Nation’s priorities must suit changing times
After reading through the economic- related sections of General Secretary of the Communist Party of China ( CPC) Central Committee Xi Jinping’s report to the 19th National Congress of the CPC, we can sum it up in one sentence: development is still the top priority, with the means and focus moving with the times.
First of all, Xi’s report shows that for quite some time to come, China will continue to pursue economic development. Conspiracy theorists who have been busy sharing their opinions about China’s “hegemony” and “new colonialism” in political and academic circles and on public opinion platforms in recent years need to take a break and read the report.
“Adopting a new vision for development. Development is the underpinning and the key for solving all our country’s problems; our development must be sound development. We must pursue with firmness of purpose the vision of innovative, coordinated, green, and open development that is for everyone ... We must actively participate in and promote economic globalization, develop an open economy of higher standards, and continue to increase China’s economic power and composite strength.”
Anyone in the world who knows anything about China can easily see the importance of the sentence reiterated in the report: Unleashing and developing the productive forces is a fundamental task of socialism.
The core theme of “unleashing and developing the productive forces” has always guided major political decisions throughout the CPC’s history, whether it is the reform and opening- up period or the decades before the founding of the People’s Republic of China.
Take land reform as an example. In June 1950, the Land Reform Law was officially published, which stipulated clearly that the basic purpose of land reform was to “liberate rural productive forces, develop agricultural production and thus pave the way for New China’s industrialization.”
Why did China’s land reform pave the way for industrialization, while land reform in some African countries led to sharp downturns in the agricultural sector and even the national economy? The key is that China’s land reform, from the guiding ideology to specific implementation, was always based on “unleashing and developing the productive forces.” The countries that failed usually regarded land reform as a simple change in the economic and political power base, ignoring the impact on productive forces. At the same time, socialism with Chinese characteristics has entered a new era, but China is still in the primary stage of socialism. There are potential risks of growth being interrupted by confrontations between major global powers. Some forces anticipate an allout high- intensity confrontation between China and other major powers so that they can gain an advantage. There are also lessons to be learned from the failures of some rising powers. All these factors have enhanced the necessity of emphasizing that development is still the top priority in governance. While the goal of development has not changed, the specific means and work focus should move with the times. When it comes to specific goals and measures, Xi’s report pointed to active but also safe solutions, with adjustments reflecting the current and future trends of economic and social development in China and abroad. For instance, the financial section of the report said: “We will deepen institutional reform in the financial sector, make it better serve the real economy, increase the proportion of direct financing, and promote the healthy development of a multilevel capital market. We will improve the framework of regulation underpinned by monetary policy and macro- prudential policy, and see that interest rates and exchange rates become more market- based. We will improve the financial regulatory system to forestall systemic financial risks.” “Financial deepening” has been a prominent feature of China’s economic development since the era of reform and opening- up. With the scale of financial assets expanding exponentially and abundant types of financial services, great changes have happened to China’s financial sector and the global rankings of Chinese financial institutions. The financial industry has played an irreplaceable role in supporting national economic development, especially in stabilizing growth after the subprime crisis. But at the same time, the rapid development of the financial industry in recent years has also given rise to potential risks, such as that of financial resources flowing from the real economy to the virtual economy and the expanding level of debt. These developments explain why policymakers have attached great importance to financial risk management this year. Given this situation, Xi’s report emphasizes serving the real economy, being macro- prudential and forestalling systemic financial risks. The tone is very cautious, partly because of the potential risks in China’s financial industry.
Central banks in major countries are generally inclined to tighten monetary policies, which will probably lead to the tightening of global liquidity and a relatively large reversal of international capital flows, thus increasing the probability of triggering financial risks. In the context of a global liquidity expansion, promoting financial innovation can help expand market share, but in the present environment, it will only generate systemic financial risks. It is reasonable to be prudent in terms of carrying out financial policy.
Xi’s report shows that for quite some time to come, China will continue to pursue economic development.