At the opening ceremony of the
20th National Congress of the Chinese Communist Party (CCP), President Xi Jinping gave a speech that offered clues on the policy direction for a wide swathe of issues – ranging from economic development to technology and diplomacy – that the Mainland would pursue over the next five years.
There is no question that the world we live in right now is substantially different from that five years ago. The Covid-19 pandemic and the war in Ukraine have pushed inflation to levels unseen for a generation, effectively ending the era of cheap money. At the same time, geopolitical tensions continue to grow, with countries across the world becoming increasingly insular and inward-looking.
For an economy that has benefited massively from globalization since its entry into the World Trade Organization in 2001, the Mainland will be confronted with unprecedented challenges amidst a rapidly evolving global landscape. As noted by President Xi in his speech, the past five years have been “extremely unusual and extraordinary.”
A key takeaway from the President’s remarks is that Beijing will continue to stick to its existing approach to managing the pandemic with “unswerving insistence on dynamic zero.”
Xi emphasized that China’s commitment to stamp out infections had “significant positive results for economic and social development,” notwithstanding weak GDP numbers. In its latest world economic outlook update, the International Monetary Fund expects a slowdown in Chinese growth to 3.2% this year compared to the 8.1% recorded in 2021.
Trade-wise, the Mainland is expected to continue to reduce its dependence on overseas markets and foreign technology, with priority given to enhancing domestic consumption and expanding domestic manufacturing capacity. This is understandable, given rising political tensions that have spilled over into the economic arena. However, it does not mean that the Mainland would be disengaging from the rest of the world, as international trade and investment will continue to play a critical role in promoting the domestic economy under the “dual circulation” model.
On the technology front, state-led spending is expected to rise over the next five years to develop strategically important technologies. As the U.S. has imposed further restrictions to limit China’s access to such cutting-edge technologies as advanced semiconductors, the President has committed the Mainland to chart a course that would “accelerate the realisation of a high level of technological self-sufficiency.”
It is perhaps more important than ever for China to improve its supply chain resilience and ensure security in the areas of food, energy and critical supplies. With intensifying competition between China and the U.S. and escalation in cross-strait tensions, there has been notable use of words such as “security” and “fight” in the President’s speech.
Although uncertainties abound, the President has declared that the “central task” of the CCP going forward was to achieve the “second centenary goal of building China into a great modern socialist country in all respects, and to advance the rejuvenation of the Chinese nation on all fronts through a Chinese path to modernization.”
On economic policy, Xi said that development was the party’s “top priority” and pledged to grow China into a “medium-developed country” by 2035 – an ambition that would require the economy to double in size from 2020 levels.
Meanwhile, the Work Report reiterated the concept of “common prosperity” and the objective to achieve “high-quality development,” which suggests that the Central Government would continue its effort to address economic inequality despite the consequence of slower growth, as has been the case over the past couple of years.
A notable development was what appears to be a quiet abandonment of the principle that “housing is for living, not for speculation,” a policy stance that was first unveiled by the President at the 19th National Congress. This comes against the backdrop of rising interest rates, sluggish demand and a fall in property prices. As the property sector accounts for more than one-fifth of China’s GDP, it is important to avoid a full-blown crisis.
Xi also stressed the importance of “one country, two systems,” which he described as the optimal institutional arrangement for the running of the Special Administrative Regions of Hong Kong and Macao. The assurance that Hong Kong should continue in its existing role as a bridge between East and West provides clarity and certainty amidst an otherwise increasingly turbulent and fragmented world.
Wilson Chong, [email protected]