China is increasingly focused on the quality of economic growth, over the pace of economic growth, said Moody's Investors Service recently when releasing a report that analyses the key policy guidelines Beijing released in late October ahead of its 14th five-year plan to be announced in early 2021 (2021-26).
"Amid rising tensions with the US and an ageing population, we see the Chinese government increasingly focused on reducing vulnerability to international supply chain disruptions, boosting domestic consumption and productivity, and increasing the sustainability of economic growth," said Lillian Li, a Moody's Vice President and Senior Credit Officer.
"The credit effects of these initiatives vary by sector, with the central, regional and local governments bearing the brunt of the economic cost, while companies in the technology and clean energy sectors stand to benefit," Li added.
Increased reliance on domestic supply has the potential to shift China's trade patterns and domestic supply chains, and alter the products and services that its consumers and businesses purchase, according to the credit rating agency.
As part of its effort to boost consumption, the government is also looking to improve household income and living standards, Moody’s pointed out.
In addition, productivity growth will be supported by an upgrade of manufacturing industries and the development of advanced technologies to reduce reliance on imports, the firm said.
Along with the commitment to reducing carbon emissions by 2035, these measures will add to existing pressures for the general government's fiscal balance sheet, the firm added.