Subsidies and Secrets: Inside China’s Economic Lifeline

hi I'm d Sean welcome to digging to China where we explore China in depth to review unique perspectives the yearly two sessions just wrapped up these are supposed to be China's most important meetings so what stood out this time what economic plans did shiin Ping hint at and what does he see as the key to saving China's economy in this episode we are going to unpack the two sessions and take a look at where China's economic policies might be headed next now we all know the Chinese Communist party's meetings like the two sessions are pretty much a big show they are more about appearances than real actions but that doesn't mean there is nothing worth watching in democ atic Count's politician just say what's on their mind like Trump who might jump on social media and blood out today I'm annexing Canada as the 51st state tomorrow I'm taking on the EU and the Ukraine whatever he's thinking he lets it Fly China's different the CCP runs things behind closed doors a secretive blackbox system a bunch of top officials sit in a room deciding the country's future and we are left guessing what they are talking about or even who's there for regular Chinese folks this secrecy makes it hard to figure out what the party is up to that's why the two sessions even if they are staged are one of the few chances people get to Peak into China's po politics and guess what the big shards are thinking it's like cracking a Cod you have to dig into every word to get the picture today I'll do that digging for you so what should we focus on with the two sessions mostly politics and economics this year the political side was kind of Snooze not much to chew on nothing dramatic like when hu Jing ta get escorted out a while back but the economic side that's where things got interesting and that's what we are diving into today let's start with some numbers from the two sessions the CCP spotlight did the four big ones that have changed this year and caught my eye GDP growth the fiscal deficit the debt limits for both local and local government and the national level they set the 2025 GDP growth Target at a 5% same as before while the fiscal deficit and the debt seedings hit alltime high if that sounds like a jargon don't worry I'll break it down what's the 5% of GDP goal mean it shows Shing still pretty sure of himself and the direction he's taking China's economy last year they just barely hit 5% and this year with the US China trade War and the tariffs looming it's going to be tough most experts doubt China can pull off 5% in 2025 but she's sticking to it that tells us he's got faith in China's economy it fits with what Wall Street being saying that XI jingping still buys into the idea of the East is rising the West falling she's confident overall overall but if you check out what the local governments are saying they are not so sure compared to their 2024 GDP targets only tening and G Jo aimed higher this year most of provinces dial the back still local dials don't matter much she's the one in charge and as long as he believes that's what drives the ship so how's the confident sheep planning to hit that 5% in such Rough Waters how's he going to lift the economy the answers in those other numbers the fiscal deficit and the debt limits in simple terms his plan is to spend big at home to get people buying more the CCP is throwing cash at things like electric cars and Home Appliances trying to fix weak spending and boost economy this isn't new it started back in October after admitting last September that the economy was in trouble they kicked off a bunch of rescue plans and pumping up consumption was one of them take January 2025 for example the government started handing out the big subsidies for electronics and iPhone 16 gets you 500 Grand off now China's got the cheapest Electronics anywhere iPhones here cost less than in any other country no more hunting for deals overseas where is the money coming from new special National bonds they've issued to cover it back when she wrote out these rescue ideas it wasn't just about consumption there was talk about boosting the stock market and propping up real estate too but the consumption push stuck and at this year's two sessions it took Center Stage it's now she's main focus for the economy and what he sees as a Lifeline to save it at the two sessions they loosen up Financial rules a lot like raising the caps on the fiscal deficit local debt and those special bonds some of that cash is patching up local government budgets but a lot of it it's going straight to subsidizing stuff people buy sticking to she's consumption boosting game plan look at the special bonds for instance last year they issued 1 trillion yen this year they added 300 billion more out of that 200 billion is mostly for upgrading equipment and appliances trade ins there is even a chart showing where all the subsidies are going Bottom Line cars and appliances will stay super cheap this year if you've got the cash it's a good time to buy one of the few chances to get something out of the CCP all this means the government spending two trillion year more in 2025 than in 2024 so after unpacking these numbers what's she signaling about the economy at the two sessions overall he's optimistic about 2025 thinking 5% of GDP growth is doable even if local leaders aren't so sure his fix for the economist woles keep pouring out government money to prop up spending and Tackle over production however I'm not shocked she's so confident about hitting 5% of GDP goal since those stimulus move started last September the economy perked up a bit there is a proof in small like the buzz around the deep sea or the Blockbuster nerja to Smashing box office records this gave the economy a jolt and made it feel like things were turning around bigger picture data backs it up too since October some numbers have looked bad like the manufacturing PMI which tracks Factory activity it's been above 50 since then meaning businesses are ramping up the Shanghai stock index is up 25% from 6 months mon ago too that's probably why she is feeling good enough to announce a 5% goal at the two sessions but it might also be giving him the wrong idea that his earlier plans were perfect and pulled China through the storm is that true though I don't think she's confidence will last long this little economic Bounce from his tweaks is likely about to fade why his fixes only patch things up they don't solve the real problems China's economy has been shaky for a while and experts have pointed out why she's been pushing a state run Innovation model that's led to Too Much production and a falling prices for years the government's dumped cash into Industries she likes like electric cars or solar power that's caused a mess these companies get hyped up by the CCP but they are also dragging the economy down take solar panels the CCP loves to brag about them but they are losing money hand over fist in 2024 almost no listed Solar Company in China made a profit just big losses prices crashed across the board why too much Supply the world needed 500 gwatt of solar panels but China turned out 1,000 gwatt of course they are losing money how this happened it's China's system companies didn't jump into solar because people wanted she decided from the top saying I want Renewables I want solar local governments ran with housing subsidies and the solar firms to impress him Reports say after she gave the order places like jangu Ani and chhai Province tripped over themselves to attract solar companies some offer the 35% cash back invest 100 yen get 35 back plus cheap loans Freel land even government Stakes for a while you could build a plant in China for next to nothing no wonder there's too much Supply electric cars have the same issue tons of random EV companies popped up in recent years all thanks to subsidies some that didn't want in got bullied look at reading Auto in Shandon they used to make old men's Joy these low speed cars for rural areas no license needed popular with old folks nicknamed old man's Joy but after she pushed Renewables local official told the reading they had to switch to EVS to match his Grand Vision or face punishment even jail for the boss that's how you end up with too much stuff to no one's buying when supply and demand get decided by one guy in Beijing instead of the market things go off the rail and when that happens the economy suffers Scholars flagged this back in 2023 and when Janet Yellen visited she kept saying it too the CCP P just dug in denying any over production online cheerleaders shouted there was no problem but denial doesn't fix reality as the economy tanked in 2023 and 2024 efforts flopped the CCP had to face it they started admitting overc capacity and looking for fixes Yellen solution dropped the state LE model let the market sort out the production cut spending and gave money back to people basically she should stop playing king take less from folks and let the market figure out what's needed it knows better she won't fully ditch his system though it's his pride and the ccp's control but he can't sit still either or the economy is done so he's compromising shifting from propping up a production to boosting demand that's his new Lifeline think of e again old way she says go Renewables and the local government shower cash on manufacturers build factories take free land new it she still wants EVS but now he's paying consumers to buy them not factories to make them it's a smart for balance overc capacity sticks around but it cuts some dead weight and eases to clut a tweak to China's model borrowing a bit from Yellen China's economy looking up lately it's not some Grand rise or she's genius it's the CCP finally easing of its stubbornness and the leaning towards Western Market ideas still I don't think this demand side Lifeline will fully save China without a total overhaul over production and weak demand will keep dragging prices down it's just a bandage not aute signs are already there deflation creeping back the CPI which track consumer prices hit negative 0.7% in February the lowest is 13 months down 0.2 2% from January Imports another demand clue dropped 8 and 1 12% in the first two months a multi-year low she's big stimulus might not even kick in fully for 2025 before it's already losing steam soon we could be back to the pain of early 2024 and for some this brief optic might have gone unnoticed anyway thank you so much for watching if you find this video helpful please like it a drop comment below and hit the Subscribe button right here it really helps you to suggest my video to others I'll be back with more content soon until then be well