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Saturday, May 26, 2018, 15:51
China to be stabilizing power in new era
By Andrew Moody / China Daily
Saturday, May 26, 2018, 15:51 By Andrew Moody / China Daily

In this undated photo, a worker monitors container operation at Zhoushan port in Ningbo, Zhejiang province. (PHOTO / CHINA DAILY)

As with others who witnessed the birth of China's new era-in my case right in the Great Hall of the People-there was a sense of experiencing history in the making.

Communist Party of China Central Committee General Secretary Xi Jinping, in his three-and-a-half-hour-long speech to the 19th National Congress of the CPC, did not just set out a new domestic agenda but also provided a timetable for China to play a more central role on the world stage right until the middle of the century.

Now more than seven months on, how defining does that speech remain and how China and the world are interpreting Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era?

Certainly, on the world stage, China was showing greater global leadership even before the CPC National Congress.

President Xi's speech to the World Economic Forum at Davos in January 2017 stressing the importance of globalization was in marked contrast to US President Donald Trump's isolationist "America First" stance-the speech being made just ahead of Trump's inauguration.

The Party Congress speech, however, gave many people the sense that China now had a defining grand strategy, not just domestically but also for its place in the world.

Former UK foreign secretary William Hague writing in his column in the Daily Telegraph earlier this month said this was no longer true of the West with the United States and Europe, in particular, divided on a number of global issues. He said it used to be a relief to open a bottle of wine with the foreign minister of either Australia or Canada and discuss the "strategy of the Western world".

While that was "hopeful but still realistic" three or four years ago, it would now seem "ridiculous" and this is because it is countries such as China that are setting the agenda, he said.

A vision of shared growth

Part of Xi's concept of globalization is the Belt and Road Initiative, which, he said in his report, was about a vision of a "shared growth" with the rest of the world. It was also emphasized at the Belt and Road Forum for International Cooperation in Beijing in May 2017 that it was not an instrument of China's foreign policy but something that all countries could participate in.

Ian Goldin, professor of globalization and development at Oxford University and a former economic adviser to Nelson Mandela when he was South African president, believes China's role on the world stage is the "watershed moment" of the new era. "President Xi was saying that the future of the Chinese people and of the Communist Party (of China) depended on a more active engagement with the rest of the world," Goldin said.

"This means a significant role for China in the global commons issues such as finance, trade, pandemics, climate change and cyber security. They all depend on cooperation and more active engagement in the world," he added.

Much of the success of the new era depends on China achieving three major goals.

The first is just two years away and that is to double China's 2010 per capita GDP by 2020 and for China to become a "moderately prosperous society", thus eliminating all extreme poverty in time for the 100th anniversary of the founding of the CPC in 2021.

This effectively involves China breaking out of the so-called middle-income trap that has befallen so many Latin American countries, in particular.

What we now know since the 19th Party Congress is that with China reporting 6.9 percent GDP growth in 2017-the first annual acceleration for seven years-and a higher-than-expected 6.8 percent in the first quarter of this year, the target should now be easily achieved with growth of little more than 6 percent from now on.

With many Western countries' incomes stagnating and living standards falling 10 years after the global financial crisis, China is determined to prove its essential legacy will be one of shared growth

China's next centennial goal is to mark the 100th anniversary of the founding of the People's Republic of China in 2049 by establishing a "great modern socialist country in every dimension". By then everyone in China will have achieved a level of "common prosperity" and the country will be a global leader in terms of national strength and international influence.

Xi also set out a completely new target in his report, that for 2035, at the halfway point between the two centennial targets. Key to this target is addressing the environmental degradation that has resulted from the industrialization of the economy in the country's first phase of modernization since reform and opening-up.

Also important is reducing the disparities between urban and rural development and giving people from deprived communities greater access to public services.

China has also set itself the goal that within 17 years, it will become a global technology leader. My own recent visits to East China's Anhui province, where pioneering work in quantum communications is being carried out, Dalian in Northeast China and Chongqing in Southwest China, have only confirmed the extent of the efforts on the ground to meet this new national goal.

Cai Rui, the 41-year-old deputy director of Dalian Institute of Chemical Physics of the Chinese Academy of Sciences, one of China's national-level science institutes, told me in January that local governments are now knocking on the door of institutes such as his to advance the national technology effort.

There has been an exponential rise in the number of STEM (science, technology, engineering and mathematics) graduates in China. According to the World Economic Forum, China had the highest number of such graduates in the world in 2016 at 4.7 million, more than eight times the 568,000 in the US.

There has always been a somewhat patronizing view overseas that Chinese science PhD students lack the quality of those in the West and are best suited to rote tasks, but this is something that has now to be seriously questioned.

It is the prospect of the US being a laggard in key technologies that is behind many of the tensions that now exist between the world's two largest economies. As Michael Spence, Nobel Prize winner and professor of economics at New York University's Stern School of Business, says, being behind in digital technologies, which will be central to defense and security, would be uncomfortable to the US. "I think China is on the way there (to being ahead) and I don't really know how to predict the American response."

For now, the US and Europe still lead in many major technologies but with the momentum of the new era, China has the potential to catch up quite rapidly. Any resistance or attempt to isolate China seems a futile strategy and there may soon to be a realization that partnering and collaborating with China is the only way forward-as already seems to be the consensus with Europe.

Higher-quality growth model

The success of the new era depends on economic reform, as Xi made clear in October, when he said the "principal contradiction" of China's development had to evolve.

In the 40 years since Deng Xiaoping launched reform and opening-up that contradiction had been between "the ever-growing material and cultural needs of the people and backward social production".

It was essentially resolved by introducing market reforms that led to China becoming the manufacturing workshop of the world as well as its second-largest economy.

Xi says the aim now is to address a new principal contradiction, "that between unbalanced and inadequate development and people's ever-growing needs for a better life". To do that, it needs to move toward a higher-quality growth model and away from one dependent just on manufacturing exports and infrastructure investment.

To achieve that goal, China needs to focus on continued supply-side reform, cutting excess capacity, particularly in State-owned enterprises, and reducing income and regional inequalities. It also needs to tackle pollution, improve the regulatory and administrative environment, and ensure greater financial stability, including dealing with the issue of debt in the economy.

For some, such as Zhu Ning, a professor of finance at Tsinghua University, it is no longer about chasing GDP numbers. "The focus is now on the development of the overall economy. People have criticized China's growth being all about growth's sake and not about development," he said.

To move to a high-quality growth model will be a significant challenge for China. Economic growth is normally driven by a combination of labor and capital inputs. However, in China's case, its working population will be declining faster than most major economies because of the ongoing legacy impact of the one-child policy. The economy should also become less capital intensive if rebalancing is to be achieved and debt levels reduced.

The only option for China, therefore, is to improve what economists call total factor productivity, which means increasing productivity. Which will not be easy, as many economies around the world have battled with decreasing productivity for decades.

For George Magnus, an associate of the Oxford University China Centre and a leading expert on China's economy, technology is key to this. "Of all the areas of new era economic thinking the focus on technology is probably the most important," he said. "You just cannot keep growing investment because you will end up with problems of overcapacity, over-indebtedness and mal investment."

This is very much the policy-driven side of the new era.

China coming of age

Seven months on from Xi's speech, what does the whole concept of the new era now mean?

Certainly, the speech itself captured headlines around the world with many seeing it as China finally coming of age and occupying a central position on the world stage. The main discussions about the new era since then have largely taken place within China rather than outside.

"People outside of China are waiting to see the ideas that underpin it and what will be the substantial parts of the new era from China's side that will affect them," says Rana Mitter, director of the Oxford University China Centre. "Those outside of China are much more aware of the Belt and Road Initiative."

A number of analysts, however, believe that the new era is important because the whole world is having to accommodate China. "If China has a new era then the world is going to have a new era because of the way China impinges on that new world," said Kerry Brown, director of the Lau Institute at King's College London. "China has become this very prominent geopolitical actor in a short space of time."

All the indications so far are that China is going to be a very different geopolitical actor than the US, certainly one less inclined to make unilateral military interventions. The Belt and Road Initiative and the setting up of institutions such as the Asian Infrastructure Investment Bank may be more the templates of China's global involvement.

"It is not going to be like the United States in its prime. It is going to be much more collective in its approach and more of a stabilizer on the world stage," added Brown.

One of the essential messages of the new era is about winning the battle against poverty, which Xi throughout his career has always seen as a scourge since he was Party chief of Ningde prefecture in Fujian province 30 years ago and implemented a series of poverty-reduction policies.

"People outside of China are waiting to see the ideas that underpin it and what will be the substantial parts of the new era from China's side that will affect them," says Rana Mitter, director of the Oxford University China Centre. "Those outside of China are much more aware of the Belt and Road Initiative."

A number of analysts, however, believe that the new era is important because the whole world is having to accommodate China. "If China has a new era then the world is going to have a new era because of the way China impinges on that new world," said Kerry Brown, director of the Lau Institute at King's College London. "China has become this very prominent geopolitical actor in a short space of time."

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All the indications so far are that China is going to be a very different geopolitical actor than the US, certainly one less inclined to make unilateral military interventions. The Belt and Road Initiative and the setting up of institutions such as the Asian Infrastructure Investment Bank may be more the templates of China's global involvement.

"It is not going to be like the United States in its prime. It is going to be much more collective in its approach and more of a stabilizer on the world stage," added Brown.

One of the essential messages of the new era is about winning the battle against poverty, which Xi throughout his career has always seen as a scourge since he was Party chief of Ningde prefecture in Fujian province 30 years ago and implemented a series of poverty-reduction policies.

This is why the new era has so much resonance in Africa, in particular, where 400 million people still live below the poverty line. For some people, this could be the essential lesson of the new era for the rest of the world.

"Britain's legacy to the rest of the world was the concept of the rule of law," says Hugh Peyman, author of China's Change: The Greatest Show on Earth. "The great American legacy was modern management systems, and the essential legacy of China's could be on how to handle laggard communities, what we now call the left-behind and now a phenomenon in the West again."

For those who live and work in China, there is a sense of a society not only just moving but looking forward. This is no longer the case in the West with many countries' incomes stagnating and living standards falling 10 years after the global financial crisis.

"There is an important shift that has taken place in China as a result of new era," said Martin Jacques, author of When China Rules the World: The End of the Western World and the Birth of a New Global Order. "There is a new atmosphere, a certain exuberance, self confidence and élan that you can see among the Chinese population that you no longer get in the West."

This might yet prove the essential legacy of the new era-the time when China had the confidence to face the world on its own terms and not on those dictated by others.

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