There were a few key takeaways from the 2017 edition of China’s twice-a-decade National Congress. Largely a political event, there were appointments of party members to more senior positions in the Communist Party of China’s (CPC) inner circle. Most interesting was President Xi’s vision for China, including a list of policy initiatives aimed at making China’s economy more open, innovative, equitable, and sustainable.
Political developments
President Xi Jinping saw his leadership solidified and status elevated as the CPC incorporated his self-titled doctrine “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era” into its constitution. Other leaders to have their names enshrined in the constitution in this manner include Mao Zedong and Deng Xiaoping.
Breaking with convention, the CPC chose not to make a strong statement on a potential successor to President Xi by failing to appoint more youthful party members to its inner circle. The CPC maintains a retirement age of 68 for its top leaders.
A refusal to map out a clear successor has opened up speculation that President Xi may remain in a position of influence even after his customary two five-year terms end in 2022. Although the Chinese constitution limits him to two consecutive terms as president, he may seek another high-level role in the CPC and serve as a guide to the newly appointed President.
Economic Policies
President Xi’s opening speech last Wednesday referred to a number of initiatives to improve upon China’s prosperity and his vision to make China a global power by 2050. To achieve this, he outlined some broad goals. Near term goals include achieving a thriving middle class by 2020, while medium term goals targeting improvements to the quality of life for the average Chinese citizen. This includes efforts to promote a clean environment, and an expansion in public services. Longer-term goals involve the promotion of a patriotic culture and strengthening national security by achieving a first-class military by 2050.
The adoption of these tenants in the CPC constitution suggest a gradual shift away from one of growth at any cost to a more balanced approach that places gains in material wealth at an almost equal footing as achieving social prosperity. This change has largely been interpreted as acceptance by the CPC of lower economic growth in the future in order to maintain social harmony.
President Xi’s vision also affirms China’s outward expansion, including investments in projects such as the Belt and Road initiative that focus on expanding trade routes, and consequently Chinese influence, throughout Asia and westward into Europe. In addition, the longer-term focus on strengthening national security implies more defense spending aimed at building its air and naval capabilities in order to deter territorial challenges from neighbouring nations.
The affirmation of policies focused on open and innovative economic development suggests an emphasis on increasing research and development expenditures to continue efforts to move up the value chain and follow the evolution of neighbouring South Korea and Japan toward advanced economy status. President Xi has set 2035 as a target for China in joining the ranks of the most innovative nations.
China’s repeated its commitment to adopting market-oriented reforms. This includes greater efforts to allowing market forces to determine resource allocation, with the implication that domestic prices from now on should be more representative of market conditions. Moreover, this commitment remains consistent with China’s determination to eventually allow global markets to determine China’s exchange rate as it strives to open itself to more foreign investment in the years ahead.
Lastly, China remains committed to supply-side structural reforms, including reducing industrial overcapacity and restructuring bad debts in its corporate and banking sectors. China’s explosive debt growth over the past decade has raised concerns that a China-driven deleveraging episode may be the event that triggers the next economic downturn globally. Debt restructuring will remain a key strategy that China employs to reduce its financial fragility implied by its elevated debt levels across all sectors.
