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The 18th National Congress of the Communist Party of China (CPC) opened in Beijing on November 8. The first day consisted of the report made by Hu Jintao, General Secretary of the CPC Central Committee, about progress in the last five years and what the direction for the country needs to be in the coming five years during the period in which the congress lasts. Congress work reports are statements of consensus. They contain the key objectives the Party sets for itself, which all members agree to abide by, and which then set the framework within which the government work report delivered by the premier is organized sometime early next year when the National People’s Congress is due to meet.
In the report given by Hu at the 17th CPC National Congress in 2007, he stated that the core objective for the Party remained, as it had been for the last three decades since reform and opening up started in 1978, to deliver economic growth. He also talked about the need for sustainable growth, for balance in society, for participation in decision making, and for taking people as the key. His report also stressed the need for intra-Party democracy, for stronger rule of law, and for continuing to build the foundations of a harmonious society in the coming decade as China becomes a middle-income country.
Growth
Within a few weeks of Hu making his work report in 2007, the world was engulfed in the worst economic crisis in several decades. Lehmann Brothers bank collapsed globally, setting off a series of events which are still unfolding to this day. This in particular has raised challenges for the CPC and governments around the world. In 2008 and 2009, growth levels dropped, with most developed countries going into recession. China’s exports fell, creating a knock-on effect on growth and employment levels.
Despite this, China was still able to deliver 8-percent growth in 2008, and over 10 percent annually from 2009 to 2011. These were within the targets set by the government in the 11th Five-Year Plan, which ran till 2010. The 12th Five-Year Plan, which started in 2011, set targets of around 7 percent for annual growth. This was in recognition that continuing to deliver such high levels of growth as China’s per-capita income rose and its economic model changed was no longer sustainable.
In the period from 2002 onward, as Hu has been general secretary of the CPC Central Committee and Wen Jiabao has been premier, China has managed to pass a number of major economic benchmarks. It became the world’s largest holder of foreign reserves in 2006, overtaking Japan. It became the largest exporter in 2008, and the second largest importer around the same time. The most dramatic landmark, however, was when it became the world’s second largest economy in 2010, overtaking Japan. In the last decade, despite the global economic crisis from 2008, China has quadrupled the size of its economy, and, in the period from 2008 to 2011, added 40 percent to the size of its GDP.
In the last decade, it has become the world’s largest consumer of all forms of energy apart from oil, where it still stands second to the United States. It has become a major outward investor, and the second largest attractor of inward investment.
Challenges
There are also more problematic statistics. Chinese pollution has continued to grow, with the impact of rapid industrialization on the environment growing greater over the decade. Attempts by the government at the national and local level to do something about these serious issues regarding climate change, deforestation and water shortage in order to move toward a green economy are all set out in the 12th Five-Year Plan. But they remain aspirations at the moment, with a continuing challenge to try to balance the need for growth with environmental considerations.
One of the continuing problems of the last decade, which will need to be addressed in the coming years, is social inequality. China has become a continental-sized economy, with great variations between the coastal area and the inward western provinces. While areas like Zhejiang and Fujian have per-capita GDP of around $10,000, respectively, areas like Xinjiang, Gansu and Tibet are half to a third of these. In his speech at the Copenhagen UN Climate Change Conference in 2009, Wen recognized that China still had around 150 million people living in poverty, on less than$2 per day. The World Bank and others have recorded poverty issues in some parts of rural China. So on the one hand, there has been huge wealth creation over the last decade, with Forbes stating that the country now has over 200 billionaires in dollar terms, and on the other hand, with the country producing most of the wealth creation globally since 2002, the spread of this prosperity has been uneven.
Since 2004, the Party and the government have introduced policies to try to address this. In terms of social welfare, they have lifted taxes on farmers, and put more money into education and healthcare. The extraordinary increase of urbanization in the last decade, with the national census in 2010 showing that for the first time ever as many people lived in the cities as in the countryside in China, has created pressures on the living environment and on the ways in which welfare has to be structured. China’s pension system remains a huge problem as the elderly population grows. How to address the imbalance between the rich and the poor has remained a constant challenge. While not wanting to impede people’s entrepreneurial talents, policies have also had to be developed to work out how to try to redistribute wealth socially, and also in terms of geographic spread.
Efficiency
The issues that the Party outlined in Hu’s speech in 2007 will continue into the new leadership, building on the progress made in the last five years. Maintaining decent levels of growth will be critical. Doing so sustainably will also be fundamental. Meeting people’s increasingly high expectations of government while preserving social stability and allowing people to express widely divergent demands and interests is another major issue. China introduced an “open government act” in 2008, similar to freedom of information acts elsewhere. It has also introduced important processes for consultation about new laws, through the National People’s Congress. Legal reform is important in balancing interests in a society that is increasingly dynamic and diverse and where there are often differences that need legal redress.
The journey to middle-income status, which will dominate the coming decade, is a difficult one. This was something recognized by Hu in the 2007 report to the 17th CPC National Congress. The move toward a per-capita income of around$8,000 or $9,000 has been a challenging time for other societies, as they have had to readjust and change their economies, and the ways in which management happens in society. China is going through this process on a far larger scale than any other society has attempted. For this task, one of the key issues will be not so much growth (although of course that will remain important) but efficiency—efficiency in the deployment of capital, in the use of resources, in the supply of food, and in the ways in which society is governed and managed. Efficiency is a critical term for both the leaders of the 17th CPC National Congress, and for those coming in at the 18th CPC National Congress.
High levels of growth similar to those that occurred from 1980 onward as the reform and opening-up period progressed will no longer be possible. Levels around 7 percent are set for the period to 2015, with probably similar or lower levels afterward. For a rich society, maintaining double-digit growth is next to impossible. For China, therefore, the real challenge will be to continue to find growth in ways that are sustainable and efficient. Movement toward less capital investment, more innovation, more balance, and more economic interlinking are critical. These are the ongoing key tasks and they will be the ones that the new leadership from this November after the 18th CPC National Congress is over will have to focus their attention on.
In the report given by Hu at the 17th CPC National Congress in 2007, he stated that the core objective for the Party remained, as it had been for the last three decades since reform and opening up started in 1978, to deliver economic growth. He also talked about the need for sustainable growth, for balance in society, for participation in decision making, and for taking people as the key. His report also stressed the need for intra-Party democracy, for stronger rule of law, and for continuing to build the foundations of a harmonious society in the coming decade as China becomes a middle-income country.
Growth
Within a few weeks of Hu making his work report in 2007, the world was engulfed in the worst economic crisis in several decades. Lehmann Brothers bank collapsed globally, setting off a series of events which are still unfolding to this day. This in particular has raised challenges for the CPC and governments around the world. In 2008 and 2009, growth levels dropped, with most developed countries going into recession. China’s exports fell, creating a knock-on effect on growth and employment levels.
Despite this, China was still able to deliver 8-percent growth in 2008, and over 10 percent annually from 2009 to 2011. These were within the targets set by the government in the 11th Five-Year Plan, which ran till 2010. The 12th Five-Year Plan, which started in 2011, set targets of around 7 percent for annual growth. This was in recognition that continuing to deliver such high levels of growth as China’s per-capita income rose and its economic model changed was no longer sustainable.
In the period from 2002 onward, as Hu has been general secretary of the CPC Central Committee and Wen Jiabao has been premier, China has managed to pass a number of major economic benchmarks. It became the world’s largest holder of foreign reserves in 2006, overtaking Japan. It became the largest exporter in 2008, and the second largest importer around the same time. The most dramatic landmark, however, was when it became the world’s second largest economy in 2010, overtaking Japan. In the last decade, despite the global economic crisis from 2008, China has quadrupled the size of its economy, and, in the period from 2008 to 2011, added 40 percent to the size of its GDP.
In the last decade, it has become the world’s largest consumer of all forms of energy apart from oil, where it still stands second to the United States. It has become a major outward investor, and the second largest attractor of inward investment.
Challenges
There are also more problematic statistics. Chinese pollution has continued to grow, with the impact of rapid industrialization on the environment growing greater over the decade. Attempts by the government at the national and local level to do something about these serious issues regarding climate change, deforestation and water shortage in order to move toward a green economy are all set out in the 12th Five-Year Plan. But they remain aspirations at the moment, with a continuing challenge to try to balance the need for growth with environmental considerations.
One of the continuing problems of the last decade, which will need to be addressed in the coming years, is social inequality. China has become a continental-sized economy, with great variations between the coastal area and the inward western provinces. While areas like Zhejiang and Fujian have per-capita GDP of around $10,000, respectively, areas like Xinjiang, Gansu and Tibet are half to a third of these. In his speech at the Copenhagen UN Climate Change Conference in 2009, Wen recognized that China still had around 150 million people living in poverty, on less than$2 per day. The World Bank and others have recorded poverty issues in some parts of rural China. So on the one hand, there has been huge wealth creation over the last decade, with Forbes stating that the country now has over 200 billionaires in dollar terms, and on the other hand, with the country producing most of the wealth creation globally since 2002, the spread of this prosperity has been uneven.
Since 2004, the Party and the government have introduced policies to try to address this. In terms of social welfare, they have lifted taxes on farmers, and put more money into education and healthcare. The extraordinary increase of urbanization in the last decade, with the national census in 2010 showing that for the first time ever as many people lived in the cities as in the countryside in China, has created pressures on the living environment and on the ways in which welfare has to be structured. China’s pension system remains a huge problem as the elderly population grows. How to address the imbalance between the rich and the poor has remained a constant challenge. While not wanting to impede people’s entrepreneurial talents, policies have also had to be developed to work out how to try to redistribute wealth socially, and also in terms of geographic spread.
Efficiency
The issues that the Party outlined in Hu’s speech in 2007 will continue into the new leadership, building on the progress made in the last five years. Maintaining decent levels of growth will be critical. Doing so sustainably will also be fundamental. Meeting people’s increasingly high expectations of government while preserving social stability and allowing people to express widely divergent demands and interests is another major issue. China introduced an “open government act” in 2008, similar to freedom of information acts elsewhere. It has also introduced important processes for consultation about new laws, through the National People’s Congress. Legal reform is important in balancing interests in a society that is increasingly dynamic and diverse and where there are often differences that need legal redress.
The journey to middle-income status, which will dominate the coming decade, is a difficult one. This was something recognized by Hu in the 2007 report to the 17th CPC National Congress. The move toward a per-capita income of around$8,000 or $9,000 has been a challenging time for other societies, as they have had to readjust and change their economies, and the ways in which management happens in society. China is going through this process on a far larger scale than any other society has attempted. For this task, one of the key issues will be not so much growth (although of course that will remain important) but efficiency—efficiency in the deployment of capital, in the use of resources, in the supply of food, and in the ways in which society is governed and managed. Efficiency is a critical term for both the leaders of the 17th CPC National Congress, and for those coming in at the 18th CPC National Congress.
High levels of growth similar to those that occurred from 1980 onward as the reform and opening-up period progressed will no longer be possible. Levels around 7 percent are set for the period to 2015, with probably similar or lower levels afterward. For a rich society, maintaining double-digit growth is next to impossible. For China, therefore, the real challenge will be to continue to find growth in ways that are sustainable and efficient. Movement toward less capital investment, more innovation, more balance, and more economic interlinking are critical. These are the ongoing key tasks and they will be the ones that the new leadership from this November after the 18th CPC National Congress is over will have to focus their attention on.