China to clamp down on monopolies and spur domestic demand

Last Friday, the meeting of the Politburo of the Chinese Communist Party (CCP) set the stage for this year's annual Central Economic Work Conference (CEWC), while formulating a framework for China's economic tasks next year.

The CEWC is a weather vane by which outsiders gauge China's economic policies. The CCP has convened the meeting attended by all Politburo members, high-ranking party and government officials of all provinces and cities, and heads of various central ministries, at the end of each year since 1994. The importance of the CEWC is second only to the plenary session of the central committee of the CCP.　　

It is expected that the CEWC will be held very soon over a period of approximately four days. It will mainly conclude this year's economic work and evaluate the execution of the 13th Five-Year Plan. It would also analyse the current international and domestic economic situations, and formulate next year's economic policies. 　

The Politburo thinks that China's economic work this year has "achieved a result that the Chinese people are happy with and the world is paying attention to", being the world's only major economy to achieve positive economic growth. Over the past five years, China's economic and technological powers, comprehensive national strength, and the people's standard of living have leapt to new levels. China completed its poverty alleviation missions on time and is set to attain its goal of achieving a moderately affluent society in all aspects.

State media did not detail the Politburo's assessment of the international and domestic political and economic situations but emphasised that there are still many uncertainties in the Covid-19 pandemic situation and China's external environment. It called for government officials of all levels to strengthen their awareness of opportunities and risks, and firmly seize the initiative in economic work. 　　

The Politburo also stated that next year is a particularly important one for China's modernisation process and it would be crucial for its economy to perform well. 2021 marks the 100th anniversary of the founding of the CCP, and is of special significance to the party that has long strived for long-term rule. At the same time, because 2021 would be the start of the implementation of the 14th Five-Year Plan, there should not be major mistakes in economic work. It is expected that "presenting a gift to the 100th anniversary of the founding of the CCP" would become a popular slogan across the country. 　　

As for the general direction of next year's economic work, the Politburo mainly reiterated points that it conveyed at high-level meetings held in the latter half of this year, such as upholding the principle of seeking progress while maintaining stability, pursuing high-quality development, and relying on reform and innovation as the main driving force.

The Politburo also indicated that it would continue to work on the "six stabilities" (employment, the financial sector, foreign trade, foreign investment, domestic investment, and expectations), and the "six guarantees" (job security, basic livelihoods, market order, food and energy security, stability of supply chains, and operation of local government functions) so that it could expand domestic demand, strengthen technological strategic support, expand high-quality opening up, and so on.

However, the Politburo also raised some new proposals such as paying attention to demand-side reforms along with supply-side structural reform; overcoming obstacles; compensating for shortcomings; and linking up production, distribution, connectivity, and consumption. All this will help to form a higher-level dynamic equilibrium in which demand leads supply and supply creates demand, and the overall effectiveness of the national economic system can be improved.

Over the past couple of years, high-level CCP meetings have emphasised supply-side structural reform, but the latest politburo meeting is the first time that demand-side reforms have been mentioned, showing that the government is trying to grow domestic demand and stimulate consumption to create a new growth model centred on domestic circulation. However, demand-side reforms call for solutions to old problems such as the income gap, a flawed social security system and unreasonable property prices, which are unlikely to materialise in the short term.

This is also the first time that stronger measures against monopolies and the "disorderly expansion of capital" have been mentioned. In fact, the authorities have recently taken relevant measures against some internet giants.

Over the past decade or so, the authorities have been tolerant of new internet industry practices, which has encouraged the appearance and growth of many new internet-related industries, but has also brought some side effects. For instance, the online loan platforms that have sprung up over the past few years have become a tool for some people to cheat netizens into making investments at high interest rates, leading to many losing all their money. At the same time, the disorderly expansion of capital might also lead to capital encroaching into the political arena, which is particularly concerning to the top leaders.

Early this year, the authorities released a revised draft of the Anti-Monopoly Law, adding for the first time regulations in determining whether an undertaking in the internet sector holds a dominant market position. In November, the Chinese State Administration for Market Regulation recently released the "Guidelines for Anti-Monopoly in the Field of Platform Economy (Draft for Solicitation of Comments)" to seek the views of the public. According to the guidelines, if platforms demand merchants to stick to only one e-commerce platform, or if they use big data to manipulate prices, or refuse transactions on grounds of rules, algorithmic pricing, technology, or volume distribution, these acts might be considered monopolistic behaviour.

The suspended listing of Jack Ma's Ant Group in November, coupled with internet giants going into the community group-buying market has been criticised by the media, and shows the authorities' stand against monopoly and the disorderly expansion of capital.

On 11 December, People's Daily ran an article that said internet giants have strong financial power, a wealth of data resources, and leading digital technology, and people hope they will not just innovate in their business model, but also take responsibility for pushing technological innovation.

The article called on internet giants not to just think about the few cabbages or fruits transacted in the community group-buying market - more exciting are the vast horizons of technological innovation and the limitless possibilities for the future.

The latest Politburo meeting has set the tone for the upcoming CEWC, which will offer more details on China's economic policies and direction for next year.

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