Interdependence will balance out China-US relations: Manoranjan Mohanty

He decodes the message of National People's Congress in China which was held earlier this month

Each year, the Chinese government’s work report is one of the central points on the National People’s Congress (NPC) agenda. How should we interpret Premier Li Keqiang’s work report submitted on March 5? Li set China’s GDP growth target for the year at “around” 6.5 per cent, slightly lower than last year’s goal of 6.5-7 per cent. So, the economy continues to lose momentum. How will that impact China?
 
The Government Work Report by Premier Li Keqiang should be read closely for getting a comprehensive perspective on the various policies pursued by the Xi Jinping regime, not just for the growth rate. Yes, the growth rate in 2016 was 6.7% and the projected rate for 2017 is about 6.5%. Even though the economy is facing a number of challenges which the premier discusses at length, the growth rate has been kept around six to seven per cent — medium to high, as they put it — as a “new normal” or a policy decision during the 13th Five Year Plan (2016-2020).

 
Their goal is to emphasise supply-side structural reforms to promote innovation-driven, quality-conscious production of goods and services. With a “Make in China 2025” strategy, they stress on expanding domestic demands while paying attention to issues of distribution and sustainability. Creation of over 11 million urban jobs — one million more than that of last year and lifting 10 million out of poverty — currently still 43 million in poverty according to the Chinese government — and eliminating poverty by 2020 were some of the other proposals announced by Li. Giving urban residency rights to 13 million migrant workers was a partial response to the hardships faced by the rural migrants working in the cities.

 

Among the serious problems noted by the Premier were overcapacity of production — they plan to cut down coal production by 150 million tons — excess urban real estate inventory — the housing bubble continues — huge amount of non-performing assets and finances, multiple taxes and charges affecting efficiency of enterprises in addition to the well-known problems of agriculture and rural distress.
 
Besides global initiatives such as One Belt,  One Road, Jinping’s ideas, including the “new development philosophy” and the political consolidation of his leadership, were the key messages at the NPC, which presented a preview of the process leading to the 19th Party Congress later in the year. Ever since Xi was designated as “the core” at the Sixth Plenum in 2016 his supremacy in all spheres — party, government, army, security and economy — has been institutionalised. Besides the Central Military Commission, Xi heads the Commissions on Finance and Economy, National Security, Internet and Informatization and a new commission on civil-military integration. Li’s Report is full of references to Xi’s leadership and his ideas.

 
Just 10 days before the annual meeting of the NPC, China appointed a new head for its top economic planning agency and a new commerce minister. The justice minister was also replaced. What does this mean?
 
The personnel changes have started at various levels, including at the top, and it would culminate at the party Congress in October-November and further at the 13th NPC a year from now. Last year, some crucial appointments and transfers were made in the People’s Liberation Army. The decision to designate Xi as “the core” and publicising it as being in the best interest of the party and the people showed there were areas of governance where Xi was not sure if his policies were fully implemented. The replacement of the commerce minister indicated an attempt to project freshness, in view of the poor performance on the foreign trade front.

 
Xi’s anti-corruption campaign is rocking the elite power boat in China. Added to that are rising protests — military veterans, students… Are there any clues in the NPC about how the government will get a grip on this?
 
The anti-corruption drive, Xi’s signature governance initiative continued with full steam — now described as “with crushing momentum” — during the past four years. As many as 240 central government officials and over one million local-level officials have been penalised for violating party and government rules. It did create trends of turbulence and many other stirrings. That the campaign did have widespread popular support cannot be questioned. However, high unemployment among the urban youth, farmers’ unrest and discontent among workers did cause concerns for the regime.

 
To manage this situation, a number of social management measures have been enforced. More funds have been made available to provincial and county governments to address people’s problems. At the same time, central monitoring and control have been further developed with the imminent establishment of a National Supervision Commission and enactment of a National Supervision Law. Xi’s emphasis on law-based governance and ethical conduct of party members through strict self-discipline are generally welcomed by people. They are important parts of Xi’s Four Comprehensives, the others being comprehensively achieving the goal of “a well-off society in all respects” by 2020, deepening reforms and an open door. Xi has put in place a solid framework of economic policies and governance strategy to easily earn a second term at the party congress.

 
With uneasy ties between the US and China and between the US and South Asia, how should we view China in the subcontinent from India’s perspective and from Pakistan’s, given the rise in China’s military budget as announced by Li?
 
China has increased its defence budget by seven per cent, a bit less than the 2016 allocation of 7.6. Before that, for over a decade the annual increase was more than 10 per cent. This year’s allocation is 1.3 per cent of gross domestic product. (Education gets about four per cent of GDP.) Cutting down armed personnel and emphasising modern technological upgrade has been the approach China has adopted for many years now. Building naval power and developing R&D are highlights of the Chinese military development.

 
Ties between China and the US under President Donald Trump are yet to stabilise. Early tensions seem to have subsided, with Trump reiterating the One China policy. State Councillor Yang Jieji’s visit to Washington has yielded positive result, with a possible trip by Xi to the US slated for April. The emergence of Xi on the world scene as the most important advocate and guardian of economic globalisation criticising protectionist measures such as those asserted by Trump may make US policymakers uneasy. The interdependence of the two economies will follow its own logic of balancing their economic relations.
 

On counterterrorism, the NPC sent serious messages. Xi met the Xinjiang delegates and reaffirmed the  central policies of strongly suppressing the challenge. India and China have already engaged in dialogue on counterterrorism. On Afghanistan, they need more understanding on the approach to talks with the Taliban. While China has its reasons to support talks, India has strongly opposed it. Bilateral and regional deliberations involving China, India, Pakistan, Afghanistan and Iran are needed on counterterrorism so that progress can be made towards peace, development and self-governance. The US may encourage this process at the present moment.
 
One Belt, One Road is spelt out once again by Li as a promising initiative for an open, global economy to develop infrastructure and trade; it is based on the principle of mutual benefit.