in negotiations on a proposed price commitment plan concerning Chinese EVs.
Chinese and EU technical teams held five rounds of talks in Beijing from Nov. 2 to 7, engaging in in-depth discussions on the specifics of the price commitment plan submitted by the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, said the spokesperson.
The Chinese side believes the overall advancement of the negotiations based on the chamber's plan, which is on behalf of the industry, will help maintain mutual trust, facilitate consensus-building and resolve differences through consultations, to avoid an escalation of the trade frictions, the spokesperson said.
The two sides have agreed to continue negotiations via video or other means, the spokesperson added.
China-U.S. Economic Ties
China is willing to strengthen communication, expand cooperation and resolve differences with the United States for stable, sound and sustainable development of bilateral economic and trade relations, a spokesperson with MOC said on Nov. 7.
Spokesperson He Yongqian made the remarks at a press conference in response to a question regarding the possibility of the United States' continuous imposition of additional tariffs on China as well as the U.S. restrictions on China's high-tech sector.
Under the principle of mutual respect, peaceful coexistence and win-win cooperation, China is willing to work with the United States and bring greater benefits to both countries and the rest of the world, He said.
⭐ Key Economic Indicators
China's foreign trade picks up pace in October
China's foreign trade registered faster growth in October, indicating stronger economic momentum.
Total goods imports and exports expanded 4.6 percent year on year in yuan terms last month, quickening from the 0.7 percent increase in September, according to date released by the General Administration of Customs (GAC) on Nov. 7.
In the first 10 months, the country's foreign goods trade rose 5.2 percent from a year ago to 36.02 trillion yuan, with exports up 6.7 percent and imports up 3.2 percent.
China is capable of achieving the full-year foreign trade goal of improved quality and stable volume, said Lyu Daliang, director of the GAC's Department of Statistics and Analysis.
China's consumer prices see stable growth in October
China's consumer prices reported mild increases last month as the domestic demand continued to improve amid a sustained economic recovery.
The consumer price index (CPI), a main gauge of inflation, was up 0.3 percent year on year in October, slightly lower than the 0.4 percent rise in September, the National Bureau of Statistics (NBS) said on Nov. 9.
Falling energy prices dragged down the price level last month and food prices registered stable growth, according to NBS statistician Dong Lijuan.
The core CPI, which excludes food and energy prices, rose 0.2 percent from a year ago in October, up from 0.1 percent in September.
The NBS data also showed the country's producer price index (PPI), which measures costs for goods at the factory gate, went down 2.9 percent year on year in October, up slightly from 2.8 percent in September.
Compared to a month earlier, the PPI only dropped 0.1 percent, narrowing from the 0.6 percent decline in September and 0.7 percent in August.
⭐ Policy Moves Much Talked
China passes first energy law
Chinese lawmakers on Nov. 8 passed the country's first energy law, which will take effect on Jan. 1, 2025.
The law, adopted at a session of the Standing Committee of the National People's Congress, China's top legislature, consists of nine chapters, including contents concerning energy planning, energy development and utilization, the energy market system, energy reserves and emergency response, energy technology innovation, supervision and management and legal responsibilities.
Formulated in accordance with the Constitution, the law is designed to boost high-quality energy development, ensure national energy security, promote green and low-carbon transition and sustainable development, facilitate active yet prudent efforts to achieve carbon peak and carbon neutrality goals, and meet the needs of building a modern socialist country in all respects.
China about to launch tax policies to support property market
China's Ministry of Finance (MOF) said on Nov. 8 it will roll out tax policies in the near future to support the healthy development of the real estate market.
These new measures have been submitted for approval in accordance with established procedures, Minister of Finance Lan Fo'an told a press conference.
The MOF is actively planning future fiscal policies to intensify counter-cyclical adjustments, Lan added.
⭐ Read More
China's demographic shifts show regional variations, human-resource potential
Eight Chinese provincial-level regions recorded positive natural population growth rates in 2023 as the government steps up efforts to tackle demographic challenges, with experts believing that China still has strong human-resource potential.
The regions of Xizang, Ningxia and Guizhou led those with positive natural population growth rates, according to the newly released China Statistical Yearbook 2024 compiled by the National Bureau of Statistics.
Among them, three regions reported birth rates above 10 per thousand, with Xizang leading with a rate of 13.72 per thousand, followed by Guizhou at 10.65 per thousand, and Ningxia at 10.02 per thousand.
China has moved to enhance childbirth support and address the challenges of a rapidly aging population. The latest move came last week, as the country introduced a series of birth support policies aimed at building a society more conducive to raising children.
A directive from the State Council outlines 13 targeted measures to enhance childbirth support services, expand child-care systems, strengthen support in education, housing and employment, and foster a birth-friendly social atmosphere.
Signaling a shift amid policies to address the challenge of an aging population, official data shows that the number of marriage registrations in China rose again in 2023, after dropping for nine consecutive years.
The yearbook indicated that China recorded more than 7.68 million marriage registrations in 2023. Approximately 11.94 million Chinese people married for the first time last year, up 13.52 percent from the previous year and marking the first upturn in the number of newlyweds in the country since 2014.
With factors including population size, labor-force participation rate, education and health status accounted for, China's human resources will remain at a higher level in the coming period, maintaining an advantage over other countries, said Wang Qinchi, a researcher at the China Population and Development Research Center.
He pointed to rapid improvements in health and education as key factors that have softened the impacts of a declining working-age population.
Adding to the demographic changes, the population aged 65 and above reached 216.76 million by the end of 2023, with the dependency ratio of the elderly population standing at 22.5 percent, meaning that, on average, every elderly person will be supported by 4.4 people of working age.
Citing projections that the dependency ratio of China's elderly population is expected to remain below the average for upper-middle-income countries until 2035, and below the average for high-income countries until 2050, Wang said that China's overall age structure still remains advantageous, providing a solid foundation for its economic growth.
As one of the world's most populous countries, China faces the mounting challenge of its 1.4-billion-strong population aging at a rapid rate. It is projected that the number of citizens aged 60 or above will surpass 400 million by 2033 and approach 500 million by 2050. At that point, seniors are expected to account for nearly 35 percent of the nation's population.
In response to these demographic shifts, China has gradually relaxed its family-planning policies over the past decade, phasing out the decades-long one-child policy. In 2021, it announced support for couples who wish to have a third child.
Local governments across China have since put in place a series of stimulus measures for childbirth, including subsidies, expanded insurance coverage, extended maternity leave, and more public child-care facilities.
Compiled by Wen W.