The China Development Forum is the highest level meeting between western business leaders and senior Chinese Leaders, ministers and business leaders. The Forum is very well organised and run by the development reform commission and its operating parts.
I was very fortunate to be among the invited guests this year in the State Guest house – Daiyoutai – in a mild Beijing spring.
As much of the content is run on “Chatham House rules” I shall confine my comments to general views.
But from Henry Kissinger and Christine Lagarde and Premier Li Kechiang the speakers were top drawer. The forum closely followed the National People’s Congress and the CPCCC meetings whose closing results were carried extensively in reports of Premier Li Kechiang’s press conference.
Three days of intense meetings covering a wide range of subjects gave those present unprecedented access to the issues and challenges facing China, and how Chinese ministers were addressing them.
Much speculation exists in the media about China’s growth rate and that is set at 6.5-7.0pc. I did not get any sense that this was unrealistic or too low or too high. The case for a lower growth rate is well made as China heads towards a more normal long term growth which has a per capita and a sustainability objective through the middle of the century.
So a figure of 6.5-7.0pc seemed reasonable and achievable. There are challenges such as a deteriorating global trade picture which causes problems for China’s exports. Most of that comes from global features such as low global growth and currency and interest rate problems resulting from an extended period of QE in the USA and Europe.
China cannot affect those global trends other than to maintain itself as a centre for stable growth. It did adjust its RMB rate against the dollar as it rose, following the Fed’s decision to raise interest rates in the USA. The RMB is not pegged now to the dollar , but once again to a basket of currencies which more realistically reflect its trading and investment patterns.
China’s foreign trade as a percentage of world trade is holding up well and speakers were generally confident that there was no need, or real benefit, from a further devaluation of the RMB.
As China moves from a low cost export based economy to being focused on domestic consumption, the effects of change will be bumpy. That was clear. But change is an acceptance of reality and the bumps inevitably follow. Most speakers felt China was realistic in that regard, and changing the pace of reforms as real issues arise. But the stimulating of the economy was being conducted in a targeted way to maintain growth at a level which would protect employment and stability.
China is, we were assured several times, on a new five year plan which intends to deliver a per capita by 2020 of twice that of 2010. All the presentations suggested that was on course.
The stimulus programme of 2008/9 was blanket whereas this time is more targeted and takes into account long term changes. The provinces will play a less significant part, especially as they are sorting out their debts arising from the last stimulus. This is largely being achieved by converting their debts to long term bonds which lowers the cost of servicing and reduces the annual repayments. I also felt that internet banking was under more control and the main banks were more solidly based as a result. Jack Ma’s evident entrepreneurial targets were being directed more to the development of the internet and beyond and less to innovative financing.
Sharing a platform with the boss of Facebook one had the impression that internet development was going to be intense and could increasingly link the USA and China in new ways.
In fact one had the impression that USA companies were forging ahead much fasted in China, and with China than their European counterparts as both nations want to develop a more meaningful relationship.
Whilst this has tensions in Asian politics the reality of USA China relations were underlined with news of President Xi’s imminent return to Washington to attend the Nuclear Conference and a private meeting with President Obama.
It was evident that AIIB was working closely with the Asian Development Bank and other global institutions on the financing of the OBOR – the New Silk Roads.
China’s management of its currency, its financial markets, and its funding of the OBOR project were clearly in the hands of seasoned professionals who were very much at ease working with global institutions.
The reform programme for the SOE’s and the changes in capital financial markets are always being mentioned. The Chinese response was no big bang moment, no change to a free market, just managed change over a period of 2-5 years. One sensed that the tension between what I call managed capitalism – the managed market economy of President Xi’s China – and the concept of a free market was there, but that the Party remained committed to managed change.
The Conference ended with an impressive one hour plus meeting with Premier Li who was comfortable and confident with a wide range of questions.
China’s leaders always look relaxed and healthy despite an incredibly active set of diaries. Following the NPC and this meeting he was on his way to address the Boao Forum and the Mekong Forum.
China is preparing for the implementation of the new five year Plan and also beginning the preparations for its Party congress in Autumn 2017.
For the West it was evident that China will be the world’s biggest growing market in the next few years and the New Silk Roads will create additional growth opportunities.
Business leaders will have left Beijing aware that China is managing challenges but is on course to maintain its growth targets. Its management of overcapacity in the steel and coal industries are evidence of its accepting problems and acting to deal with them. They will not be easy but they are not surprised by problems. They accept them as part of running a nation and having long term goals which are also regularly reviewed.
I did not feel that Chinese leaders were confused by the challenges so much as foreigners were unware of their different destinations. They are not planning to develop economies like ours although we will share many features. Their goal is into the next century and a stability and shared wealth which encourages reasonable growth and social stability. So they feel the stones as the cross the river but they know what is on the other side of the river.
The world has a strong interest in a stable and developing China.