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UPDATED: February 25, 2013 NO. 9 FEBRUARY 28, 2013
Expectations on the Coming Sessions
China's development is far from complete. So what more must be done?
By Mei Xinyu

WORKING FOR THE FUTURE: Workers operate on lines producing truck components in Baotou, Inner Mongolia Autonomous Region, on October 26, 2012 (ZHAO TINGTING)

Two decades ago, economists, especially those outside China, could accurately anticipate global economic trends without paying much attention to the sessions of the national congress of the ruling Communist Party of China (CPC) , the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC). Today, however, these sessions could be hardly ignored by any acute market watchers.

China alone contributed half of global GDP growth in 2011 and 2012. According to World Economic Outlook issued by the International Monetary Fund in April last year, China accounted for 14.3 percent of the world's real GDP in 2011, almost the same as that of the eurozone. All this indicates that the NPC and CPPCC sessions, which are set to convene early next month, will not only decide the layout of China's economic and social development in the coming years, but will also influence world economic trends.

Leadership transition

Leadership transition, which began at the 18th CPC National Congress in November last year, would be completed smoothly. That will be a big comfort to the world.

The European sovereign debt crisis doesn't look like it will end any time soon. The U.S. economy has just managed to get over the fiscal cliff. Emerging economies began to suffer turmoil since the second half of 2011.

A turbulent economy usually calls for strong government intervention to prevent disaster. There have been many lessons in this aspect, one of which is Japan. The former high-flying economy was set to surpass the U.S. economy in the 1980s, but after its economic bubbles burst, the country fell into depression and hasn't emerged from its two "lost decades." Economic factors of course were to blame, but frequent central government changes played a key role. Similarly, a commonly acknowledged reason for the European Union's inability to cope with its debt crisis is the lack of strong leadership. Having seen these lessons, many nations are pinning hopes on China's smooth leadership transition and the country's stable economic growth so as to help stabilize the global economy.

The leadership transition will ensure China's long-term political stability and policy continuity. The country has made impressive economic achievements after the founding of the People's Republic of China in 1949, particularly since the launch of reform and opening-up policies in the late 1970s. China now is the world's second largest economy measured by GDP.

However, past achievements do not provide an absolute guarantee for future development. In the 20th century, many developing countries saw their economies take off, but only a limited number of them rose to developed-nation status. Of the 108 countries whose per-capita income was lower than $7,000 in 1970, only four of them had become high-income countries by 2010 according to World Bank standards. Among them, Antigua and Barbuda, Equatorial Guinea and Malta are island economies with small populations and territories. Equatorial Guinea is also rich in oil. However, Antigua and Barbuda and Equatorial Guinea have been plagued by many flaws in their social development. Only South Korea, with a comparatively large population and a territory of nearly 100,000 square km, has witnessed sound social development alongside economic growth.

Internal political turmoil has been a major factor halting the progress of many developing nations, and leadership transitions often ignite social and political conflicts. China has had its own bitter experience in this respect. Therefore ensuring the stability of its political system and allowing a smooth leadership transition are preconditions for the country's sustainable economic and social development.

Continuity and changes

Frequent self-inflicted setbacks are the source of calamities and chaos in big nations. Compared with other major economies, a big advantage of China's political system is its ability to guarantee a consistency of major policies. In 2012, the CPC realized a smooth leadership transition. It is of little doubt that the same will happen during the upcoming NPC and CPPCC sessions.

Maintaining continuity, however, does not mean ignoring the need for change. China's sustainable economic development increasingly relies on the transformation of its economic growth pattern and social stability based on a fair income distribution. "The key point in studying national development and national strength is not to look at indicators such as GDP, but at where the profits go and how the profits are distributed among laborers," said Zhang Wenmu, a professor with the Strategy Research Center at the Beijing University of Aeronautics and Astronautics.

Problems to be tackled

The 18th CPC National Congress put forward a plan to transform China's economic growth pattern and set the goal of doubling per-capita GDP and individual income by 2020 from 2010 levels. These are admirable goals. However, transforming the country's growth pattern will bring about profound adjustments, which will affect the lives of many people. The impact will not be completely positive. We should be fully prepared to manage the consequences. High-income Chinese should not expect to continue enjoying incomes that are disproportionally higher than those of the majority of the population. Even the so-called middle class should not expect to gain without giving. Take a simple example. For at least a dozen years, China's urban middle class has been used to hiring cheap hourly household workers and going to restaurants priced in the mid-range because labor costs were low. As wages—especially those of the vast low-income group—are bound to increase, the middle class will certainly have to spend more to maintain the same comforts. In fact, the rapid increase in the costs of household services and the catering industry in recent years have proved this.

China is also facing other severe problems, such as a regional development disparity, corruption and environmental pollution. And none of these problems can be easily solved. However, there is reason to be fully confident in its chosen path of development. It is believed that the participants of this year's NPC and CPPCC sessions and the soon-to-be elected leadership will be more prepared than ever to stand up to the challenges.

The author is an op-ed contributor to Beijing Review and a researcher with the Chinese Academy of International Trade and Economic Cooperation

Email us at: dingzhitao@bjreview.com

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