[act-ma] CME: China Study Group, April 11 Thursday 7:00 - 8:30 p.m.
sar8 at verizon.net
Thu Apr 4 14:02:15 PDT 2013
China Study Group, April 11 Thursday 7:00 - 8:30 p.m.
Presentation on "Today in China: New Leaders, Changing Economic
Policies" followed by discussion
Place: Center for Marxist Education, 550 Mass. Ave, Central Square,
Today in China: New Leaders, Changing Economic Policies
March 25, 2013
published online by Portside
China held its most important political meetings in ten years with
the Communist Party Congress in Nov. and the National People's
Congress in March 2013. A new leadership group assumed power: Xi
Jinping is the new CPC general secretary and national president, Li
Kejiang the premier of the state council. New officials assumed all
but two positions in the political bureau's standing committee.
China held its most important political meetings in ten years with
the Communist Party Congress in November and the National People's
Congress (national legislature) in March 2013. A new leadership
group assumed power: Xi Jinping is the new CPC general secretary and
national president, Li Kejiang the premier of the state council and
new officials assumed all but two positions in the political bureau's
standing committee, the top decision making body of the communist
party. China's term limits regulations mandated the large turnover
of leadership, which gives a good opportunity for setting new
policies for the next ten years.
A major decision is that China will change its economic development
strategy. Outgoing General Secretary Hu Jintao's important report to
the 18th party congress (Nov. 8, 2012) made clear the decision to
"speed up the creation of a new growth model." Officially adopted as
basic policy, Hu's model of sustainable "scientific development"
changes the focus to driving the economy by domestic demand, moving
to higher value-added and high-tech production, higher wages and
spending more on social services for the people. New cities will be
built in China's vast interior as population shifts from rural to urban.
Since the 1980s rapid economic growth has been driven by both large
state funded projects and expansion of the private sector. This
included foreign direct investment in export oriented factories
serviced by low wage migrant labor. A huge success in increasing the
production forces, this model however has led to increasing
imbalances and problems; and now these issues must be addressed.
Many Chinese have been upset by the income gap, the disparity between
the wealth of the newly affluent and the average working people.
Chinese workers have staged increasing strikes and protests over
labor and environmental issues, leading to fears for social
stability. Premier Li Keqiang, in his first press conference, said,
"the Chinese government needs to increase care for the most needy to
prevent them from challenging the society." (China.org.cn, March 17,
2013). In February the government announced detailed plans to
address the issue, which the Wall Street Journal described as
"sweeping policy guidelines to narrow the growing gap between rich
and poor...and pay for ambitious welfare programs." (Feb. 5, 2013)
The Guardian headlined, "China unveils major tax reforms to make rich
pay more." (Feb. 6, 2013)
These plans include: a goal of doubling citizens' incomes in the next
ten years; raising taxes on profitable state-owned enterprises to
better fund social services; caps on managerial salaries in SOEs;
paying higher interest rates on individual savings; greater benefits
and safety net access to migrant workers; fair compensation to
farmers selling land for developments; and other actions. The plans
are far reaching, if implementation is effective there will be
progress in closing the gap. (1)
During the 1980s and 1990s, China's focus was on rapid economic
development as the basis of a strong, prosperous country. This
included changing from the mostly state-owned economy of Mao's last
years to a more balanced mixed economy with state ownership of the
strategic sectors of finance, heavy industry and infrastructure
combined with fast growing private markets and production. This
program was a historic success, as China transformed itself into an
economic powerhouse, greatly increasing the standard of living for
most people and lifting 400 million people from poverty (according to
both the UN and the World Bank poverty alleviation statistics,
available online). There was rapid growth in foreign trade not only
with the West but also Asia, Africa and Latin America.
However, problems associated with China's economic transformation
continued to mount: corruption, the increasing gap between the
wealthy and average earners, exploitation of migrant worker labor,
growing pollution and damage to the environment, partial breakdown of
the social security system and safety net. With Chinese public
opinion starting to demand action on these problems, General
Secretary Hu Jintao several years ago introduced "scientific
development." According to Hu, with powerful production forces now
in place, China's long-term strategy must shift to a balanced,
sustainable and people-centered approach. That is, rapid GDP
expansion should be tempered to emphasize quality and innovation and
not just quantity, environmental damage and resource limits
necessitate building a green economy, and central to everything must
be the income, cultural life and well-being of the people -- the core
mission of the communist party. New General Secretary Xi Jinping's
"China Dream" speech to the National People's Congress (People's
Daily, March 18, 2013) emphasized the importance of education, jobs
and housing for the people.
The great recession of 2008 led to a loss of export markets for China
and 20 million Chinese workers lost their jobs. The state responded
with a huge program of spending on public works. Politically, the
great recession dealt a major blow to the position of Chinese
economists and officials advocating continued emphasis on foreign
investment and the export sector. State banks again began to
prioritize investment in state-owned enterprises. Consensus grew that
a change in economic policy was necessary.
Most members of China's 82-million Communist Party agree that both a
strong state sector and dynamic private markets are necessary for
development. The question is getting the right balance -- what is
the emphasis? The 18th Party Congress reaffirmed the importance of
the state sector and economic and social planning.
There is much enthusiasm for the center-left effort to correct many
of the imbalances of rapid industrial expansion; but as one pundit
said, "the plans are grand but the obstacles many." In particular,
central government decisions supported by the people often meet
resistance by mid-level officials and local groups and capitalists
with a different agenda. Serious corruption and bureaucracy can make
government initiatives ineffective. The sheer size of China creates
momentum that will take years to alter.
However, change is already apparent. The Wall Street Journal,
commenting on the business investment environment, reported on Jan.
17, 2013, "A long-term trend of rising wages and other costs has made
China less attractive, especially for basic manufacturing... total
foreign direct investment flowing into China fell 3.7% in 2012."
The focus in coming years will be on the success of actual
implementation of the new economic model. With China's economy on
track in coming decades to equal and surpass the US as the world's
biggest, it is important for all of us to watch how this unfolds.
Notes: The plans are detailed in, "China Issues Proposal to Narrow
Income Gap," (NY Times World, Feb. 5, 2013) and "Highlights of
China's income distribution reform plan," (Xinhua, Feb. 6, 2013).
Duncan McFarland is member of the National Coordinating Committee of
the Committees of Correspondence
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