‘There’s no sign of challenge to Xi’
China’s economic growth recently dipped to its lowest rate in almost three decades. President Xi has warned provincial and ministerial officials that the economy is facing deep and complex changes. What role will economic problems play in the National People’s Congress (NPC)? Especially the trade tensions between the US and China? Indeed, the economy is facing a problem. Premier Li Keqiang mentioned the “new downward pressure” that the economy faced in 2018. Actually 6.6 per cent growth rate for a $13.45 trillion economy is not low and for over five years, Xi Jinping leadership had consciously opted for “medium” rate of growth and greater focus on quality of development. But there were two sources of new problems. One was the China-US trade friction that led to dislocation of the manufacturing sector, the second was the instability in the financial sector which was described as one of the three principal risks. This session of the NPC pays a great deal of attention to economic targets because by 2020, the goal was to build a “moderately prosperous society in all respects”. The complete eradication of absolute poverty is one of the goals for which many specific measures were announced. Declaring “employment-first” as a macro policy is another goal. Last year 13.61 urban jobs were created, the target for 2019 is 11 million. The conspicuous feature of the economic strategy under Xi Jinping is the identification of “new drivers of growth” namely, science and technology innovations ranging from clean-tech, AI and smart manufacturing to breakthroughs in information technology and computers. But whether these measures were adequate to cope with the challenges is an open question.
The NPC last year abolished the presidential term limit and gave key posts to close confidants of Xi Jinping. How has Xi’s position and policymaking developed in the year following the NPC’s constitutional amendment? While in the past the NPC has never vetoed any resolution of legislation, are we likely to see some questioning?
Xi Jinping’s commanding leadership remains unquestioned. The policies and actions are described as being in line with Xi Jinping Thought. His speeches at the Boao Forum for Asia that promised further facilitation of foreign investment, at the inaugural of the International Import Export Exhibition in Shanghai where he focused on the growth of a consumption driven economy in China, the address to the Academy of Science setting the goal of China becoming a global leader in innovation and many international initiatives at the BRICS, SCO and G-20 meetings put Xi Jinping at the centre of decision-making. Despite continuing exposures and prosecution of leaders and cadres on corruption charges, there is no sign of any challenge to his leadership. Human rights groups within China and abroad do point out many instances of repression, especially in the minority areas.
A new foreign investment law will be endorsed by the NPC. How should we see this new law playing out?
Like the anti-corruption law setting up the National Supervision Commission enacted in 2018, the Foreign Investment Law is the highlight of the 2019 session. It fulfills the promise made by Xi Jinping in Boao to make China one of the most attractive destinations for investors and traders.
This law replaces three prevailing laws dealing with firms having foreign equity, China-foreign joint firms having non-equity component and firms fully owned by foreign capital. The new law will meet some of the complaints arising from western companies as this would protect intellectual property rights, provide for easier arbitration mechanisms and would have far greater transparency and online clearances thus reducing the scope for corruption and manipulation. But it is the implementation of the law that remained to be seen in a highly complex system where personal connection continued to matter a lot even in the face of stringent anti-corruption drive. But this law is a very welcome step for operation of the global economy.
What are the other important legislative proposals that the NPC will be dealing with? What do these proposals tell us about the legislative and social challenges before China?
Some economic measures were announced, of which, some will be in the annual budget and resolutions and the corresponding laws and regulations will be made by the Standing Committee of the NPC which with its nearly 200 members is a mini-legislature meeting every month. Reduction of VAT from 16 to 13 per cent and tariffs from 9.8 to 7.5 per cent and enterprises’ contribution to employees’ insurance by a substantial amount were along the line of any neo-liberal regime. But there was also a significant raise in the allocation for health and education. The personal contribution in cases of serious diseases was lowered and reimbursement in many diseases raised from 50 to 60 per cent. Pollution control measures were further strengthened and a 3 per cent reduction in utilisation of energy per unit of GDP was again announced for the next year. But such measures have failed to check the environmental degradation in the past, especially air pollution which continued to pose challenges in China because the growth strategy itself produced its environmental consequences. But without these stringent steps it could be much worse.
Should we expect any tweaking or changes in the Belt and Road Initiative (BRI), given that this is putting its own set of pressures on China's economy? Premier Li Keqiang in his Work Report and Foreign Minister Wang Yi at his press conference directly addressed some of the concerns expressed worldwide about the operation of BRI during the last five years. That though it was a Chinese initiative, BRI was conducted on the basis of mutual consultation and cooperation to the benefit of the local population and the region was emphasised more than once. Allaying the fears that this was laying a “debt trap” or that it was a “geopolitical tool” of China, the BRI was described as an “economic pie” to be shared by the relevant parties. It was reiterated that China shall not seek hegemony. In 2019, China would host the second BRI International Forum. Having emerged as a major component of Xi Jinping’s global diplomatic strategy BRI will no doubt generate economic, military as well as political pressure in the coming years. The two cases of fast progress cited by Premier Li — Pakistan and Australia may not present the complete picture about issues of financing and strategic complementarity in the various cases.
How do you expect China’s neigbours to react to the proceedings of the NPC? There is a clear sign that China wishes to raise the relations with India to a higher level. There were two statements indicating this. Firstly, China has maintained a fairly neutral position on the recent tensions between India and Pakistan calling upon the parties to exercise restraint, turn the crisis into an opportunity, address concrete problems and start dialogue. The recent visit of the Chinese Vice-Minister for Foreign Affairs Kong Xuanyu to Pakistan and his imminent visit to India to help the dialogue process was an indication of this.
Secondly, on China-India relations there was a glowing statement: “Our friendship and cooperation will surge ahead like Yangtze and the Ganges giving strong and sustained impetus to our relationship”. That a positive turn in India-China relationship was a preferred policy for China was a product of three developments. One was the, unpredictable twists and turns in China-US relations both in trade and in regional security issues. India-China economic relations needed a major boost in this context. Second, the political developments in Afghanistan where US-Taliban talks may create a new situation with the withdrawal of US troops. Here too, unless there was a coordinated strategy involving India and China, besides other powers of the region including Iran and Russia there would be continuing tensions. Third, the challenge of terrorism was to be faced as a common problem to tackle both “symptoms” as well as “roots” for which China, India and Pakistan all of whom faced threats of terrorism needed to cooperate. On Japan and South China Sea too, there were cooperative gestures. Indeed, the NPC session had a special significance for the neighbours.