China elected its new leaders in late 2012, then moved a year later at their Third Plenum to identify the main policies that would be followed. The Economic Work Conference, a month later, in December 2013, identified more detailed aspects of those policies. Now comes the National People’s Congress and the CPPCC, where the Government’s implementation policies are identified.
We shall see over the next few days a clearer picture emerging of the route being taken towards Socialism with Chinese Characteristics. Commentators have focused on shadow banking and the falling rate of the RMB s as indicative of major challenges in managing the financial infrastructure of the new evolving market economy.
While I share the concerns for China during transition, we may be seeing a period of surfacing problems which need to be solved by policy decisions, instead of allowing ways to develop outside clear policy decisions. So we would see a mixture of announcements of policies to speed reform, and actions designed to bring the sheep back on the farm, albeit expensive sheep and shepherds!
Over the next 12 months China will determine its way forward but much of it has been poured over for many years and, whilst practice is the final determinant of policy, much of this has been experimented with for several years.
The leadership has already stated the State Owned Enterprises, while being further reformed, and taking in private sector shareholders, will form the pillar of the Chinese economy, it is a market economy guided by the Party and Government, that will flourish with an enlarging private sector, albeit developed by policy and not by mere economic forces.
The message will be economic reform and development of the market with guidance. The New China will provide huge commercial opportunities for the World.
This will all be happening against a world situation which is darkening with the complications of the Ukraine, which shows the deep fault lines in the global order and architecture for managing global tensions.
The tragic and savage terrorist attack in Kunming is also something that is a sad event for friends of China.
But China has managed adversity and has a clear minded and modest leader in President Xi. It will overcome the challenges by remaining clear minded and not trying to change too fast. Change is needed but not fast change.
We shall comment soon on the Government Congress’ outcomes.