00:00For more on all of this, let's bring in Isabel Hilton, founder of China Dialogue.
00:05Thank you very much indeed, Isabel. Great to see you.
00:08And just first of all, President Xi, resetting the tone on economic development.
00:12I mean, what kind of message do you think Beijing is trying to send out at the moment?
00:18Well, it is that time of year when we all start looking at China's plans.
00:23We've had the plenum, there's a central economic work conference coming up very soon.
00:27And this all, of course, feeds into the two meetings in March when the numbers get put on it.
00:33So we don't have the numbers yet, but this is clearly all about the domestic economy and the need to rebalance.
00:41It does have important repercussions internationally.
00:45And it's quite clear from what's been said that China is not turning its back on global markets.
00:50But we have had a very turbulent year in global trade, largely because of the U.S. and its tariff policies.
00:59And although we have a 12-month truce, nobody can really count on stability, given the war in Ukraine,
01:06given mounting climate impacts, which will hit treasuries, and the continuing volatility of the U.S. administration.
01:13So these adjustments do seem to be aimed at reinforcing China's relatively long-running de-risking policy,
01:21which means continuing the recovery from the property crash and finding a way, as you said, to stimulate domestic consumption.
01:30So when we hear phrases like a more proactive fiscal policy and appropriately loose monetary policy,
01:37it's a correction, I think, from the attempt to get more of a grip on debt, which had a depressing effect on consumption.
01:45And it's a rebalancing, so we're probably going to see more debt, maybe additional rate cuts to reach the growth target if it's 5%, as it's likely to be next year.
01:58So it's not a huge reversal, but it is definitely a readjustment.
02:03And what would you say the picture doesn't look like for next year?
02:09Well, the exports, as you said, look very strong.
02:13You know, we've got a trade surplus of a trillion in November from year on year, which is the first time.
02:21The exports to the U.S. were down nearly 30%, and the exports to the European Union were up nearly 15%, as well as the ASEAN growth.
02:32Now, we can understand why the exports to the U.S. are down.
02:36The problem is that shifting those exports to Europe has caused strain in the European markets.
02:42And we had a very strong message from Macron during his visit last week, President Macron, saying, you know,
02:49please, China, you know, think about the impacts of your industrial policy on your biggest and best consumers, which remain in Europe.
02:58And I think we'll probably get a similar message from the German foreign minister this week.
03:04So at the same time, this policy of promoting the industrial economy to carry the whole economy is causing problems in China, too.
03:14So we've got what the Chinese government calls Neijuan, which is a kind of involution, deflationary pressure on prices.
03:22So Chinese firms, they're selling a lot, but they're really not making money because they're having to compete in this very kind of savage way.
03:33So the problem that China's been grappling with for nearly 10 years is how to grow the domestic markets.
03:41And I think that may require more fundamental reform than we're seeing.
03:47So, you know, that could mean leverage, leveraging China's global footprint to expand production abroad, for example,
03:56but also shifting, shifting real money into consumers' pockets.
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