China's Communist Party admits economic risks; convenes delayed Plenum to discuss crisis

Beijing: China's ruling Communist Party, headed by President Xi Jinping, in a rare admission on Tuesday spoke of the grim economic outlook in the world's second-largest economy due to insufficient demand and an uncertain external environment and called for coordinating domestic, social and economic policies to obtain tangible results.

It was also announced that the much-delayed key Plenum of the party to discuss measures for course correction -- the 3rd plenary session of the 20th Communist Party of China (CPC) Central Committee -- will be held here in July. The Plenum was originally due to be held in October-November last year and its delay sparked speculation that it was postponed due to the uncertain economic situation in the world's second-largest economy sparking local and global concerns.

Xi 70, who is into his unprecedented third term, heading the party, the military and the Presidency, is grappling with an economic slowdown accentuated by the COVID-19 pandemic and deepening property market crisis. In a candid admission of the economic crisis, the meeting of the 24-member Political Bureau of the party, headed by Xi, spoke of the difficult situation at home and abroad for Chinese enterprises.

It “cautioned against challenges, such as insufficient demand, high operation pressure facing enterprises, and an external environment that is more complicated, grimmer and more uncertain,” state-run Xinhua news agency reported. “The complexity, severity and uncertainty of the external environment have spiked,” it said, adding that domestic social and economic policy must be coordinated, with a focus on tangible results. “Many businesses are under greater operating pressure … We will support private enterprises to tap into overseas markets while dialling up efforts to attract and leverage foreign investment,” it said.

The Plenum is to be attended by the 376 full and alternate members of the new Central Committee. Facing the economic slowdown and a huge property crisis, China early this year fixed its GDP target for this year “around five per cent.” Significantly for the Chinese economy, credit ratings agency Fitch cut its outlook for China this month citing increasing risks to the country's finances as it faces economic challenges. Also Fitch Ratings has lowered its outlook for China's state-owned banks from stable to negative a week after it cut its projection for the country's sovereign credit rating, reflecting pessimism in the world's second largest economy and concerns over Beijing's capacity to support its biggest lenders.

The Politburo meeting, however, said in its statement that China's economy still has a solid foundation, plenty of advantages, strong resilience and huge potential, the meeting said, calling for efforts to strengthen confidence in economic work. The current and future periods are critical for building a strong country. China's reform must continue in the face of complex international and domestic situations, a new round of scientific and technological revolution and industrial changes, and the new anticipation of the people, it said.

Deepening reform is essential to upholding and improving the socialist system with Chinese characteristics and modernising China's governance system and capacity, the meeting said. The whole Party must put reform in a more prominent position and deepen reform in all respects with a focus on promoting Chinese modernisation, it said. The country should actively expand trade in intermediate goods, service trade, digital trade, and cross-border e-commerce exports, support private enterprises in expanding overseas markets and intensify efforts to attract and use foreign investment, it added.