ISSN 2330-717X

Takeaways From The Chinese Government’s Work Report – Analysis

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By Dr. Altay Atlı*

Chinese Premier Li Keqiang stressed pragmatic and steady growth in the government’s work report for 2015, which he presented during the opening session of the National People’s Congress last week in Beijing. The annual meeting of the National People’s Congress takes place every spring and is attended by around three thousand delegates hailing from all administrative regions of China. This makes it the largest parliamentary gathering in the world. The government’s annual work report, conventionally presented by the premier at the opening of the annual meeting, is an important document as it provides an overview of the previous year and sets the targets and policies for the upcoming year.

The work report for 2015 reflects on the tough transition experienced by the Chinese economy as the country makes efforts to switch from a development model based on labor-intensive low-cost manufacturing, exports, and high-volume investment in infrastructure and heavy industry toward a new and more sustainable model based on technology and capital-intensive production, domestic consumption and investment focusing on quality rather than quantity. In this process China has seen growth slow. The current work report provides valuable insights on how Chinese policy makers evaluate the situation and how they are likely to proceed in the coming period.

To start with, the report demonstrated that the government does not choose to ignore ongoing problems. Instead there is a candid approach to potential fragilities and flaws. For instance, the report declares that, “A comprehensive analysis of all factors shows that China will face more and tougher problems and challenges in its development this year, so we must be fully prepared to fight a difficult battle.” While pointing out that “the global economy is experiencing profound changes and struggling to recover,” and “there are increasing instabilities and uncertainties in China’s external environment,” the report also indicates that within China “problems and risks that have been building up over the years are becoming more evident”.

In light of this troubled environment, the Chinese government has been revising its growth forecasts. Following the announcement of an annual growth rate of 6.9 percent for 2015, the forecast for 2016 was lowered from 7 percent to the interval between 6.5 and 7 percent. Moreover, the report also sets a target to double the 2010 GDP and per capita personal income by 2020. Reaching this target requires the economy to grow at an average annual rate of at least 6.5 percent during this five-year period which, while not impossible, is strictly dependent on the effective implementation of structural reform without delays and without compromises. In the meantime, international institutions analyzing the global economy are lowering their predictions for the Chinese economy. For example, the OECD’s forecast for Chinese growth in 2017 is 6.2 percent, while the IMF has lowered its prediction to 6.3 percent.

What does China need to do in order to achieve its stated objectives? Li Keqiang’s work report draws attention to six areas of priority that are also included in the 13th Five Year Plan (2016-2020) soon to be announced to the public. These areas are as follows:

1.) Maintaining a medium-high rate of growth and promoting the development of industries on the medium-high end: To this end, advanced manufacturing, modern services, and strategic emerging industries will be developed by 2020 through the structural upgrading of industry, and through initiatives that use advanced technologies.

2.) Ensuring that innovation drives and energizes development: Encourage innovation through both public sector investment and private initiatives in order to “transform China into a manufacturer of advanced and quality products.”

3.) Balancing development between urban and rural areas and between regions: This follows from China’s “new, people-centered urbanization” strategy. Enabling around 100 million rural residents to live and work in local towns and cities in the central and western regions is a key component of this strategy. The objective is ensuring that permanent urban residents amount to 60 percent of China’s population by 2020.

4.) Encouraging green lifestyles and working environments: The report includes the aim of building “a Beautiful China where the sky is blue, the land is green, and the water runs clear.” This will require, first and foremost, air pollution to be reduced and taken under control, along with lowering water consumption, energy consumption and carbon dioxide emissions to a sustainable level.

5.) Deepening reform and opening up to create new institutions for furthering development: “Fundamentally, development relies on reform and opening up,” states the report. While the report emphasizes the need to “ensure that the market plays the decisive role,” it also underlines the necessity of “the government better playing its role in resource allocation, and work to be accelerated to create the systems, mechanisms, and growth model that will guide the new normal in economic development.”

6.) Raising living standards, and “seeing that everyone shares in the fruits of development”: The Chinese government declares that it aims to ensure that growth is accompanied by greater quality. In this respect, greater efficiency in the fight against poverty, raising standards in the education system, improving the health service system in order to achieve a one-year increase in average life expectancy, creating create 50 million new urban jobs, and rebuilding 20 million housing units in rundown urban areas are all among the government’s objectives.

In addition to setting out these goals, the Chinese government’s work report details policy actions that need to be taken in the short term. Maintaining macroeconomic stability, empowering the private sector and entrepreneurship, lowering production costs and reducing excess capacity, increasing the quality of supply in goods and services, increasing the potential in domestic demand and consumption, making pro-growth investments and improving public services in rural areas will all make the government’s 2016 to-do list.

The work report also refers to international economic relations. The “One Belt, One Road” project focusing on collaboration with Eurasia receives special treatment here. Along with this, the report proposes new methods and business models for increasing trade volumes and diversifying the basket of foreign trade. Overseas investment and industrial cooperation with other countries appear to be rising to the top of China’s agenda.

As evident in the government’s work report presented by Premier Li Keqiang, China has taken a realistic approach to present problems and formulated comprehensive, feasible and constructive solutions. The real issue, however, is whether these measures can be effectively implemented in practice. The Chinese government has the correct road map in its hands, but whether it will actually follow the marked route is a different question. 2015 was a year in which the reform process did not proceed as smoothly as foreseen, with serious tremors experienced in the economy as observed in the securities market and monetary policy. China now wants to stabilize growth at 6.5 percent in the medium term. For China to reach this goal, the government must actually stay on track and execute its newly formulated policies.

*Dr. Altay Atlı is a research fellow at the Asia-Pacific Studies Center of USAK. He is also an adjunct professor at Boğaziçi University Asian Studies program

JTW

JTW

JTW - the Journal of Turkish Weekly - is a respected Turkish news source in English language on international politics. Established in 2004, JTW is published by Ankara-based Turkish think tank International Strategic Research Organization (USAK).

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