The world's second-largest economy is grappling with a real estate debt crisis, weakening consumption, an ageing population and geopolitical tensions overseas.
President Xi Jinping will oversee the ruling Communist Party's secretive Third Plenum, which usually takes place every five years in October, though Beijing has offered few hints about what might be on the table.
State media in June said the delayed four-day gathering would "primarily examine issues related to further comprehensively deepening reform and advancing Chinese modernization", and Xi last week said the CCP was planning "major" reforms.
Analysts are hoping those pledges will result in badly needed support for the economy.
"There are many hopes that this Third Plenum will provide some new breakthroughs on policy," Andrew Batson of the Beijing-based consultancy Gavekal Dragonomics told AFP.
"China's government has struggled to execute a successful economic strategy since emerging from the pandemic," he added.
But he said he did not expect a "fundamental departure from the course Xi has already laid out", in which technological self-sufficiency and national security outweigh economic growth.
And the People's Daily, the Communist Party's official newspaper, warned on Monday that "reform is not about changing direction and transformation is not about changing colour".
Ting Lu, chief China economist at Nomura, said the meeting was "intended to generate and discuss big, long-term ideas and structural reforms instead of making short-term policy adjustments".
The Third Plenum has long been an occasion for the Communist Party's top leadership to unveil major economic policy shifts.
In 1978, then-leader Deng Xiaoping used the meeting to announce market reforms that would put China on the path to dazzling economic growth by opening it to the world.
And more recently following the closed-door meeting in 2013, the leadership pledged to give the free market a "decisive" role in resource allocation as well as other sweeping changes to economic and social policy.
- Growth figures expected -
This year's conclave will begin the same day China is due to release its growth figures for the second quarter.
Experts polled by AFP expect China's economy to have grown, on average, 5.3 percent year-on-year between April and June.
Beijing has said it is aiming for five percent growth this year -- enviable for many Western countries but a far cry from the double-digit expansion that for years drove the Chinese economy.
Authorities have been clear they want to reorient the economy away from state-funded investment and instead base growth around high-tech innovation and domestic consumption.
But economic uncertainty is fuelling a vicious cycle that has kept consumption stubbornly low.
Among the most urgent issues facing the economy is a persistent crisis in the property sector, which long served as a key engine for growth but is now mired in debt, with several top firms facing liquidation.
Authorities have moved in recent months to ease pressure on developers and restore confidence, such as by encouraging local governments to buy up unsold homes.
Analysts say much more is required for a full rebound as the country's economy has yet to bounce back more than 18 months after damaging Covid-19 restrictions ended.
"Short-term stimulus is badly needed to boost the teetering economy," Nomura's Ting said.
But, he added, "major steps towards market-oriented reforms might be limited this time".
The main obstacles to Chinese growth
Beijing (AFP) July 11, 2024 -
China's top leadership is set to meet on Monday to thrash out plans to boost growth, but the country's economy remains weakened by sluggish consumption, a property sector in crisis and deflation fears.
Here AFP looks at the main challenges facing the world's second-largest economy:
- Fragile consumption -
A high youth unemployment rate -- 14.2 percent in May -- and economic uncertainties are weakening consumption, one of the driving forces behind the Chinese economy.
China plunged into deflation for four months last October, with the sharpest contraction in consumer prices for 14 years in January.
They have since returned to positive territory but are rising only slightly, with June's increase just 0.2 percent, according to data released on Wednesday.
Stagnant or falling prices are bad for the economy's health, forcing firms to cut back to clear their stocks or reduce production in the absence of demand, which weighs on their profitability and willingness to hire.
- Real estate in crisis -
The property sector, which enjoyed two decades of meteoric growth as the population's standard of living rose, long accounted for more than a quarter of China's GDP.
But it has been under pressure since the government tightened credit conditions for property groups in 2020 in order to reduce their debt. Many such firms are now on the verge of bankruptcy.
That disincentivises Chinese people to invest in property, especially as real estate in China is often paid for before it is even built.
The fall in prices per square metre is also a blow to the wallets of homeowners, who have long seen property as a safe investment.
- Local authorities in debt -
The finances of some local authorities are stretched to the limit, after three years of astronomical spending to combat the Covid-19 pandemic, and above all a property crisis that has deprived them of a major source of income.
The economic context is exacerbating their difficulties, according to analysts at SinoInsider, an American consultancy specialising in China.
And they point out that some companies have recently complained about receiving tax arrears dating back to the 1990s.
SinoInsider noted that local governments are "trying various methods" to increase their revenues, at the risk of weakening businesses that have already been tested by the economic situation.
- Trade under pressure -
China's exports are also a matter of concern for the country's leaders.
Historically they are a major growth driver and have a direct impact on employment for thousands of companies.
But the sector is under pressure from geopolitical tensions between Beijing and Washington, as well as those with the European Union, a key trading partner for the Asian giant.
In early July, the EU imposed up to 38 percent additional customs duties on imports of Chinese electric cars, a decision that could become final in November.
Brussels accuses Beijing of illegally favouring its manufacturers through subsidies.
- Weak investment -
The economic situation in China, geopolitical tensions with Washington and the risk they pose to supply chains are holding back foreign investment.
The Chinese economy has potential, with its doors wide open and private investment is welcome, say China's leaders, who in recent months have stepped up their efforts to attract foreign business leaders.
Over the period from January to May, foreign investment nevertheless fell by 28 percent year-on-year, according to figures from the commerce ministry.
- Financial pressure -
Given the economic climate, the financial sector is reluctant to invest in traditional growth sectors, fuelling an "asset shortage", SinoInsider said.
On the other hand, it is buying more and more "risk-free" long-term government bonds, which is driving down yields.
This is helping to depreciate the Chinese currency, with the risk of accelerating capital flight, SinoInsider warned.
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