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China's businesses are struggling and job seekers are struggling to find work, President Xi Jinping admitted in his New Year's Eve speech on Sunday.
This is the first time Xi has mentioned economic challenges in his annual New Year's messages in 2013. It comes at a critical time for the world's second-largest economy, which is grappling with a structural slowdown marked by weak rising demand, unemployment and battered business confidence.
Xi acknowledged in the televised address the “headwinds” facing the country: “Some companies have had a difficult time. Some people have had difficulty finding work and meeting their basic needs.”
“All of this remains at the forefront of my mind,” Xi said in remarks that were widely reported in state media. “We will consolidate and strengthen the momentum of the economic recovery.”
Hours before Xi's speech, the National Bureau of Statistics (NBS) released its monthly Purchasing Managers' Index (PMI) survey, showing that factory activity fell to its lowest level in six months in December.
The official manufacturing purchasing managers' index fell to 49 last month, compared to 49.4 in November, an NBS statement said.
A PMI reading above 50 indicates expansion, while any reading below indicates decline. December was also the third consecutive month in which the manufacturing purchasing managers' index contracted.
Downturn in the manufacturing sector
The country's huge manufacturing sector was weak for most of 2023. After a brief uptick in economic activity in the first quarter of last year, the official manufacturing purchasing managers' index contracted for five months through September. Then it fell below 50 again.
China's economy has been plagued by a range of problems this year, including a prolonged real estate downturn, record-breaking youth unemployment, persistent low prices and increasing financial strains on local governments.
The story goes on
An unfinished residential building in Xinzheng town, Zhengzhou, China's central Henan province, seen on June 20, 2023. – Pedro Pardo/AFP/Getty Images/File
Beijing is seeking to boost growth and boost employment after introducing a series of supportive measures last year and promising to strengthen fiscal and monetary policies in 2024.
But his increasingly statist approach to the economy, which emphasizes party-state control of economic and social affairs at the expense of the private sector, has spooked entrepreneurs. The government's crackdown on companies in the name of national security has also deterred international investors.
On Saturday, the People's Bank of China said it had approved a request to remove majority shareholders from Alipay, the ubiquitous digital payments platform owned by Jack Ma's Ant Group. The move means Ma has officially relinquished control of the company he co-founded.
Ma, who also co-founded Alibaba Group, said last January that he would give up control of Ant as part of his retreat from his online businesses. His companies were the first targets of Beijing's unprecedented crackdown on Big Tech, which was seen as overly powerful in the eyes of the Communist Party.
Tough against Taiwan
Xi also vowed that mainland China would be “reunified” with Taiwan, reaffirming Beijing's longstanding stance on the self-governing island democracy with a strongly worded comment ahead of a crucial election there.
“China will certainly be reunified, and all Chinese people on both sides of the Taiwan Strait should be bound by a common goal and share in the glory of the revitalization of the Chinese nation,” Xi said in a section of his speech dedicated to his plans for the modernization and development of China.
The comments came just two weeks before Taiwan's Jan. 13 presidential election and struck a bolder tone than those in his New Year's address the year before.
Xi then said, “The people on both sides of the Taiwan Strait are members of the same family.” I sincerely hope that our compatriots on both sides of the Strait will work together purposefully to jointly promote the lasting prosperity of the Chinese nation.”
Xi has made taking control of Taiwan a cornerstone of his broader goal of “rejuvenating” China to a position of global power and prestige. The Chinese Communist Party claims Taiwan as its own territory, although it has never controlled it, and has not ruled out using force to take the island.
Taipei has accused the party of influence operations in the run-up to the election, with incumbent Vice President Lai Ching-te, a candidate openly loathed by Beijing, seen as the frontrunner.
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