Exclusive | China’s third plenum: US executives eye first-hand insights from economy-centric conclave
- Companies including Goldman Sachs, Starbucks, Nike and Qualcomm are on the list to head to China next week following the conclusion of the third plenum
A group of heavyweight US executives will head to Beijing next week, hoping to meet with Chinese officials to obtain first-hand insight following the conclusion of China’s widely-watched third plenum, according to people with knowledge of the matter.
The visit will be arranged by the US-China Business Council (USCBC), a Washington-based advocacy group.
It will be led by council president Craig Allen and board chair Raj Subramaniam, CEO of FedEx Corporation.
Companies included on the list for the visit are Goldman Sachs, Starbucks, Honeywell, UnitedHealth, Nike and Qualcomm, all of which have a huge business presence in China.
“The group is hoping to meet with top Chinese leaders, such as foreign minister Wang Yi and the minister of commerce, Wang Wentao,” said one source.
The business leaders I talk to expect to see some reforms emerging from this year’s third plenum
The USCBC did not reply to an emailed request for comment.
“The business leaders I talk to expect to see some reforms emerging from this year’s third plenum,” said Alfredo Montufar-Helu, head of the China Centre for Economics and Business at The Conference Board.
“The question is whether these reforms will be robust, targeted and ample enough to address the structural imbalances that underpin the persistent weakness that we are seeing in consumer confidence, and which led to weaker and downgrading consumption, intense price-based competition from local firms and downward pressures on profits.”
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China posts 4.7% second-quarter growth, lower than expected
The USCBC represents more than 270 American companies that conduct business in China.
The council will hold its closed-door annual flagship event, the China Operations Conference, in Beijing on July 26, which is mainly set for discussions related to China’s macroeconomic and business environment, according to information disclosed on its official website.
Chinese authorities have rolled out the red carpet for foreign investors, promising to widen market access and provide equal treatment, but such promises are often met with suspicions.
Foreign direct investment dropped by 28.2 per cent year on year in yuan terms in the first five months of this year, according to China’s Ministry of Commerce.
For my business, we still rely heavily on products that are made in China
Jonathan Garrison, founder of Beijing-based trade, logistics and merchant services company EnRoute Global, said the “confidence” of foreign investors was a critical factor when investing in the Chinese market.
He added that “the list of priorities” for companies in the next 12 months or “whatever time frame they’re putting on” is much less important than the “overall climate” and that climate “going from investment to domestic consumption”.
Dan Digre, president of Misco, an American designer and manufacturer of audio speakers in Minnesota, said that it was important for the US and China to maintain a good relationship from an economic standpoint.
“For my business, we still rely heavily on products that are made in China,” he said, adding that the problem of the US’ relationship with China was “driven by politics”.
“Reaching out to the Chinese might make the current administration look like they’re trying to make a deal”, at a time no US presidential candidate would want to look “weak”, he added.
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China posts 4.7% second-quarter growth, lower than expected
China’s economic growth misses the mark amid weak demand, risks ‘undershooting’ annual target
- China’s economic growth fell short of expectations in the second quarter, with analysts suggesting fiscal easing may ‘feature more prominently’
China’s second-quarter economic growth fell short of expectations, hindered by weak consumption and declining property investment, adding to challenges for Beijing to hit its annual growth target as its top policymakers began a meeting on Monday to discuss solutions to stubborn challenges.
“China’s economy shows a broad deceleration as weak consumer and business sentiment further deepen the woes,” said Gary Ng, senior economist at Natixis Corporate and Investment Bank.
In the first half of the year, China’s gross domestic product grew by 5 per cent year on year, while quarter-on-quarter growth slowed to 0.7 per cent in the second three months of the year, down from a rise of 1.5 per cent from the previous three months.
[The latest] data shows that it will be challenging for Beijing to reach its full-year growth target
“[The latest] data shows that it will be challenging for Beijing to reach its full-year growth target, and it will have to ensure that GDP growth stays around at least 1.4 per cent quarter on quarter in the next two quarters,” said Ding Shuang, chief economist for Greater China at Standard Chartered.
“And to achieve such growth, Beijing must simultaneously ensure that external demand remains strong to support exports while speeding up the repair of domestic demand.”
Last year, China’s GDP reached 4.9 per cent in the third and 5.2 per cent in the fourth quarter, leading to 5.05 per cent year on year growth in the second half of the year.
The reading was the lowest for the same month in the past decade, except for the only decline in June 2020 in the early stages of the coronavirus pandemic.
And it came as the 618 shopping festival in June, similar to Black Friday in the United States, seemingly failed to significantly boost residents’ willingness to spend.
“Our estimates suggest retail sales growth probably contracted outright in seasonally-adjusted month on month terms, amid still depressed consumer confidence,” said Zichun Huang, China economist at Capital Economics.
“Looking ahead, we expect economic growth to regain some momentum in the coming months.
“And while consumer spending is likely to stay subdued, continued price cuts among Chinese manufacturers mean that exports should remain robust for now despite increased tariffs from the US and EU.”
Overall fixed-asset investment rose by 3.9 per cent in the six months of 2024, year on year, compared with a 4 per cent gain in the January-May period, while private investment grew by 0.1 per cent in the first half of the year.
Property investment, meanwhile, fell by 10.1 per cent in June, year on year, unchanged from May.
“It shows that the property support measures are starting to take effect. We expect more supportive policies to continue to roll out in the coming months, as stabilising the property market is a key step to restoring confidence,” he said.
Meanwhile, China’s industrial output increased by 5.3 per cent last month from a year earlier, compared to the 5.6 per cent growth in May.
China’s overall urban unemployment rate also stood at 5 per cent in June, unchanged from May.
“Export demand has supported industrial production in the first half of the year, but this factor could begin to weaken in the second half of the year if global growth moderates, and if tariffs come into effect,” added Song.
“Backloaded (and much-needed) fiscal easing will feature more prominently from hereon, but only partially offsetting a more tenuous geopolitical environment for Chinese goods in the second half of the year,” said Louise Loo, lead economist at Oxford Economics.
“We continue to expect the economy to grow at a modest sub 1 per cent sequential pace for the rest of the year, for an annual growth of 4.8 per cent that still undershoots officials’ 5 per cent target.”
If there is no shift towards demand-side policies, China may not reach its 5 per cent annual growth target
The date was released on the same day China’s third plenum, which is expected to see the highest policymaking body set its economic strategy for the next five to 10 years, started in Beijing.
“If there is no shift towards demand-side policies, China may not reach its 5 per cent annual growth target,” added Ng.
“The good news is that the poor economic data may eventually offer an excuse for changing the course.”
Larry Hu, chief China economist at Macquarie Capital, expects the Politburo meeting to be held in late July is set to turn more pro-growth, especially in terms of fiscal spending, although a big-bang stimulus is not on the cards.
“The [third plenum’s] agenda is likely to include tax reform, given that unsustainable land revenues for local governments are now a thorny issue facing Beijing,” said Hu.