Report Interpretation

Party in full swing with delivery of pledges

Two things struck me as substantive in the maze of reports emanating from the recent 17th National Congress of the Chinese Communist Party in so far as economic aspects are concerned: Xiaokang, and healthcare for all by 2020.

Of course, Xiaokang was brought in as a goal in the 16th Congress five years ago but its reiteration, with clarifications, and the fact that the necessary growth rate required for the related target of quadrupling of the country's GDP by 2020 over its 2000 level has done more than just fine over the last five years makes it more pertinent.

Besides, it is the use of the Xiaokang notion, rooted in China's ancient history and culture, by the Party that is most important. It points to the return of this civilization to its classical traditions, beliefs and values, including Confucianism, as it grows, develops and seeks its place in the new world of the 21st century.

That China will be able to quadruple the GDP in the said timeframe looks easier than before, even though the Congress session came close on the heels of some negative news around the Chinese economy, particularly the safety and quality issues that could mar the credibility of the "Made in China" label with long-term consequences to the "factory of the world".

Otherwise, it is indeed a complement to the resilience of the Chinese economy and to the skills of those managing the threats to the Chinese economy one has heard chronically.

Inflation is one potential problem that the Chinese themselves are recently talking about.

However, the upward tendency in the prices of a few essential items of consumption mainly food items notwithstanding, it is difficult to believe that inflation is really posing a threat to the Chinese economy. It is, of course, extraordinary that 30 years of China's reforms and growth should pass without a serious bout of inflation.

The Party's take on agriculture makes interesting reading. While the claims of having achieved a breakthrough in raising growth rates in agriculture and in rural incomes, having abolished taxes, providing subsidies in medical care/insurance, and basic living allowance to the poor are usual stuff, it says "it is time to pay back agriculture".

Now that has serious theoretical resonance. There is a ring of an admission that agriculture might have considerably contributed and suffered in the industrialization process. And that resources must flow back into it now.

This is different from pumping resources into agriculture to help it generate and release surpluses for non-agriculture/industrial sectors. The Chinese economy seems to have reached a higher plane where its non-agricultural sectors are producing huge surplus resources of their own.

The shift to the qualitative aspects of economic growth, as distinct from the quantitative aspects reflected in preoccupation with growth rates of the GDP and the like, that one first heard of in and after the 16th Congress, seems to be actually taking place. Newer policies and increased funds for health, education and social security all indicate that.

The stated reason might be the need to correct inequalities etc, but one could better read it as related with the gradual maturity of the Chinese economy.

The Chinese economy has reached a stage where not only these sectors need independent attention in the sense that ever increasing level and growth rates of GDP by themselves may not ensure a broad-based increase in the quality of life so necessary for achieving that "moderately well-off society" but where the state and economy can afford to spare enough resources to plough into the social sectors.

It suits China's economy in the long run. There may appear to be an opportunity cost in investing in the social sectors over investing back into the immediately/obviously productive sectors but investment in social sectors is likely to pay off in due course. It also reflects on the shaping up of the modern welfare state in China.

Healthcare for all by 2020 may sound like a political slogan and look ambitious for a country of China's size but it definitely indicates the country's priorities now. The challenge will not be funds but the building of requisite institutions as healthcare is increasingly privatized.

It is important that the framework for reforming the healthcare system, involving several ministries like education, labor and social security, and civil affairs, that reportedly centers on the "coordinated and parallel" reform of the medical services, insurance and supply systems comes in the backdrop of increasing public criticism of high medical costs and a string of hospital scandals.

While envisaging increased government responsibility and spending, it seeks to encourage greater participation of private capital from both home and abroad in the sector.

The Party's emphasis on "innovation" is also striking. One hears of "enhancing China's capacity of independent innovation and making China an innovative country" and plans "to increase spending on independent innovation and making breakthroughs in key technologies vital to economic and social development".

Ambitious again, but overdue, one might say. The accent is on "establishing a market-oriented system for technological innovation, in which enterprises play the leading role, and encourage formation of internationally competitive conglomerates".

Coming amid concerns for intellectual property rights, piracy and issues of quality Chinese brands, the message is that China is serious about investing heavily in the R&D and it is not good just at copying. However, it has a long way to go here.

While the shift to the qualitative aspects from the quantitative, growth-centered focus, expressed in increased spending on the social sectors or into fields like R&D, is for real, to me it does not seem to be adding up to a new economic policy as such.

One heard five years ago that it was coming. This time there is talk of "accelerating transformation of the mode of economic development".

Even "upgrading of the industrial structure, balancing urban and rural development, pushing the building of a new socialist countryside, improving conservation of energy, resources, ecology and environment" may all be important in themselves, but the FDI-exports led growth model with promises of more and more reforms remains intact.

It was significant, however, that China's property law, aimed at providing equal protection to both State and private properties was put into effect just before the Congress met. And the Party decided to amend its constitution to "foster the development of the non-public sector".

Even as the Party looks back at the last "extraordinary" five years of difficulties and achievements, the tendency is to keep reminding how bad things were before 1978. "Even a melon seed would be cause for controversy", then. "Even the price of a box of matches was determined by the government".

It is claimed that the number of extremely poor people in the countryside that stood at 250 million (30.7 percent of the total rural population) in 1978, when the reform and opening up started, declined to just over 20 million by the end of 2006. Could well be.

It is added that China's reform and opening up drive has been hailed by the World Bank as the largest poverty reduction campaign ever launched in world history, particularly in reducing its rural population in abject poverty.

A bit odd that a country that began its reforms on its own, much before the World Bank hawked its structural adjustment programs to developing/transitional economies, should value a certificate from the World Bank so much.

Interestingly, there is no giving up on Marxism. And there do not seem to be any limits to "Sinification". If the word "democracy" was used 60 times in Party Generay-Secretary Hu Jintao's speech, as Chinese newspapers promptly reported before others could, the term "Chinese characteristics", I counted, appeared not less than 57 times.

Nevertheless, the Party is on. People are having a good time. The Party is still delivering. Its promise remains the same, delivering on the economic front and getting a respectable place for the Middle Kingdom in the new world.

With the Party and the government continuing to talk of people's prosperity in terms of cars and computers, and making peoples' lives "more colorful", it sounds more than Xiaokang.

The author is an associate professor and fellow at the Center for the Study of Developing Societies, Delhi, India, and heads the Chinese Economy Program at the Institute of Chinese Studies at the center

(China Daily 11/14/2007 page11)

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