Representational image.

Even as the Chinese Communist Party’s (CPC) Central Committee starts on its four-day deliberations, the figures of growth that the National Bureau of Statistics (NBC) released for the second quarter showed a drop compared to quarter one.

The overall growth for Q2 stood at 4.7 per cent compared to 5.3 per cent of Q1. But the NBS said that the growth for the Hemisphere 1 or the first half is 5 per cent. China’s target is 5 per cent growth for 2024.

Western economic analysts and market watchers think that it is a difficult target to reach unless the Chinese government announces fresh stimulus. The two main factors that had affected the economy were the crisis in the real estate or property market. The second is that of jobs. Because of low growth of jobs, retail consumption had gone down considerably.

Chinese exports are keeping the economy buoyant, but it may be difficult to sustain as trade disputes grow over balance of trade with the importing countries, especially in the European Union (EU) zone and in the United States. For China-watchers, this is the testing time for China’s President Xi Jinping, who is also the general secretary of the Communist Party of China (CPC). The expectation is that he would announce an economic programme that will address the challenges facing the Chinese economy at the important party plenary.

Tian Xuan, associate dean of Tsinghua University’s PBC School of Finance observed, “Our financial markets are still developing and not yet mature. We need the government to play its role well to correct market failures.” It indicates that the government could be announcing some measures to regulate the markets better as it were after the turmoil in the property market last year. Tian is also a deputy to the National People’s Congress, the national legislature.

The dilemma that China and its leaders face is that of how much market should be allowed to play itself out and how much government should direct policy. Xi’s shift in policy has been for greater state control in political and social matters, and lesser regulation of the market. What is not clear however is whether government will step in to bail out the troubled entities in the market, or announce stimulus measures that will encourage creation of jobs.

One of the major depressing points of the economy story has been the weakening retail consumption. Xing Zhaopeng, China strategist at ANZ, says, “Among all the monthly figures released today (Monday by the National Bureau of Statistics), the highlight is the weak retail sales. Household consumption remains very weak…with employers slashing salaries and high youth unemployment, households will still be cautious going forward.”

So far, China has benefited hugely from the economic reforms, opening up of the Chinese markets, and the boom in domestic consumption. There will be the boom-bust fluctuations, and it would be better to keep the doors of the economy open rather than shut at the first whiff of crisis. The housing sector has held itself in the face of the market devaluation.

What is debatable is whether the bid to control the power and growth of capitalist tycoons like Jack Ma is detrimental to the growth of the economy. On the face of it, it may seem necessary to clip the wings of individuals like Jack Ma, but it is likely to send out the negative message that the success of individual entrepreneurs is not welcome.

That could hit the growth of the economy. The success of the Chinese economy is mainly due to Chinese entrepreneurs. The monopolistic tendencies of big entrepreneurs like Jack Ma will have to be regulated, but it has to be done in a way that does not dampen the entrepreneurial zeal of the Chinese.