The new normal’ economy and policies of China
The ‛new normal’ is indeed an apt way to describe or analyse several things taking place in China.
I AM not sure who first coined the term “the new normal”, but it is increasingly being used worldwide to mean that something that was unusual is now becoming quite usual and we should become used to this new situation.
Last week, during a trip to China, I heard this phrase quite a lot. It was used by several Chinese officials and scholars to describe the changed or changing situation in their country.
The “new normal” is indeed an apt way to describe or analyse several things taking place in China.
I was there mainly for a Think Tank summit which brought together leaders from research institutions and former political leaders, many of whom had joined think tanks or created institutions of their own.
About 40 of the foreign participants had a one-hour dialogue session with Premier Li Keqiang. He was asked questions, mainly by Western leaders such as former president of the European Commission Romano Prodi, former Australian premier Kevin Rudd, and US President Obama’s former special climate change envoy John Podesta who now heads Hilary Clinton’s election campaign.
The visitors were clearly impressed by China’s recent economic performance but also had big worries about many issues, including the country’s impact on global climate change and the geo-political implications of its new initiatives such as the huge “one belt, one road” project that will involve many countries from China through Central Asia to Europe.
Premier Li handled the questions very well without referring to notes or to aides. Speaking in a steady tone and with up-to-date facts and statistics, he tried to assure the group that China recognised the global and national problems and that its new initiatives would involve cooperation and not conflictual competition with Europe or the US.
If his aim was to assure his audience that China was seriously tackling issues like air pollution, economic slowdown, the remaining poverty and increased inequality, as well as to join in the fight against global problems such as climate change, economic slowdown, financial crises and political instability, he succeeded.
When someone asked the Premier to get China to assume more global leadership, Li said, “China has a long way to go to achieve modernisation. China does not have an intention to lead the world but to assume the responsibility of a big country.”
This was a theme I heard often from both Westerners and from Chinese officials and scholars during the week.
Many in the West want China to take on more global responsibility, especially with regard to action on climate change, and to place more of its foreign exchange assets in resolving global economic and environmental problems.
At the same time, it is worried that the new global initiatives China is taking, such as its emerging massive investments abroad – exemplified by the New Silk Road projects – and its role in forming the New Development Bank (NDB) and the Asian Infrastructure Investment Bank (AIIB), will reduce and then displace Western economic dominance.
The Chinese, inspired by President Xi Jinping’s speeches on the China Dream to rejuvenate the nation, are gaining confidence in their continuous economic growth and re-gaining their significant role in the world.
But they are also aware of the dangers and threats from existing big powers afraid of losing their monopolistic grip on world power. Historians remind that war usually breaks out when a dominant world power is replaced by an emerging power.
Avoiding war and conflict as China continuously engages with the US and also Europe, so that there is a “new type of relations between major powers”, seems to be a strategy that all three powers are adopting, while being aware that there are forces in each society that are pushing for a more confrontational approach.
In a dinner speech, the “new normal” was used by Xu Shaoshi, chairman of the National Development and Reform Commission (the powerful agency responsible for economic policies and projects), to describe the shifts in China’s economy and policies.
This new normal includes four stable factors (stability in agriculture and services growth, in consumer demand and prices, and in employment) plus the sluggish economies in developed countries that are weakening global trade, commodity prices and affecting China.
The growth rate has fallen from over 10% to around 7%. This was described by Xi as China entering the new normal, a shift in gear due to a change of speed and driving forces.
China is countering the slowdown through monetary policy (reducing the interest rate), large investment projects, boosting demand, encouraging entrepreneurs through cutting red tape, and transforming the development model itself by expanding consumption and rapid urbanisation.
It would appear from Xi’s speech that change is the response to the new normal of moderate growth after the past decades of blistering double digit growth that won’t (and perhaps shouldn’t) come back.
At the think tank summit, a highlight was the presentation by Jin Liqun, head of the interim secretariat of the Asian Infrastructure Investment Bank and tipped to be its first President.
Critics have already predicted that the AIIB and its sister, the new Development Bank of the BRICS countries, might have lower environmental and social standards than the World Bank and Asian Development Bank and thus pick up the types of “dirty projects” rejected by the existing development banks controlled by the developed countries.
Jin surprised his audience by promising that the AIIB would be “lean, clean and green”. It would have high standards for the environment, and push for energy-saving and environment-friendly technology in its projects.
A few days later, on June 29, the AIIB was launched when 50 of the 57 founding countries signed an agreement laying out the framework of the new institution. It is the first major multilateral bank with developing countries holding the majority of shares and votes.
There is quite a lot of excitement as to what the new bank will do that is different from the existing banks, and whether China (the biggest shareholder at about 26% of the equity) can manage such an institution whose members also include major European countries.
On June 30, China announced its climate change contribution – that it would cap emissions around 2030 and its carbon intensity per unit of GDP would decline by 60% to 65% by 2030 compared to 2005.
As the largest emitter in absolute terms (though only an average emitter among developing countries in per capita terms), China’s “contribution” in terms of its planned actions has been long anticipated. The response from experts and NGOs so far has been favourable.
Whether it is adequate in terms of helping the world stay below a two degree target will still be debated in the days ahead, together with analyses of the pledges made by the US, Europe, Japan and others.
Being intensely scrutinised by the world is thus also a “new normal” for China. What remains in my mind after leaving China is Premier Li’s answer to the question of whether China is willing to lead: “We still have a long way to go. We have no intention to be a world leader, but we will take on our responsibilities as a big country.”
Smaller countries, including in neighbouring South-East Asia, will want to be assured that China also does not have ambitions that encroach on their rights.
How China plays its role in the present and future will be a developing story, which is new rather than normal.