China will be able to meet its development targets for this year, as the country makes efforts to stimulate consumption and investment, Chinese Premier Li Qiang said in a meeting with the head of the International Monetary Fund during the annual Boao Forum.
(Bloomberg) — China will be able to meet its development targets for this year, as the country makes efforts to stimulate consumption and investment, Chinese Premier Li Qiang said in a meeting with the head of the International Monetary Fund during the annual Boao Forum.
Chinese officials told the forum earlier on Wednesday that China is facing a more challenging global environment this year with a weaker world economy and inflation risks. The forum’s participants are expected to hear more details from Li about the outlook for the world’s second largest economy from his keynote speech scheduled for Thursday morning.
Government officials and business leaders are meeting this week on the tropical island of Hainan for the conference, with discussions on topics ranging from supply chain disruption to the post-Covid economic recovery to clean energy and geopolitical tensions. Billed as an Asian version of the World Economic Forum, the conference kicked off Tuesday and is slated to run through Friday.
What to Watch:
- Li will deliver a keynote speech at the conference Thursday morning, after holding meetings with a couple of visiting foreign leaders Wednesday afternoon, including the IMF’s Managing Director Kristalina Ivanova Georgieva
- Singapore’s Prime Minister Lee Hsien Loong, Spanish Prime Minister Pedro Sanchez, Malaysian Prime Minister Anwar Ibrahim, Georgieva and Ivory Coast Prime Minister Patrick Achi will also attend the keynote speech
- There will be panels Thursday afternoon discussing various subjects from ESG investment to the next generation of Internet and energy revolution
Latest developments: (Time-stamps are local time in Boao, Hainan)
Premier Says Confident of Achieving Full-Year Goals (6:43 p.m.)
China will enhance macro-policy adjustments and focus on releasing consumption and investment potential, Premier Li Qiang told IMF Managing Director Kristalina Georgieva in a meeting in Boao Wednesday, according to a report by China National Radio.
China’s economy has shown a trend of stabilization and has rebounded so far this year, the state media cited Li as saying.
Li also said China is willing to deepen cooperation with the IMF and reiterated the country’s commitment to widening the opening of its economy to the world, according to the report.
MIIT Official Urges More Room for Digital Economy Businesses (5 p.m.)
Regulators should be discreet and tolerant in dealing with early-stage digital economy issues, and anything not forbidden by the law should be allowed, Wang Jiangping, deputy minister of China’s Ministry of Industry and Information Technology, said in a panel at the Boao Forum.
Wang also said laws and regulations should catch up with the technologies, and a stable, fair and predictable business environment is now required for the country.
Oil and Gas Giant Voices Energy Transition Challenges (3:45 p.m.)
China National Petroleum Corp., China’s largest oil and gas producer, faces challenges for energy transition as it seeks to secure the nation’s energy supply while also trying to meet the requirements of low-carbon development, President Hou Qijun said at the Boao Forum.
“It’s easy for a small boat for make a u-turn, but it’s quite difficult for a large one,” Hou said, noting CNPC accounts for 52% of China’s crude oil production and nearly 70% of its natural gas output.
CNPC aims to develop more renewable businesses in the long term, including hydrogen, and aims to have renewables make up one third of its overall operation by 2035, Hou said.
Liquidity Management a Top Task for Central Banks (2:48 p.m.)
Managing liquidity should be a top priority for central bankers, a Chinese foreign exchange regulator said, arguing that interest rate adjustments may not be a timely tool to tackle “volatile” financial problems.
“We’re in an era of high volatility,” said Lu Lei, a deputy head of China’s State Administration of Foreign Exchange. “It’s worth thinking whether it’s still suitable to use interest rate hikes of 25 or 50 basis points to respond to changes that happen every day or even every minute.”
Open market operations, however, are “constant” and can adjust liquidity based on the changing market situation, he said. Monetary authorities should provide cash support if overall liquidity is being exhausted and starts affecting smaller financial institutions, he said.
China has blamed rapid global interest rate hikes for leading to the collapse of Silicon Valley Bank, whose impact has spread across the Atlantic to Credit Suisse Group AG. The US Federal Reserve’s monetary tightening over the past year also added pressure on the Chinese currency to depreciate amid capital outflows.
The SVB and Credit Suisse incidents show that policymakers need to take financial stability into consideration while making policy arrangements, Lu added.
Still, he said he was confident that global central banks have “enough tools” to solve current financial system challenges.
PBOC Pushes for Green Financing (11:40 a.m.)
The People’s Bank of China’s relending programs have incentivized banks to allocate more loans toward green projects, Governor Yi Gang said.
The relending programs provide cheaper funding to banks and at the same time promotes information disclosure by lenders, Yi said on a panel at the Boao Forum.
One of the PBOC’s relending programs — focused on promoting green technology — has provided funding of 300 billion yuan ($44 billion) to banks, resulting in 600 billion yuan of commercial bank loans to corporates, Yi said. China’s outstanding green loans have now reached 2 trillion yuan, he said.
The PBOC is seeking to make bank disclosures of climate-related information compulsory eventually, Deputy Governor Xuan Changneng said on the panel. Disclosures are currently voluntary.
Speaking after the panel, Yi said the PBOC will increase support for private companies and step up financial aid for smaller firms.
Former Chinese Official Decries ‘Picking Sides’ (11:30 a.m.)
Using language frequently cited by Chinese leaders, including Xi Jinping, former Vice Premier Zeng Peiyan said peace and stability is of crucial significance to Asia and that countries around the region should ditch a Cold War mentality and “avoid picking sides and forming blocs.”
“Some countries are constantly fanning the flames and advocating for decoupling and engaging in Cold War-style confrontations that have had a serious impact on the world order and the interests of various countries,” Zeng said. He urged nations to “jointly maintain regional peace and stability by resisting such selective formation of teams and avoiding ‘small groups and circles’ type of confrontation. While Zeng didn’t specifically name the US, the criticisms he raised are similar to ones Beijing has made against Washington in the past.
SK Group Proposes Voluntary Carbon Market in China (11:17 a.m.)
SK Group’s chairman Chey Tae-won proposed a study at the Boao Forum about launching a voluntary carbon market in China, saying that would spur new participation, create new opportunities for companies across the region and would supplement government-led carbon markets. SK earlier this year announced plans to help develop voluntary markets across the region.
China’s national carbon market has gotten off to a slow start since launching in July 2021, and currently allows only power plants to buy government-granted allowances to pollute. More industries, including steel- and cement-making, are expected to eventually be included.
A voluntary program known as China carbon emission reduction credits, or CCERs, has struggled since 2017 when the government forced the program to stop issuing new credits. The credits still trade in low volumes, and Beijing is expected allow new issuance to resume this year.
NDRC Sees Slowing Growth, Persistent Inflation (10:46 a.m.)
China is facing a more challenging global economic environment as growth slows and countries like the US struggle to contain inflation, a senior official at the nation’s economic planning agency said.
Global growth lacks momentum and downward pressure is rising, Zhao Chenxin, vice chairman of the National Development and Reform Commission, said at the Boao Forum. It’s very uncertain whether the US and Europe can curb inflation, he added. The global financial system’s fragility is increasing, and the Silicon Valley Bank crisis will need to be monitored, said Zhao.
Trina Urges to Lower Trade Hurdles (10:45 a.m.)
Trade barriers in countries including the US and India are raising the cost of clean energy, according to the head of a top Chinese solar company.
Clean energy equipment should be manufactured in places where the cost is the lowest, and they should be traded around the globe without any barriers, Gao Jifan, chairman of Trina Solar Co., said in a panel at the Boao Forum.
“We should build a mechanism that make everybody feel safe, instead of building barriers,” Gao said.
China dominates global solar panel manufacturing. But a growing number of countries including the US and India are trying to build competing domestic sectors as climate targets and pricey fossil fuels cause demand for clean energy to surge.
However, Gao said, given some foreign governments’ supporting policies for clean energy, such as the US’s Inflation Reduction Act, Trina Solar is willing to build manufacturing capacities in those countries as well.
Green Hydrogen to Get Cheap Enough Soon (10:40 a.m.)
The cost of producing hydrogen from renewable energy, or green hydrogen, will become cheap enough to compete with the clean fuel produced from coal or natural gas within three years, Zhou Fugui, chairman of wind turbine maker Sany Renewable Energy, said at a panel at the Boao Forum.
The cost of producing hydrogen from renewable sources is almost double the price using coal, and over half of hydrogen was produced from the dirty fossil fuel in China as of 2020.
China’s Exposure to the US Banking Crisis Limited (10:40 a.m.)
China’s exposure to the US banking crisis is still limited, former World Bank chief economist Justin Lin said, noting low external debt and capital controls that have regulated cross-border flows. China’s solid growth potential means it will be a source of stability for the world economy if the banking crisis worsens, Lin said.
During a discussion about artificial intelligence and tools like OpenAI’s ChatGPT, Lin said it was important to embrace new technologies even though the improvement in productivity will come with challenges.
From Tuesday:
Mongolia Eyes 7% Economic Growth in 2023 (6 p.m.)
Mongolia’s economic growth is expected to reach 7% if China’s economy expands 5% this year, according to Mongolia’s Economic Development Minister Khurelbaatar Chimed.
China is Mongolia’s largest trading partner and its economic recovery will benefit the country, Chimed said during a panel discussion at the Boao Forum, adding that China’s gross domestic product growth is expected to be at least 5% in 2023.
Debt Trap? (5:30pm)
Jim Yong Kim, former president of the World Bank, dismissed the notion that China has pushed some countries into debt traps with its infrastructure-related lending.
“The name calling is too much,” said Kim. While it’s “perfectly reasonable to be concerned about debt,” people should refrain from using broad statements like “debt trap diplomacy” casually, Kim said at a panel discussing the Asian superpower’s Belt and Road Initiative.
Other panelists proposed that mobilizing private capital is a better solution to infrastructure financing without increasing countries’ indebtedness, especially when the world is facing growing economic challenges.
Private-public partnerships can be a right approach for developing countries, according to Mongolia’s Economic Development Minister Khurelbaatar Chimed, citing experiences of the landlocked Asian nation’s mining companies.
READ: China Becomes Lender of Last Resort for Developing Countries
Ex-PBOC Chief Warns of Risks for Global Economy (4:26 p.m.)
Former Chinese central bank Governor Zhou Xiaochuan said the global economy does not look promising in 2023, as it increasingly faces both “conventional and unconventional” growth challenges.
“Cold War mentality, conflicts and wars, economic sanctions, trade and technology decoupling are not the solution to problems. They will only lead the world to a more dangerous situation,” he said in remarks posted on Boao Forum’s social media account.
Other key points he made are as follows:
- Asia is the key force for global economic growth and sustainable development
- Despite weakened global demand, Asia will make an important contribution to growth and stability in the world
- China will bring “certainty” in a world of uncertainty by working with other Asian countries
Top Liquor Brand Eyes Biomass Power Expansion (4 p.m.)
Wuliangye Yibin Co., the world’s third-largest liquor company by market capitalization, plans to expand its biomass energy program as it seeks to reduce emissions.
The company plans to build a facility to process and burn 400,000 tons of solid waste from its liquor-making process annually, sending about 80 million kilowatt-hours a year of carbon neutral electricity to the grid, cutting emissions by more than 100,000 tons, the company said in a report announced Tuesday at an event at the Boao Forum for Asia.
Wuliangye, which specializes in the Chinese liquor known as baijiu, already operates a facility that captures methane from its wastewater and burns it for energy, reducing emissions by 4,300 tons a year, the company said. That’s compared to its annual emissions of about 520,000 tons, according to data compiled by Bloomberg. The company also plans to boost its share of renewable energy use to 50% and reduce carbon emissions intensity by 30% by 2025.
Supply Chain Shifts to ‘Safety-oriented’ from ‘Cost-oriented’ (3 p.m.)
The global supply chain is shifting to “safety-oriented” from “cost-oriented” following the shock of the pandemic, Macau’s former Secretary for Economy and Finance Vai-Tac Leong said at a Boao Forum session. Geopolitical tensions and sanctions are also a factor, he said.
Covid lockdowns in China pushed companies to move some of their supply chains to Southeast Asia or elsewhere, added Fabrizio Ferri, China CEO of Italian shipbuilder Fincantieri. For many manufacturers, supply chains in China are now mainly for the domestic market instead of the wider world.
With the deterioration of the US-China relationship, international clients — particularly from America — are asking Chinese suppliers if they can move, said Zhu Shihui, chairman of Vital Thin Film Materials, a Guangdong-based company that provides rare materials used in electronic displays and semiconductors. “We have no choice, as we have to survive,” Zhu said.
China should work more independently in some areas, such as certain semiconductor production, said Yao Yang, director of the China Center for Economic Research at Peking University. While there will be some near-term challenges, Chinese companies will benefit from this in the end. The entire localization of production won’t be a universal trend for industries, he said.
Consumer, Manufacturing Challenges (1:00 p.m.)
There has been little sign of so-called “revenge spending”, or the unleashing of pent-up consumption demand, since China scrapped Covid restrictions in December, according to Lin Guijun, a professor specializing in international trade at the University of International Business and Economics in Beijing. It may take one to two years for consumers to recover their income and start to feel more confident with spending, as many people suffered from reduced earnings over the past three years, he told reporters on the sidelines of Boao Forum. China will also need to import more goods and help low-income groups increase their wages in order to improve domestic consumption, Lin said.
Moving labor-intensive industries like textiles to Southeast Asian countries such as Vietnam is a good thing for China, as it helps reduce excessive domestic capacity and pushes China to upgrade toward higher value-added production, Lin said. In the longer term though, this may make it harder for the manufacturing sector to maintain its dominant place in the Chinese economy, and there hasn’t been sufficient discussion of this problem yet, he said.
Green Goals (12:00 p.m.)
Green development promises to be a key theme at this year’s Boao Forum for Asia, with panels on renewable power, energy infrastructure and the impacts of extreme weather, and leading companies from China’s solar and wind industries in attendance.
As the world’s largest emitter of greenhouse gases, China plays a key role in determining how much the Earth will be impacted by climate change. While it is expanding its fleet of polluting coal power plants to try to ensure reliable electricity supplies, it is also the top clean power producer and dominates manufacturing of clean technologies like batteries and solar panels.
Here are a few recent stories that highlight China’s key role in the global energy transition:
- China’s Rooftops Are Becoming the Key to the World’s Solar Boom
- How China and the US Watered Down a Key UN Climate Document
- China Approves New Coal Power With Capacity of Entire UK Fleet
- China Gives New Backing to Coal Even as Clean Energy Accelerates
Asian Economic Recovery Seen Accelerating, Albeit Unevenly (10:30 a.m.)
Asia’s economy is expected to grow 4.5% this year, up from last year’s 4.2%, Zhang Yuyan, an economist at the Chinese Academy of Social Sciences — a top think-thank for the Chinese government — forecast at a briefing in Boao.
South Asia should see the fastest growth in the region this year, with the rate of expansion hitting 5.4%, followed by 4.5% for East Asia, 4.1% for Central Asia and 2.9% for West Asia, he said.
Inflationary pressures for the region are expected to ease in 2023 due to recent sharp falls in commodity prices and a slowing global economy that has dampened demand.
Asia a Major ‘Bright Spot’ (10:00 a.m.)
China kicked off the Boao Forum Tuesday with a call for strengthening multilateral cooperation, stabilizing the global economy and easing geopolitical tension.
At a briefing to mark the start of the gathering — the first after the end of the country’s draconian Covid Zero policy — the forum’s secretary general, Li Baodong, told journalists that Asia will be a major “bright spot” for the global economy this year, which is reeling from a series of challenges such as geopolitical conflicts, an ongoing banking crisis, slowing growth and climate change.
–With assistance from Ocean Hou and Li Liu.
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