China’s top leaders say the economy does not have enough ‘internal’ motivation

BEIJING – China’s top leaders said at a regular meeting on Friday that domestic demand remains insufficient, according to state media.

The assessment came after China reported better-than-expected GDP growth of 4.5% in the first quarter, prompting many investment firms to raise their economic forecasts for the year.

State media of the meeting, translated by CNBC, said in Chinese: “Currently the positive turnaround in the Chinese economy is basically a recovery. The internal drivers are still not strong, and the demand is still insufficient.”

“Economic transformation and upgrading are facing new resistance, and the promotion of high-quality development still needs to overcome many difficulties and challenges,” the statement said.

Chinese President Xi Jinping led Friday’s meeting of Chinese leaders, known as the Politburo.

The meeting also called for enhancing people’s sources of income while improving employment, especially for university graduates.

The unemployment rate for people ages 16-24 rose to 19.6% in March, near a record high set in July 2022. Overall unemployment for people in cities remained much lower, above 5%.

Bruce Pang, chief economist and head of research for Greater China at JLL, said the meeting readings did not indicate a significant change in fiscal and monetary policy.

He pointed out that the meeting focused more on encouraging consumption and achieving stability in investment, noting that the comment on the lack of “internal” motivation focuses on soft private sector investments and opportunities to improve them.

The Politburo meeting also specifically called for further development of new energy vehicles, construction of battery charging stations and transformation of power grids.

Regarding artificial intelligence, the authorities said that China should “attach importance” to “general” artificial intelligence, create an environment for innovation and pay attention to risk prevention.

The first quarter saw the popularity of ChatGPT artificial intelligence chatbot skyrocket, prompting many companies in China to double down on similar products. Public releases have so far focused on commercial customers rather than the public.

Beijing this month opened up to draft rules for public comment on AI-generated content.