After eight

A new economic target stimulates debate at this year's NPC


09 Mar 2012
Week in China

Shen Jilan hit the headlines again at this year's National People's Congress (NPC). As WiC pointed out in issue 98, she got a
lot of media attention at last year's meeting thanks to a revelation about her voting record. The 82 year-old has attended every meeting of China's parliament since 1954. And as she proudly told the Beijing Youth Daily she has yet to vote against a single government proposal.

Many chief whips in the UK would no doubt envy such loyalty. But this year Shen caused controversy with a proposal of her own. According to the Southern Metropolis Daily she wants to set up a new body to decide who should and shouldn't be allowed to access the internet. Why? Free access to the internet was misleading the masses with bad information and foreign "nonsense" she claimed. Not surprisingly the idea didn't find much favour with China's 500 million internet users. "Her mind stays in Mao's time, but she is a delegate for today's people," complained weibo user Wang Gang.

China's annual legislative session began on Monday. Apart from Shen's plan to straitjacket the web, what else came up at this year's NPC?

Premier Wen's percentage game...

As usual Prime Minister Wen Jiabao delivered his so-called work report – a speech that the Nikkei newspaper calls China's equivalent of the "state of the union".

On this occasion, Wen moved world financial markets. That's because he forecast that China's economy would only grow by
7.5% this year. For economists and analysts this indicated a slowdown, with potentially recessionary implications for the world
as a whole.

Stock markets sold off thanks to Wen setting the lowest growth target since 2004.

But the number was significant for another reason. As WiC pointed out in issue 8, there is a psychological importance in China to 8% growth – it's viewed as the level required to absorb school leavers and graduates into the workforce. There is even a term 'bao ba' (protect 8) to describe its strategic importance.

So departing from it – even by 0.5% – is a key signal. In fact, Wen used his speech to reiterate a need to change China's economic model. "The key to solving the problem of imbalanced, uncoordinated, unsustainable development [in China] is to accelerate
the transformation of the pattern of economic development. This is both a long-term task and our most pressing task at present," he said.

Better quality growth must be sought, said Wen, through "policies that encourage consumption."

The end of 8% growth...

The Wall Street Journal commented that Wen had "signalled that an era of supercharged expansion may be coming to an end, a shift with profound implications for countries like Australia and Brazil that have prospered from red-hot demand for commodities."

It added that the lower growth target suggested China's leaders don't "intend to stimulate the economy through state-led investment, as they have in the past. Instead, they plan to let a long-touted shift away from export-led expansion to take its course."

The key to solving the problem of development [in China] is to accelerate the transformation of the pattern of economic development.

But does Wen's speech actually mean China will see 7.5% growth this year? HSBC doesn't think so. "We reiterate that the lower GDP target should be seen more as the lower bound of Beijing's range of acceptable growth forecasts, rather than as an actual growth forecast," writes Sun Junwei, HSBC's China economist. "Beijing has an impressive track record of overshooting its pre-announced growth targets; for example, we refer to the average of 11% actual growth
versus 8% target growth for 2005-2011."

Significantly, the government's increased focus on welfare programmes means it will run a bigger fiscal deficit this year – 1.5% of GDP versus 1.1% in 2011. That is stimulative.

Sun reckons "a wider deficit, plus more monetary easing should help China achieve an around 8.6% GDP growth rate for this year."

Wen's speech had its critics?

One of the key planks of the government's welfare drive is an increase in affordable housing. Wen announced that spending on this would rise 23% this year to Rmb211.8 billion – with five million public housing units finished in 2012 and seven million more under construction.

Hao Yuan, vice governor of Gansu province, was not convinced. He said local governments lacked the funds to pay their share of affordable housing costs, calling it a "major financial burden". Speaking at the Chinese People's Political Consultative Conference (CPPCC) – an event that accompanies the NPC – he said local governments don't have enough capital or land, nor (interestingly) the incentive, to build affordable housing.

That wasn't the only note of dissent. Also speaking at the CPPCC, Chen Feng objected to a passage in Wen's speech that referred to China's "blind development" of wind and solar energy and calling for its "suppression". The chairman of HNA Group thought the prime minister had sent out the wrong signal and said so on a panel. The government, Chen believed, should actively support 'new energy' rather than talk of its suppression; an action he deemed "inappropriate". Wen's strong language could just cause more problems for the nascent industry, he added.

WiC isn't suggesting a new era of parliamentary debate has begun. But such public criticisms are an interesting development; and certainly less choreographed than in bygone sessions.

Were any other interesting comments made at the event?

One NPC delegate getting attention was Li Xinghao, chairman of air conditioning firm Chigo Group. Nanfang Daily reports that he had two fairly radical and controversial proposals.

The first seems to build on the idea of carbon trading, but apply it instead to China's one-child policy. Li suggested that poor rural residents could sell their right to have a second child to wealthier urban families. "The state should establish a trading platform for those with demand to apply and those with a legitimate 'quota of fertility' to transfer," said Li. This would combine family planning with "enhancing national competitiveness".

Li's other suggestion: he wants anyone convicted of robbery to be sent to China's northern deserts to plant trees. "Let them atone for their crime by greening the environment, which is beneficial to eliminating the root causes of their lazy thinking," he commented.

Proposals like these abound at the NPC. But few of the delegates' ideas ever become government policy.

Who was there and who wasn't?

This year there were 2978 delegates selected for the NPC (although 54 were absent). South Weekend sought to briefly cast the spotlight on three delegates, who were attending from Guangdong, Chongqing and Shanghai. That's because they represented a constituency that historically has been ignored by China's parliament: migrant workers.

Beijing has an impressive track record of overshooting its pre-announced growth targets.

The role of Hu Xiaoyan, Hong Houming and Zhu Xueqin is to act as a voice for the migrants and air their concerns and grievances. But as the newspaper points out this is quite a challenge. After all, it's tough for three delegates to fully represent 242 million people.

Conspicuously not present this year were any of the 'independent candidates' who made such a media splash last year (see WiC109). Circumventing the usual processes they'd tried to become delegates by announcing their candidacy on Sina Weibo, China's Twitter-equivalent. Leading the charge was sports writer Li Chengpeng from Chengdu, whose campaign attracted popular acclaim. But the absence of any independent candidates at this year's NPC shows the movement essentially failed.

However, the most high-profile delegate not to show was Wang Lijun (see WiC138). The deputy mayor of Chongqing has been detained in mysterious circumstances. In a press conference a spokesperson for the CPPCC said Wang had asked for "leave" not to attend this year's NPC – but without specifying why.

Wang's absence seems to further confirm the view that those who favour the cause of reform are in the ascendant (see last week's issue). That view is likewise reinforced by Guangdong Party boss Wang Yang's confident swagger at this year's NPC. Widely regarded as a leader of the reform camp, he suggested scrapping lengthy introductions and applause for officials at government meetings, trimming ministries' powers to veto projects and strengthening intellectual property rights. His 'small government' credentials again came to the fore when he discussed why he favoured waiving a variety of unhelpful corporate taxes.

Time to reform, says Wen

Going back to Wen's 'state of the union' speech, CCTV noted the premier used the word 'reform' more than any other term – on 70 occasions in fact.

The South China Morning Post concurred that this was the key theme in his speech. The Hong Kong-based newspaper said Wen "vowed to accelerate reform of the mainland's economic structure by focusing on raising household earnings and breaking-up state-owned monopolies...and singled out six areas for deepening reform which included taxation, the financial system, income distribution and the government's role in the economy."

All told, this NPC will probably be remembered for Wen's clarion call for "deepening reform". But by the time he delivers his final work report next March, just how 'deep' should become clearer.

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