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China economy

Xi Jinping uses new Mao-like status to outline longer-term economic blueprint for China

As well as the key ‘battles’ – risk, poverty and pollution – Beijing’s economic policies for 2018 and beyond also touch on issues to do with quality of life

PUBLISHED : Thursday, 21 December, 2017, 9:18am
UPDATED : Thursday, 21 December, 2017, 11:07am

President Xi Jinping, China’s most powerful leader in decades, has mapped out a plan to renew the economy in three years by tackling financial risk, reducing poverty and fighting the country’s chronic smog problem.

At the three-day, closed-door economic work meeting that concluded in Beijing on Wednesday, the top leadership decided China will follow a “high quality” growth model with more focus on fairness, the environment and a joyful life, Xinhua reported. That takes the place of the old “high speed” model that for decades has put the expansion of gross domestic product above all else.

Financial risk the ‘critical battle’ for Xi Jinping in next three years

In a departure from previous years, Xi used the annual meeting to draft three-year, rather than one-year, plans for the financial sector clean-up and environmental management. The policies also touch on a wide range of issues that matter to the everyday lives of the country’s 1.3 billion people, including too much homework for children, difficulties getting an appointment to see a doctor, the nursing shortage and online scams.

“Unlike his predecessors, Xi is willing to compromise and more determined to push forward this work [by tolerating slower GDP growth],” said Ding Shuang, chief Greater China economist at Standard Chartered Bank in Hong Kong.

The meeting did not reveal a quantitative GDP growth target for the US$12 trillion economy. Many economists expect Beijing to announce a lower target in March than this year’s goal of around 6.5 per cent, showing its tolerance of slower growth to allow for reforms.

China has developed at breakneck speed in past decades to become the world’s second-largest economy, mainly through heavy investment, cheap labour and land resources, and by ignoring the environmental costs.

The big picture from China’s most important economic meeting of the year

Although previous leaders have vowed repeatedly to change the development model, there has been little progress in achieving a trade-off between quality growth and fast growth.

But Xi – after cementing his power at the Communist Party congress in October, when he was elevated to the same status as late leaders Mao Zedong and Deng Xiaoping – appears keen to drive change.

In 2020, Xi will reach the “midterm” of his second five-year term as leader and he is aiming to make good on the party’s promise to build “a comprehensive well-off society” by then.

So for the next three years, the leadership’s top economic priorities will be improving the air quality, alleviating poverty and curbing financial risk, according to the communiqué released after the conference.

There are at least 43 million people living in absolute poverty on the mainland, or with an annual income of less than 2,800 yuan (US$420), according to official data. China’s Gini coefficient, a gauge of income inequality, was 0.465 last year – one of the highest in the world. A reading above 0.4 is seen as a mark of a society ripe for unrest.

Analysts said policy mentions of social issues to do with quality of life showed a wider concept of development under Xiconomics, which was given an official name at the conference: “Xi Jinping Economic Thought on Socialism with Chinese Characteristics for a New Era”.

Zhao Xijun, a finance professor at Renmin University, said Xi has “broadened the concept of the economy from just investment, exports and consumption to a comprehensive range of issues which could affect the economy implicitly”.

“At the heart of his idea is having people benefit from economic development,” Zhao said.

Rapid growth in the last four decades has turned China from a poor rural country into a global economic superpower. But development has also left it with a yawning wealth gap and appalling pollution, and many ordinary Chinese feel they have been left behind in the economic boom.

The good, bad and ugly sides of Xi’s economic work conference

On Wednesday, the leadership vowed to push ahead with a clean-up of the financial sector. “We will promote a benign cycle from the financial sector to the real economy, to the property sector, and within the financial system, and firmly crack down on financial irregularities,” the statement said.

Beijing will also push ahead with housing reforms and work on a “long-term mechanism” – including fiscal, monetary and land policies – to keep property prices in check, it said. There was no mention of property taxes.

Local and non-local residents were allowed to take co-ownership of homes along with local governments last year – with prices at less than half the market rate – and the authorities have also encouraged long-term stable rental housing.

But Yi Xianrong, an economist at Qingdao University, said the measures did not go far enough to change the imbalance in China’s housing market. “It will take at least five years to see any effects from the mechanism,” Yi said.

Although China is facing headwinds from an increasingly unfriendly Washington over trade, as well as US tax cut plans and a hawkish Federal Reserve, the communiqué did not mention the US or Donald Trump – the leadership said only that Beijing would try to balance trade by boosting imports.

Additional reporting by Frank Tang