China Research

Certain Western analysts have judged the opening speech of Xi Jinping, Chairman of the Communist Party and President of China, at the National Congress as too general and leadership-oriented.

According to the point of being too general, I do not really agree. One can find a lot of strategic ideas and more concrete details in Xi’s recent speech (and much more than we are used to get from political leaders directly after elections in our part of the world). But not very much of what Xi said on October 18 is really new. However – at this stage of creating the modern China – it also feels good to get certain objectives and commenced reforms repeated.

As regards the second observation, I only can add the following question: Had anyone expected something different after Xi’s strong own political positioning – and also from the CP itself?

Xi Jinping reconfirms strongly the need of building “a great modern socialist country” and of “ensuring the Party”s leadership over all work”. In the short run, Xi wants to see China as a “moderately prosperous country” by 2020. Then he wants China to go for  modernized socialism in two steps: the first step during 2020 to 2035 in basic terms and the second one from 2035 to around 2050 by changing China into a “prosperous, strong, democratic, culturally advanced, harmonious, and beautiful country”. The meaning of “democratic” is not further explained.

In other words: there is no intention to abolish socialism and Marxism – and the goal to find a modern Chinese stance of the socialist ideology remains in place (which Xi, by the way, recommends to other developing countries, too). Xi also refers to apply the rule of law and more openness in the society (economy) which both hopefully will be given more concrete emphasis in the future. The continuous fight against corruption also receives priority by Xi, the elimination of poverty in the forthcoming years likewise.

Further marketization of the economy
And what did Xi say about the Chinese economy? Quite a lot actually – and somewhat more than I expected myself. Let me briefly sum up most of the important points of the future being mentioned by China”s political “core leader” Xi Jinping for the National Congress:

– globalization (“stick together through thick and thin”),

– better economic policy co-ordination,

– further supply-side reforms (better access to goods/services and downsizing of SoEs),

– deepening institutional reforms (“zero corruption tolerance”),

– the major infrastructure project “Belt and Road “,

– significant easening of market access for FDI in China,

– international promotion and co-operation on production capacity,

– supporting the growth of private business,

– making SoEs “stronger, better and bigger”,

– breaking administrative monopolies and favoring market prices,

– improvements of manufacturing quality and technological development,

– improvements of the state-owned sector,

– boosting the role of private consumption in GDP growth,

– making China’s interest and exchange rates more market-based,

– improvements of the financial regulatory finance system,

– reforms of financial systems, etc.

The two key issues remain open. How much of these – mostly – reasonable objectives will be implemented in reality? And how much has been achieved so far?

Unclear areas
Thus, quite a number of reform areas has to be defined and developed further (despite the satisfactory approach on paper). This shortcoming could have been expected.

Of course, it is still hard to see what the concentration of political power to Xi Jinping and the composition of the new Standing Committee of the Politburo will mean to future reforms.

Contradictory is currently how the more lately somewhat increasing public influence on parts of Corporate China is in line with the clearly outspoken marketization  plans. The marketization of financial markets is still insufficiently transparent.

Within the domestic banking system, there seems to be more competition because of the shrinking margins. Capital markets on the other hand remain underdeveloped – despite some progress in recent years. This is true of both the stock market and the bond market – with both markets suffering from insufficient liquiduty and turnover. Linked to this issue is also the challenging public and private debt situation. The National Congress has not decreased my worries in this specific respect.

Altogether: More continuous analysis of China’s politics and economic developments will be inevitable if one tries to understand China and the world economy.

 

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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