About the author:
Liu Baocheng, Associate Dean, Academy of Global Innovation and Governance, University of International Business and Economics
Most economists are obsessed with GDP figures, because they are quantifiable. This simplistic approach tends to overshadow the ends, which is the quality of life for all citizens in a modern society, with means. The report delivered by General Secretary Xi Jinping at the 20th CPC (Communist Party of China) plenary session in October 2022 mapped out a holistic blueprint for Chinese modernization. This grand notion encompasses shared prosperity for all, coordinated development between material and spiritual civilization, harmonious coexistence between people and nature, whole-process democracy and a road for peaceful development that contributes to building the community of shared future for mankind.
The government report delivered by Premier Li Keqiang at the annual session of the 14th National People’s Congress in March 2023 produced eight development strategies aligned with the grand goals set forth by the CPC report. These include: 1) expansion of domestic demand, 2) establishment of a modernized industrial system, 3) invigoration of all market players, 4) attraction for foreign investment, 5) prevention of systematic financial risks, 6) rural revitalization campaign, 7) continuing the transition to green development, and 8) meeting people’s basic living needs and developing social programs.
In view of the daunting challenges China faces, which include demand contraction, supply disruption, weakening prospects as a result of the COVID contagion, global protectionism, geopolitical conflicts and economic recession among major trading partners, the government work report set a realistic growth target of approximately 5% for 2023. This figure rests upon a holistic perception of a healthy economic paradigm where employment, inflation, trade balance and de-carbonization are taken into accurate account. Urban unemployment shall be kept in the vicinity of 5.5% with 12 million jobs created annually. This is seen as approximate full employment in economic terms. The CPI inflation marker shall be contained at 3% to ensure real household income increases mirror GDP growth. Bearing in mind the stringent agenda for carbon peaking by 2030 and carbon neutrality by 2060, China is resolved to take decisive measures that increase power utility rate and reduce carbon emission. Energy transition may run counter to economic growth figures in the short term, but definitely serves the long-term interest of the nation as ecological quality is steadily enhanced.
China’s development strategy maintains a high level of consistency from conception to implementation. The report at the 19th National Congress of the CPC in 2017 outlined China’s primary challenge as the people’s yearning for better life versus the imbalanced and inadequate development pattern. As early as 1997, the 15th CPC National Congress officially put forward the Two Centenary Goals, i.e., to build a moderately prosperous society by 2020, and to shape China into a prosperous, strong, democratic, culturally advanced, and harmonious modern socialist country by 2050. Now that China has fulfilled its first centenary goal, the 14th Five-Year Plan and Vision 2035 - effective since 2021 - charted a two-phase roadmap, and the first stage is to basically realize socialist modernization by 2035, which primes achievement of the second centenary goal.
Broadly speaking, a modern social construct is composed of state, market and civil society. Market players are responsible for economic output, and the state is charged with the power and responsibility to safeguard market functionality and cater to civic harmony through regulation and wealth redistribution. The model of mixed economy - state-owned firms, private firms and foreign-invested firms with their respective advantages - has powered China’s economic growth and industrial upgrading since the adoption of reform and opening-up policy over four decades ago.
Two important conceptual frameworks laid out in China’s new development paradigm are often misinterpreted. The first is “dual circulation,” which is misconstrued as an attempt to close China’s door against global participation. In fact, when domestic circulation is slated as the mainstay, positive interaction with the global circulation is dynamically encouraged. In addition, unification efforts for domestic market are intended to eradicate regional barriers for business activities across the country. They also facilitate the free flow of productive factors with world markets. The second misconception relates to the promotion of “shared prosperity” along with the third round of wealth distribution, often misconstrued as depriving the rich to aid the poor. During his first press conference, China’s newly elected Premier Li Qiang specifically negated the antagonism instigated by some opinion leaders against Chinese private business entrepreneurs. He reiterated China’s protection of private property and the legitimate interests of private businesses. Li Qiang also expressed strong determination to foster an enabling environment of equal treatment and fair competition for all business actors on the track of market orientation, rule of law and globalization.
China is fighting an uphill battle in its drive for high quality development within a complex and uncertain global environment. Faced with the threat of trade decoupling and high-tech containment, the country is left with little choice but to boost indigenous innovation at a number of chokepoints. Amassing the required talent pool for technological breakthroughs and paving a sophisticated eco-system of industrial upgradation is not a short-term undertaking.
While China’s demographic dividend is on the decline, the task to renew the skillsets of its massive labor force through professional training is daunting. The dramatic growth of the silver generation, which hit a record high of 18.7% of population, is a mixed blessing. The extension of life expectancy is a strong marker of human development, but the increasing aging population can also call for a greater responsibility of the social welfare program. The government needs to explore new avenues to foster workforce participation of older people who are able and willing to engage in productive work or social service. Young couples are seeking alleviation of their practical concerns over childcare, schooling and housing before they are incentivized to have more children. Most crucially, they need to be assured of a reasonable outlook for job stability with a decent income.
China clearly understands that green transformation is an overarching trend. A delicate balance needs to be maintained between a reasonable pace of economic growth and ecological conservation. China is seeking all means in the shift to clean energy. Substantial progress has been made to develop non-fossil energies such as solar, wind, hydro and nuclear technologies. However, expected reductions to the heavy reliance on coal for power generation are only achievable in calculated steps. In the continued drive for industrialization and urbanization, increasing energy intensity and boosting the circular economy are the most pragmatic approaches for cost effectiveness. China has begun to realize that consumers are responsible for 53% of carbon dioxide emissions. Therefore, it is imperative to put consumer education at the top of the agenda. Consumer awareness and actions not only help reduce waste, but provide strong leverage to guide supply chain convergence to a greener track.
Government will also have to adapt to changing circumstances by strengthening its governance capacities. While the notion of effective government and efficient markets is a perfect fit for China’s model of socialist market economy, further clarification must be made between the roles of government and the market. Government must refrain from excessive intervention when supply and demand is able to bring the market to an equilibrium. State-owned companies can reduce their reliance on franchise and subsidies granted by the government and learn to compete on an equal footing with other private players.
Ultimately, deepened institutional reform, in line with further market opening, provides the means for China to forge ahead on its unique path of high quality development.
Please note: The above contents only represent the views of the author, and do not necessarily represent the views or positions of Taihe Institute.
This article is from the March issue of TI Observer (TIO), which is a monthly publication devoted to bringing China and the rest of the world closer together by facilitating mutual understanding and promoting exchanges of views. If you are interested in knowing more about the October issue, please click here:
http://www.taiheinstitute.org/Content/2023/03-31/2124231553.html
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