China is making progress in its economic recovery from the coronavirus crisis, but warning signs remain, according to Cheung Kong Graduate School of Business’ Professor of Economics, Li Wei, as he released the April results of his Business Condition Index (BCI) at an event hosted in partnership with Asia House on Thursday 30th of April, 2020.
During the webinar, Li Wei, Professor of Economics, Associate Dean of MBA Program, Director of the Case Center, CKGSB, outlined the key findings of April’s BCI, painting a mixed picture of China’s economic environment.
There was a small increase in the overall BCI, with the April index rising to 42.2 from 41.3 in March. But the investment and hiring figures are a cause for concern in terms of China’s long-term prospects, Professor Li said.
“Hiring is falling down and the interest in investment in declining,” he commented. “This is something we’ve never seen before since we started collecting the data [for the BCI].
“It is something that we need to address in policy, and in many areas.”
Policy response was an issue explored further when Asia House Chief Executive, Michael Lawrence, opened the discussion up, bringing industry experts Alicia Garcia-Herrero, Chief Economist, NATIXIS; Xin Li, Managing Editor, Caixin Global and CKGSB Alumna; and Asia House Chairman Lord Green into the discussion.
For Garcia-Herrero, while there have been some encouraging signs in China’s infrastructure-based stimulus approach, its focus is not where it needs to be. “The lack of demand is pushed by a very weak labor market,” she said. “Infrastructure-led stimulus might not be good enough to lift the labor market, which is what is needed for people to consume.” Garcia-Herrero suggested a shift in focus “to a much more consumer-led stimulus.”
The nature of this stimulus was explored by Caixin Global’s Managing Director, Li Xin, who identified a “tug of war” between local and central government over which sectors should be prioritized.
Asked about the role of the central government in stimulating the economy, Xin outlined the clear messaging coming from Beijing. “The government priority is very much centered on basic livelihood and employment,” she said, adding that this will likely set the tone when the National People’s Congress meets in May. “The guarantee of basic livelihood and employment is very much front and center.”
However, the increasing importance of China’s innovation industry indicates a hands-off approach will be necessary to some extent, Xin said. “Much of tech sector is privately led, and that can’t be changed. If you want to boost the tech sector, you have to give more leeway to private companies.”
The webinar attracted more than 250 senior business and policy leaders including notable participants such as Asia House Chairman Lord Stephen Green, Lord Sassoon and Economist Gerard Lyons, who all weighed into the discussion during the final Q&A segment.
*Briefing credited to Asia House