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Overseas views on NPC & CPCC: China's Development Transition

Editor: Li Kun 丨CCTV.com

03-15-2016 14:48 BJT

Full coverage: 2016 NPC & CPPCC Sessions

Editor's note: The National People's Congress (NPC), China's top parliamentary body, and the Chinese People's Political Consultative Conference (CPPCC), China's top political advisory body, have convened its annual sessions, known as the "two sessions" on March 3-16 2016, which marks a pivotal year as the nation continues on to embark with its reforms and opening up policy, shifting towards a "New Normal" for economic growth rates, starting its 13th Five-Year Plan for social and economic development over the next five years and confronting challenges on the foreign policy front. How will the NPC address those concerns? What do foreign experts and Overseas Chinese say? The Panview Column of CNTV has invited some of them to express their views on major issues to be discussed at the ongoing two sessions.

Author: Robert Lawrence Kuhn

To know where China is going as a country is to confront the challenges of change in every sector of China's nationhood and statecraft. China's development has been astonishing. China's economy is now the second largest in the world and it will likely become the largest, doing in decades what elsewhere took centuries. But dramatic changes cause pervasive problems—and China is confronted with contradictions and challenges.


China's 13th Five-Year Plan, 2016-2020, arrives at a propitious time. With the country's economy slowing and reform entering "deep waters," China's challenges are more complex than ever—and now the whole world is watching.

What are the key issues in the Plan, the key guidelines? What about China's GDP growth rate, on which the world remains fixated? What are the obstacles that China's economy faces? What are potential pitfalls? How to sustain the country's development in an era of lower, "new normal" growth, and in an economy requiring sensitive rounds of reform in the face of entrenched interest groups? How to weigh the benefits of industrial growth against the scourge of pollution? What industries are favored? How to continue to enhance standards of living in a society of increasing demands, high expectations, and deep imbalances? What's the role anyway of a five-year plan, a staple of the planned economy, in China's "socialist market economy?" Must new policies break with the past?

These are just some of the challenges that China must face and the questions that China must answer.

The world wants to know where China's economy is and where it's going—and so do the Chinese people. Appreciating the 13th Five-Year Plan is a good way to assess where China stands right now, and monitoring the Plan over time will be a good way to discern where China will be in the future.

The grand vision of the 13th Five-Year Plan, which has been formulated to guide China's continuing development in a complex and volatile environment, is to transform the economy while sustaining medium-high growth. The Plan is like a roadmap, portraying what China must do, by 2020, to realize a "moderately well off society"—which is the first of President Xi Jinping's "Four Comprehensives" and the first goal of "The Chinese Dream."

Insights can be gleaned by distinguishing the 13th Five-Year Plan from the previous (12th) Five-Year Plan, especially the "Five Big Development Concepts" —innovation, coordination, green, opening up, shared. Note the leading role by played by innovation and the elevation of ecological concerns to the highest level of national priority. Industries favored include those related science and technology, especially information technology (IT), clean technologies, healthcare and biotech, and advanced manufacturing (robotics). Essential to the 13th Five-Year Plan is the complete elimination of extreme poverty. And although the target growth rate of roughly 6.5% gets the headlines, more important is industrial restructuring away from labor-intensive and high-polluting manufacturing to higher-value added and service industries, and raising the contribution of consumption to the overall economy.

Other major drivers of the 13th Five-Year Plan include urbanization, price reforms, especially in energy, and improved government services. Social security will be strengthened; high-school education made universal; and the one-child family planning policy relaxed to allow two children.

There are many challenges. China's economy is facing a formidable constellation of severe, debilitating forces: slowing growth, market volatilities, social imbalances, industrial overcapacity, massive pollution, excessive debt, rising wages, reduced competitiveness, overbuilt housing, unproductive infrastructure, insufficient state-owned enterprise reform—the list is not short. And all amplified by a plugged-in population that expects (perhaps unduly) rapid results.

Finally, whoever thought China's anti-corruption campaign would slow down, thought wrong. "Strictly govern the Party" means that officials "don't want to be corrupt, don't dare to be corrupt, and couldn't be corrupt."

These issues are real, each the natural result of unprecedented economic development in a compressed period of time. Each issue is being addressed, imperfectly of course, but in a coordinated manner. China's focus on innovation, entrepreneurship, science and technology, Made in China 2025, residency (hukou) reforms to help migrant workers, and the like, are all part of the 13th Five-Year Plan.

A fallacy of China's slowing GDP growth is using year-on-year percentages as the benchmark. If China's GDP grows at 6.5% this year, on a base of almost $11 trillion, the absolute increase (about $700 billion) is roughly double of what it was ten years ago (in 2006, when the economy grew at 12.7%). Moreover, because China's population is now only slightly larger, the incremental GDP per capita today is well larger than what it was in those so-called high-growth years. Yet the problem of China's unproductive growth is real, which has lead to overcapacity in industry, housing and infrastructure. China's story is not a simple one.

Moreover, forecasting for a single year often introduces artificial constraints. Longer time periods are required. Market economies run in cycles, boom and bust, with peaks and troughs higher or lower. So those who predict "collapse", loosely defined, must be "correct" at some points in the cycle (much like a clock that has stopped working must be "correct" twice a day). Even though China's economy has internal contradictions, like overcapacities, and remains vulnerable to external shocks, like global slowdowns, although China's economy is slowing, it is not crumbling. China's economy will cycle but it won't collapse.

For implementing the 13th Five-Year Plan, "innovation" is given the "core position," the pride of place, because innovation brings about new companies and new products and encourages new ways of doing business. But making innovation-based companies successful is much more difficult than making low-cost manufacturing companies successful. Nothing in business is easy, but if you have large numbers of competent workers willing to work hard for low wages, then success can be achieved with reasonable efforts, and indeed low-cost manufacturing is what powered China's historic economic transformation.

But innovation doesn't work the way low-cost manufacturing does. Innovation cannot be instituted by formula or legislated by fiat. An innovation may be planned brilliantly and executed flawlessly—but still it may not be successful in the marketplace! What determines market success is often not obvious, and subtle effects, not in one’s control, can make or break innovations. The success rate for innovation is by nature low. This means that an innovative-based economy must accept failure as a necessary part of the process leading to success. If all of your ideas work, it means that your ideas are not very innovative or you have too few ideas.

Innovation is especially important because China is placing a heavy bet on science and technology. The country's two prime goals—a moderately prosperous society by 2020 and a fully modernized country by 2050—depend on technological advances and an innovative spirit, both of which are founded on science and require a scientific way of thinking.

But for China's science to fulfill its mission, how must it adapt? How to promote creativity? How to encourage critical thinking? How to transform a hierarchical system that privileges seniority and networking into a meritocratic system that rewards productivity and results? How to allocate research funds efficiently?  What's the optimum role of government?

To realize its potential, science in China must change. Some scientists contend that the current system is hampering their work, especially how they are evaluated and how funds are allocated. Even more fundamental are critical thinking and creativity—the former to challenge conventional wisdom, accepted norms and senior authorities, and the latter to develop new ideas, technologies, products and services. But critical thinking and creativity can be disruptive, but it's a kind of disruption that can dramatically improve results and enhance outcomes.

What to do? Science works in its own world; it operates optimally according to its own rules and ways of thinking. This means that brilliance bests continuity and productivity trumps seniority.

The most effective and robust policy to facilitate China's transition is greater competition. Each industry has its own optimum industrial structure, specifically the ideal number of major players, which often means a target of a handful of major competitors (not dozens, which is fragmented, and not just one, which is a monopoly).

In addition, China opening up its markets further for foreign companies is essential, not only because of China's international commitments but also because increasing competition accelerates the development of China's markets and enhances the well-being of the Chinese people.

Yet, some wonder about the viability, in a market economy, of any kind of centralized "Plan"—which, after all, epitomizes a planned economy.

The response is that China is unique—huge population, large imbalances, rapid development, historical traditions. China's transformation has been sui generis—nothing in human history has ever been quite like it. Much is at stake, of course, for China and for the world. We shall keep watch.


Robert Lawrence Kuhn is a public intellectual, political/economics commentator, and international corporate strategist. He spoke at the launch ceremony of Xi Jinping's book, The Governance of China, and he provided live commentary on CNN for Xi's policy address (in Seattle) during his U.S. state visit in September 2015. Dr. Kuhn is the host of Closer To China with R.L. Kuhn on CCTV NEWS (Adam Zhu, executive producer).


To find more about Robert Lawrence Kuhn at:
http://english.cntv.cn/2014/12/23/ARTI1419321298029803.shtml    

To watch programs of Closer To China with R.L. Kuhn at:
http://english.cntv.cn/2014/12/18/ARTI1418891990154602.shtml 


( The opinions expressed here do not necessarily reflect the opinions of Panview or CCTV.com. )

 

 

Panview offers a new window of understanding the world as well as China through the views, opinions, and analysis of experts. We also welcome outside submissions, so feel free to send in your own editorials to "globalopinion@vip.cntv.cn" for consideration.

Panview offers an alternative angle on China and the rest of the world through the analyses and opinions of experts. We also welcome outside submissions, so feel free to send in your own editorials to "globalopinion@vip.cntv.cn" for consideration.

 

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