China’s new postindustrial grand strategy
AS the 19th National Congress of the Chinese Communist Party (CPC) opened in Beijing, General Secretary Xi Jinping delivered a report about “building a moderately prosperous society” for a new era.
In his long speech, Xi also offered a blueprint for China’s development for the next 5 to15 years. It was ignored by many observers who tend to have set ideas about China or who fail to see what is common with China’s development and that of other major advanced and emerging economies – that is, the great shift away from industrialization.
Roadmap to post-industrial China
From the 1980s to the early 2010s, China’s growth rested on investment and net exports. That was China as the “world factory” of low costs and cheap prices. It was a world-historical performance of double-digit growth. Yet, it would also be—toward the early 2010s—China of overcapacity and local debt; China that grew with foreign capital and domestic imitation, amid deep income polarization and great damage to the environment.
In Xi’s China, direct investment is no longer a foreign monopoly. Now Chinese capital is moving across borders and contributing to modernization not just in China and emerging Asia but increasingly across the world.
From Deng Xiaoping in the 1980s to Hu Jintao in the 2000s, Chinese policies built on industrialization. In the Xi decade, new policies are driving the transition to the post-industrial society.
In the past half decade, China has begun a massive rebalancing of the economy toward innovation and consumption. The new China is represented by rising costs and prices, but also by indigenous innovation and premium domestic brands. It is China of supply-side reforms and restructuring, painful but necessary transitions across industry sectors and geographic regions, particularly in the northeast’s “Rust Belt.” It is China where excessive debt is no longer sanctioned and where deleveraging has begun.
That highlights the importance of the rule of law, and the struggle against cor decisively moving toward the rule of law, via its anti-corruption struggle.
The new China is a strong sovereign state that will never again allow internal disintegration or foreign intrusions.
From growth to social equity and environmental protection
In Xi’s view, China has entered the “new normal” in the international environment, while the mainland is domestically characterized with “uneven and inadequate development,” which is at odds with “people’s ever-growing demand for a better life.”
New policies must address this contradiction, with greater economic policy focus on quality and equality of development than before.
Greater investments in social equity mean broader and less uneven coverage of pension and health care insurance nationwide; basic public services; rejuvenation of rural areas through land increased spending on high school education and vocational training; more affordable housing; and extended rural land leases.
In view of macroeconomic policy objectives, this medium-term agenda rests on what might be called Xi’s axiom: “Development is the foundation and key to addressing all problems.” These goals include the target to achieve “a moderately prosperous society” by 2020.
In turn, that objective rests on the doubling of GDP per capita between 2010 and 2020. This is no longer a dream but the reality. Despite deceleration typical to post-industrialization, Chinese economic growth will remain around 6.8-6.3 percent by the end of the 2010s – which is enough to realize the goal.
Xi’s blueprint also suggests that environmental protection will become as important as economic growth in the coming years. This is not something new in the Xi era; but the emphasis on and importance of environment that Xi highlighted in the Congress is new.
That means development of new technologies in green manufacturing and clean energy; cleaning up air, water and soil pollution; devel targets; the establishment of a new national natural resource management and ecological supervision agency, plus tighter environmental rules, and accordingly, deeper impact on certain key sectors and companies.
It also means that China is intent on enforcing and realizing the Paris Climate Accord – with or without the Trump administration.
China as a responsible international stakeholder
Internationally, the new China promotes more inclusive global governance. If the US-led Bretton Woods, Marshall Plan and North American Treaty Organization (NATO) promotes international cooperation, assistance and peaceful development in the 21st century.
Today, globalization proceeds through the China-supported One Belt,One Road (OBOR) initiative, supported by the BRICS New Development Bank (NDB) and the Asian Infrastructure Investment Bank (AIIB); that is, multilateral development banks that represent the interests of emerging and developing nations—not just those of the advanced economies as the World Bank, the International Monetary Fund and the World Trade Organization have done since the postwar era.
As the new Xi roadmap will be executed across China, per capita income could climb to 35 percent of the US per capita income in 2022. While that remains far from the current levels in advanced economies, it is instructive to understand that, in relative terms, it corresponds to US living standards in the early 1990s and those in Western Europe in late 1990s. In advanced economies, such progress took two centuries; in China, only four decades.
At the end of the new leadership’s mandate in the early 2020s, the size of China’s economy could also surpass that of the United States.
That’s the new China that Xi envisioned in his long speech at the 19th Party Congress. That’s his Chinese Dream – one that we all will know better by the early 2020s.