By Alexander Chipman Koty
Chinese President Xi Jinping announced the beginning of a “new era” for socialism in China and laid out his vision for the country’s future in his nearly three and a half hour speech to open the 19th National Congress of the Communist Party of China.
The epic 65-page speech proved tiresome for some members of the audience: former president Jiang Zemin was seen yawning, dozing, and repeatedly checking his watch, while Xi’s predecessor, Hu Jintao, visibly gestured towards his watch upon the speech’s conclusion.
Xi’s speech, though short on specifics and riddled with political jargon, declared a bold direction for China’s political, economic, and cultural ambitions. The goals, priorities, and challenges highlighted in the speech will serve as an important roadmap for Chinese policymakers as Xi enters his second term as China’s president.
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In his speech, Xi noted, “This is a new, historic juncture in China’s development,” which requires “socialism with Chinese characteristics for a new era.” Accordingly, Xi set out a long-term timeframe to achieve “the great rejuvenation of the Chinese nation”.
By 2020, China will become a “moderately prosperous society”, with poverty eradicated in rural areas. By 2035, China will achieve “socialist modernization”, where it will be a leading innovator with strong rule of law and have a large middle-income population with reduced income disparity. And by 2050, China will be a “great modern socialist country”: a “prosperous, strong, democratic, culturally advanced, harmonious, and beautiful” global power.
As part of this development plan, Xi stressed the importance of more inclusive growth rather than focusing on GDP growth targets. Xi did not reference the Party’s goal to double China’s 2010 GDP by 2020, which Hu promised at the last Congress in 2012.
Instead, Xi stressed the need for more equitable income distribution, and highlighted economic concerns on the minds of many Chinese people, such as home ownership affordability, education quality, and access to medical services.
Although Xi backed away from the commitment to doubling GDP by 2020, China appears on track to meet that goal. China has so far outpaced its 2017 economic growth target of “around 6.5 percent”, posting 6.8 percent growth in the third quarter of this year on the heels of 6.9 percent in the first two quarters.
Outperforming the economic growth target could give Xi more room to tackle structural issues such as China’s rapidly ballooning debt. Despite robust GDP growth numbers, the credit rating agencies Moody’s and Standard & Poor’s both downgraded China credit rating this year, citing concerns over debt.
Foreign investment and market reform
Xi pledged to further open China’s economy to foreign investment, stating, “China won’t close its open door – the door will only be opened wider and wider.”
This includes reducing market entry restrictions on foreign businesses, protecting foreign companies’ legal interests, and treating them equally to their domestic counterparts.
These promises are unlikely to allay the concerns of the foreign business community in the absence of concrete reforms. Organizations such as the US Chamber of Commerce and the EU Chamber of Commerce have been vocal in recent months about the treatment of foreign businesses in China, and what the latter organization labeled “promise fatigue” regarding market reforms.
Further, many of the economic ideas espoused by Xi in his speech do not appear to support significant liberalization.
On the reform side, Xi said the country would push towards market-driven interest rates and foreign exchange reform, support the market-based allocation of resources, and “business survival determined by competition”. Xi also made a commitment to “clean up rules and practices that hinder a unified market and fair competition, support development of private firms and stimulate vitality of all types of market entities.”
However, Xi also announced plans to make state-owned enterprises (SOEs) bigger, stronger, and more efficient. He said the government will “promote strengthening, improvement and expansion of state capital, (and) effectively prevent loss of state assets, deepen reform of state-owned enterprises, development a mixed-ownership economy, and cultivate globally competitive world-class firms.” According to the New York Times, Xi used the word ‘market’ only 19 times in his speech, compared with 24 times for Hu in 2012 and 51 times by Jiang in 1997, despite the fact that Xi’s speech was considerably longer.
Rather than liberalize SOEs, Xi appears intent on reasserting Party control over SOEs, preferring to streamline their management rather than fundamentally shift their role in the economy. These SOEs are set to play a major role in Xi’s signature Belt and Road Initiative, which he also noted the importance of for China’s foreign policy.
Innovation and technology
Xi emphasized the importance of strengthening China’s innovative capabilities and encouraging the growth of emerging tech sectors. He stated, “We will strengthen basic research in applied sciences, launch major national science and technology projects, and prioritize innovation in key technologies.” Among the industries he highlighted were internet, big data, and artificial intelligence.
These remarks lend support to the “Made in China 2025” industrial policy, which aims for China to move up the manufacturing and services value chain, as well as plans to become a leading innovator by 2035. Foreign governments and businesses have expressed apprehension over the policy, citing concerns over forced technology transfers and intellectual property theft. However, the government also offers incentives such as reduced corporate income tax rates to attract foreign investment in high-tech sectors.
The move towards a more tech and service-driven economy also contributes to efforts to combat pollution and climate change. Xi said, “Taking a driving seat in international cooperation to respond to climate change, China has become an important participant, contributor, and torchbearer in the global endeavor for ecological civilization.”
The government has been strongly encouraging the development of green industries, which serves a dual purpose of combating domestic pollution woes and encouraging China to become a leader in emerging technology. For example, China recently released new requirements for automakers to meet new energy vehicle production quotas, which analysts widely consider some of the most ambitious targets in the world.
An ambitious vision
Xi’s opening address at the once-every-five-years Congress put forward an ambitious vision for China’s growth that extends through the first half of the century. He projected a China that is increasingly confident on the world scene, transforming into an advanced economy, and ready to address the social issues resulting from years of breakneck growth.
To accomplish these goals, Xi is doubling down on the approach he used during the first term of his presidency by reasserting the importance of the Party’s guidance in the economy and all other facets of society. After laying out his vision for China’s immediate and long-term future, it is now up to Xi to accomplish his stated goals as he begins his second term as China’s top leader.
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