2024-07-22 06:18:09
Chinese President Xi Jinping emphasized that China should prepare for crises by revitalizing its own economy, mentioning the “black swan” and the “gray rhino.” To this end, China has been actively increasing liquidity supply by lowering its benchmark interest rate immediately after the 3rd Plenary Session of the 20th Central Committee (20th Third Plenary Session) ended.
According to the official Xinhua News Agency, at the Third Plenary Session of the Central Committee of the Communist Party of China that ended on the 18th, Xi Jinping explained the party’s decision, saying, “(China) has entered an era of strategic opportunities, risks, and challenges, and black swans and gray rhinos can occur at any time.” A black swan is a risk that has a low probability of occurring but can have a major impact if it does, while a gray rhinoceros is a risk that can be anticipated but easily overlooked.
Xi Jinping warned that China must thoroughly prepare for the situation in which regional conflicts and chaos are increasing around the world, as well as the intensifying external restraints against China. Xi also used the two terms when explaining China’s economic reality during a group study session of the Central Politburo in January 2021.
The full text of the 3rd plenary session decision was also released on the same day. The total of 300 reform tasks included the enactment of the Private Economy Promotion Act. The main contents are to allow private companies to participate in key national infrastructure projects that have been monopolized by state-run companies and to improve the funding system for these projects.
This is interpreted as an intention to foster capable private companies in cutting-edge technology fields such as artificial intelligence (AI) and biomedicine to get ahead in the US-China hegemony competition. Regarding the “new quality production capacity” that the Chinese president has recently emphasized, he said, “We must quickly build an independent and controllable industrial supply chain to raise the level of resilience and safety.”
Meanwhile, the People’s Bank of China announced on the 22nd that it would lower the 5-year Loan Preferential Rate (LPR) by 0.1 percentage points to 3.85% and the 1-year LPR by 0.1 percentage points to 3.35%. This is the first time in five months since February that China has lowered its de facto benchmark interest rate, the LPR, and it broke market expectations that it would be frozen again this month. Some analysts say that the Chinese authorities made the surprise decision to lower interest rates further after the GDP growth rate (4.7%) in the second quarter was lower than expected and the Third Plenary Session was also evaluated as lacking the will to boost domestic demand.
Beijing = Correspondent Kim Chul-jung [email protected]
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2024-07-22 06:18:09