China growth model shows Xi Jinping’s vision will outshine that of Deng Xiaoping, and the world can profit
William Zheng says President Xi Jinping’s plans for a modern socialist China by 2035 are more detailed and ambitious. But a debt-ridden economy needs new growth engines like technology and innovation, which is where businesses may find new opportunities
The Communist Party’s 19th Congress was watched closely by the whole world. Many commented that the new leadership line-up didn’t include a clear potential heir, raising chances that general secretary Xi Jinping might stay in office beyond 2022.
While gaining insight into the opaque system of Chinese politics is intellectually satisfying, what matters to us overseas would still be its economic development and our opportunities. A further look at China’s growth model would help.
I believe Xi’s vision of China’s renaissance is more ambitious than that of Deng Xiaoping, who orchestrated the open-door policy and kick-started the great reform. In Deng’s “three-step development strategy” of the 1980s, the first step was to double the size of the economy and ensure enough food and clothing for all. That goal was achieved by the end of the ’80s. The second step was to quadruple the economy by the end of the 20th century. That goal was achieved in 1995, five years early.
The third step was to increase per capita gross domestic product to the level of moderately developed countries by the mid-21st century, that is 2050.
Xi has shown great confidence in surpassing Deng’s target. As he proclaimed in his address to the congress: “We should work hard for the next 15 years [to 2035] to ... realise socialist modernisation.”
China plans to be a “moderately prosperous society” by 2020, a “modern socialist country” by 2035 and a powerful one by 2050. That means Xi is confident of achieving Deng’s three-step development goal 15 years ahead of schedule.
Certainly, Xi’s 2035 vision has more comprehensive details than the blueprint outlined by Deng. He wants to see China become a top innovative nation by 2035 and achieve global influence by 2050.
To realise this grand vision, Xi will have to ensure that growth is all-round, and not interrupted by internal or external risks. Xi stressed the need to manage key risks well, and fight poverty and pollution.
Can China do it in 2035? Its leadership seems confident that China will not fall into the middle-income trap. The World Bank put China’s GDP per capita at US$8,123 in 2016. Assuming a conservative 5 per cent yearly growth and that its population remains largely stable, China’s GDP per capita in 2035 would be over US$19,500, that is, on par with current levels in Portugal. If the government is able to realise above 6 per cent annual growth, GDP per capita could cross US$23,000, not far from South Korea’s current level at US$27,000.
From now to 2035, Xi and his teams face an uphill task. China’s debt-ridden economy makes it almost impossible to repeat the huge investment-driven growth of the past three decades. The gloomy world economy would provide little help to its export engine. They have to find growth by revitalising domestic consumption.
China has already activated two major components of domestic consumption in the past decade. The property and automobile sectors have been the two key pillars supporting the economy, but are no longer sustainable.
With more cities facing serious traffic jams, further growing the car population does not seem viable. Over-reliance on property has led to many debt and social problems, to the extent that Xi received one his longest applauses when he talked about housing issues.
Without these two industries to provide growth momentum, Xi seemed to indicate technology and the upgrading of skills would be the answer. He wants China to push forward overall development by focusing on scientific research, talent training, and innovation.
If you want to do business with the Chinese, these might be the areas to find the most goodwill from the Chinese government.
William Zheng is a veteran journalist who has served and led major Singapore and Hong Kong media organisations in his 20-year career