Politburo’s omission of previously core elements of Xi Jinping’s economic plan is significant, analysts say.
China’s ruling Communist Party sent a strong message on Wednesday that it will significantly alter its economic policy course to respond to growing economic headwinds resulting from the trade war with the United States. The shift was signalled in a statement after a meeting of the Politburo, the party’s top policymaking body, which analysts agreed marked an important change in tone compared to three months ago.
It indicated that the immediate economic threat posed by the US trade war was forcing a mid-course correction in economic policy.
Wednesday’s statement expressed concerns about “growing downward pressure” on the economy from a “hostile international environment” and noted “many difficulties with certain enterprises and the emergence of risks accumulated over long periods of time”.
“We need to attach great importance to this situation and be more forward-looking to respond in a timely manner,” it said.
“We have to enhance reform and opening up to focus on core problems with targeted solutions … We must get our own things done and firmly seek high-quality growth.”
The reference to a positive reading of the economic situation as “stable with good momentum”, had been constants in Beijing’s official documents since December 2015, when Xi’s “supply-side structural reforms” concept came into shape.
Fudan University economics professor Li Weisen said debate was intense among academics and government advisers over the proper course for Chinese economic policy.
“The general consensus is that the Chinese economy is facing downward pressure and the pressure will only grow,” Li said.”
“It’s a very delicate moment.”
George Magnus, a research associate at the University of Oxford China Centre and author of Red Flags: Why Xi’s China is in Jeopardy, said the tweaks in monetary and fiscal policies would not be enough to lift the Chinese economy out of its troubles.
Magnus said that while Xi had enhanced the control of the state and party in the economy, the right alternative would be “bringing more market mechanisms into play and allowing the state to retreat or lessen so that there could be transfer of wealth from the public to the private sector, a recalibration of the state’s role, and a greater role for private decision-making”.
“That’s easy to say but it’s hugely political and would involve greater reliance on an independent judicial system, neutral contract enforcement, a competition and regulatory environment … This is simplely not what Xi’s China is about,” he said.
Magnus argues that Xi’s authoritarian and repressive philosophy is ultimately not compatible with the country’s economic aspirations. Thorough and well researched, Magnus’s book also investigates the potential for conflicts over trade, China’s evolving relationship with Trump, and the country’s attempt to win influence and control in Eurasia through the Belt and Road initiative.
Analysts said the likely delay of the Central Committee meeting – expected to focus on mid to long-term economic policies – might suggest a lack of consensus among the Chinese leadership over how to battle the growing headwinds facing the world’s second-largest economy.
In recent decades, it was often an occasion when Chinese leaders revealed major reform programmes and new economic blueprints.
It was at this plenum in 1978, for instance, that late paramount leader Deng Xiaoping launched the “reform and opening up” that placed China on its path of economic liberalisation and growth. Another autumn plenum in 1993 endorsed the concept of the “socialist market economy”, which dismantled a large part of China’s state-owned sector.
China’s top leadership has outlined a new game plan for the private economy and the stock market as the country braces for further hits to the economy from the trade war with the United States.
The Communist Party’s Politburo, the 25-member supreme policymaking body headed by President Xi Jinping, agreed on Wednesday that there was “growing downward pressure” on the economy with “profound changes” in the external environment, state-run Xinhua news agency reported.
The statement was a shift from three months ago when the Politburo said there had been “noticeable” changes in the external environment.
It is the first time the leadership has showed public concern about China’s slowing economic growth since the trade war broke out with the US in the summer.
Unease rattles China’s invincible facade, Washington Post, Aug 3, 2018
In China, there is an overwhelming feeling of unease — about the economy and the political system, relations with the United States and the future of China’s opening to the West, which over the past 40 years has brought China so much success, wealth and happiness. This malaise is emerging against a backdrop of a slowing economy, a scandal affecting hundreds of thousands of children’s vaccines, the continued challenges of cleaning China’s air and water and providing food safety, and an aging population.
In a remarkable essay called “Imminent Fears, Immediate Hopes,” published late last month, the constitutional scholar Xu Zhangrun of Tsinghua University captured the feelings of many Chinese people when he questioned whether China’s reforms and opening up policies “are being terminated and whether totalitarian rule will return.”
For decades, Xu wrote that the rule of the Chinese Communist Party was predicated on an implicit social contract comprising four articles: (1) The first held that the party would focus on improving China’s economy and would end the political campaigns that had wreaked so much havoc on Chinese society and destroyed so many lives. (2) Second, the party would switch from criminalizing private property to protecting it, recognizing “the desire of China’s billions to own something.” (3) Third, the party would tolerate a certain minimum standard of personal freedom. People would postpone their desires for a more democratic system, Xu writes, “because at least if I get a new hairstyle I don’t have to look to an official for his OK.” (4) Limits that held China’s senior leaders to two five-year terms made up the fourth leg. Xu observed that the term limits gave people “a sense of political security” because, in the end, “it doesn’t matter who you are, it’s only going to be 10 years.”
Now, however, Xu argues in his essay, this contract is being ripped up by the regime of China’s strongman, Xi Jinping. Earlier this year, Xi forced through a rewrite of China’s constitution, ending term limits and clearing the way to declare himself president for life. State-run media has lionized the president in a way that’s reminiscent of the cult of personality that grew around Mao Zedong. Political campaigns have returned, targeting pro-Western ideas, such as freedom of speech and assembly.
A key source of the unease expressed in Xu’s essay has been the perilous nature of relations with the United States. Xu notes that the current trade war with America has exposed “the weakness of [China’s] national strength and its system.”
Read More …
- Chris Buckley, As China’s Woes Mount, Xi Jinping Faces Rare Rebuke at Home, The New York Times, 31 July 2018 “Xu has written a challenge from the cultural heart of China to the political heart of the Communist Party,” said Geremie R. Barmé, an Australian scholar of China who is translating Mr. Xu’s essay. “Its content and culturally powerful style will resonate deeply throughout the Chinese party-state system, as well as in the society more broadly.”
- Jeremy Goldkorn, Peak Xi Jinping? Two Essays, Six Years Apart, Offer Perspective On Chinese President, SupChina, 2 August 2018
- Jerome A. Cohen, Xi Jinping sees some pushback against his iron-fisted rule, The Washington Post, 2 August 20q8