‘TWO SESSIONS’: AMID UNCERTAINTY, CHINA’S QUEST FOR BOLD DEVELOPMENT

At a historical moment of hope and uncertainty, China pledges bold economic development, despite global tensions.

CHINA’s annual “Two Sessions” meeting has approved national priorities for 2021. Delivered by Premier Li Keqiang, the Government Work Report set a growth target of over 6 percent for the Chinese economy for 2021.

Last year, a numeric goal was skipped due to the Covid-19 pandemic. The fact that it was now released reflects rising recovery confidence.

In light of economic realities, the target also suggests caution. Amid the steep global contraction, China’s 2020 real gross domestic product (GDP) growth climbed to 2.3 percent, making it the only major economy to grow. In 2021, international observers project China’s growth could rise up to 8 percent due to a low base in 2020 and the ongoing recovery momentum.

China plans to create more than 11 million new jobs in 2021 while keeping inflation rate (CPI) at 3 percent and cutting the deficit-to-GDP ratio to 3.2 percent. Annual research and development (R&D) spending will increase by more than 7 percent in the next five years, including foreign-funded R&D centers in China. The goal is to foster technology selfsufficiency over time.

In addition to fiscal and monetary policies, the government’s focus is increasingly on job creation and consumer prices that have a direct impact on per capita incomes. This is vital in light of the modernization goals of China’s 14th five-year plan (2021 to 2035).

Doubling GDP, per capita incomes by 2035

Some two decades ago, Goldman Sachs’s Jim O’Neil coined the idea of Brazil, Russian, India and China (BRIC) economies, predicting China’s gross domestic product (GDP) would catch up with that of the United States by the early 2040s.

During our conversation in 2009, I projected the inflection point to result a decade earlier, around late 2020s while O’Neill said Goldman Sachs was also revising its catch-up prediction. Despite the failed global recovery in the 2010s and US tariff wars, these projections remain on schedule and may be accelerating.

As the difference between the US and Chinese growth rates increased from less than 4 percent to almost 6 percent from 2019 to 2020, rapid recovery brought the Chinese economy closer to the US economic output, which it could surpass by the end of the 2020s.

Last November, President Xi Jinping

said, “It is entirely possible for China to meet the current highincome countries’ standards by the end of the 14th five-year plan (2021 to 2025) and to double the economic aggregate or per capita income by 2035.”

That would require a growth rate of 4.7 to 5 percent in the next 15 years. It is a bold objective, but assuming continued reforms within China’s economic potential.

Progress in trade, investment, finance and technology

China’s recent trade progress supports the realization of that potential. Despite the US tariff wars, China ended 2020 with a record trade surplus and strong exports.

Last November, China signed the Regional Comprehensive Economic Partnership (RCEP) pact with the Association of Southeast Asian Nations plus Japan, South Korea, Australia and New Zealand. A month later, the RCEP was followed by the China-EU Comprehensive Agreement on Investment (CAI). Recently, President Xi and French President Emmanuel Macron called for its prompt ratification, offsetting external uncertainties, trade pacts supporting domestic demand, technology self-sufficiency, upgraded supply chains and further opening up in domestic markets.

Moreover, China’s potential is supported by investment and finance.

Inbound foreign direct investment in China hit a record high of $144 billion in 2020; thanks in part to the new foreign investment law. Meanwhile, financial integration between China and the global economy has intensified significantly.

The big question mark involves external efforts to undermine China’s potential, particularly the rise of Chinese multinational companies in advanced technology.

US-China vision needs a reset

Recently, Anne O. Krueger, the World Bank’s former chief economist, noted that “President Trump’s modus operandi was to bully China on trade, foreign investment, cyberspace, e-commerce, intellectual property, the South China Sea, Taiwan and other issues.”

Characterizing Trump’s trade war as “a failure that harmed both China and the US,” Krueger called for “resetting US-China trade relations.”

That’s been the ardent hope of many progressive Democrats and global-minded Republicans.

Yet, US Secretary of State Antony Blinken’s foreign policy speech, parts of which left Democratic progressives furious, suggests that his China vision builds on former secretary Mike Pompeo’s blunders. It claims to be competitive when

it seeks supremacy; collaborative, which it precludes; and adversarial when that’s not warranted.

A potential technology war is a case in point.

Toward technology protectionism

Reportedly, the Biden administration may go ahead with a Trump administration-proposed rule to secure the technology supply chain by allowing the commerce department to prohibit transactions involving “foreign adversaries,” including China.

Former Google top executive Eric Schmidt, who has headed Pentagon technology commissions, has urged Biden and Congress to exploit targeted export controls on high-end semiconductors “to protect existing technical advantages and slow the advancement of China’s semiconductor industry.”

And since AI requires fifth-generation or 5G platforms that Chinese technology giants have pioneered in commercial markets, the objective is to purposefully undermine those giants, including China’s nascent semiconductor industry.

National security serves as a ruse to offset the competitive erosion of US technology giants relative to new European, Korean, Chinese and other rivals. It is technology protectionism by another name.

Peaceful development or geopolitical tensions

By promoting new rearmament drives, geopolitical friction and forever wars, such priorities are likely to further deepen America’s severe income polarization. The timing couldn’t be worse.

As the bipartisan Congressional Budget Office has just warned, US debt as a percentage of its GDP is about to soar. The mounting federal debt puts the US at risk of a fiscal crisis and, due to the central role of the US in the world economy, the repercussions could reverberate globally.

Most importantly, such misguided agendas would derail the dreams of industrialization and modernization in many emerging and developing economies that cooperate with China and greatly benefit from its peaceful development.

Instead of more harm to global economic prospects, what is needed is multilateral cooperation between and among both advanced and developing major economies across all political differences.

Dr. Dan Steinbock is an internationally recognized strategist of the multipolar world and the founder of Difference Group. He has served at the India, China and America Institute (USA), Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see https://www. differencegroup.net.

The original commentary was published by China Daily on March 5, 2021.