WUKONG China sets out its
Wu Zhong, China Editor
KONG - Dull as the 18th National Congress of the
Chinese Communist Party (CCP) may be, with its
pre-fixed agenda, the party meeting that continues
this week could still be said to be of
epoch-making significance, both politically and
On the political side, the
18th party congress symbolizes that the CCP and
China have eventually walked out of the shadow of
Deng Xiaoping. It is well known that outgoing
President Hu Jintao, like his predecessor Jiang
Zemin, was handpicked and pre-appointed by Deng
Xiaoping. As such, it could be said Hu has ruled
China under Deng's shadow for years even though
the paramount leader passed away several years
before he came to power.
leader Xi Jinping has no direct personal
connection to Deng
whatsoever and hence is not personally indebted to
him. This may make it easier for him and CCP
officials of his generation to review Deng's ideas
and policies more objectively.
point of view, it may not be coincidental that
before the 18th party congress, criticism of Deng
began to surface in China. For example, Deng's
policy of allowing some people to "become rich
first" is now blamed for causing and ever-growing
wealth gap. There are also calls to abandon Deng's
pragmatic trial-and-error approach toward reform
and opening up ("Crossing the river by touching
rocks on the riverbed").
economists now argue that economic and financial
reforms have already entered the "deep water zone"
so it is no longer possible to touch any stepping
stones. Therefore, economic reform and opening up
must be reoriented; they require new theories and
cannot be deepened without accompanying political
and social reforms.
Likewise, as tensions
caused by territorial disputes in the East China
Sea and South China Sea between China and Japan
and some Southeast Asian countries intensify,
Deng's diplomatic policy principles of tao
guang yang hui" ("not to show off one's
capability but to keep a low profile") and
"shelving disputes and seeking joint development"
are increasingly being questioned in China.
The farewell to Deng also marks a formal
goodbye to the "communist revolution". Both Mao
Zedong and Deng were leaders of the Chinese
revolution in the last century. Once Hu Jintao is
gone, the CCP's direct link to Deng is also ended.
In this sense, Xi's coming to power truly marks
the beginning of the post-Deng Era. Xi's
declaration that the CCP is no longer a party of
revolution but has become the ruling party of
China shows he wants to draw a demarcation line.
Xi is not handpicked by any single
party heavyweight. He was chosen as a compromise
of factional struggles. He does not need to remain
loyal to any single person or single faction,
making it easier for him to make changes, provided
he wants to.
Economically, the 18th party
congress also marks the end of the era in which
China has had to rely for its economic growth
primarily on foreign investment and trade. From
now on, China will have to boost domestic
consumption as the major stimulus for economic
At the opening session of the
congress, Hu delivered a keynote policy address -
said to have been drafted by a group led by Xi
Jinping. The report sets policy principles for the
party and the government's works over the next
The address sets the goals of
doubling both China's gross domestic product (GDP)
and people's incomes by 2020 compared with 2010.
This is the first time the CCP has explicitly set
a long-term growth goal for people's incomes and
is apparently aimed at easing public discontent
over the fact that personal income growth has
fallen behind economic growth in most of the past
three decades. Putting such political
consideration aside, an increase of people's
incomes is a must if economic growth is to double
the country's GDP by 2020.
To achieve the
GDP growth target, China must maintain an annual
growth rate of about 7.5% over the next eight
years. Given dramatic changes in the business
environments both at home and abroad, it is
impossible for China to rely on foreign trade to
stimulate growth to the extent required by this
2020 target. Continued reliance for growth on a
high rate of investment is equally problematic
without an accumulation of an unsustainable debt
burden. Hence, China will have to rely
increasingly on domestic consumption to keep its
Growth of exports will
remain sluggish. At a press conference on the
sidelines of the congress, Minister of Commerce
Chen Deming admitted export growth this year would
be less than 10%. Chinese economists generally
expect consumption's contribution to GDP will
exceed 55%, becoming the leading horse of the
"troika" pulling the Chinese economy.
to boost domestic consumption, people must have
more money to spend. This explains, from an
economic point of view, why the CCP for the first
time sets a growth target for people's incomes.
This is a direct and effective way to boost
According to the National
Bureau of Statistics, China's GDP totaled 39.8
trillion yuan (US$6.74 trillion) in 2010, up 10.3%
from the previous year. Average per capita income
for rural residents was 5,919 yuan, up 10.9% year
on year; average per capita disposable income of
urban residents was 19,109 yuan, up 7.8%.
If the ambitious GDP growth goal the CCP
sets can be attained, then by 2020 China's GDP is
expected to reach nearly 80 trillion yuan while
rural and urban residents' per capita incomes will
be 12,000 yuan and 40,000 yuan respectively.
China's population now is 1.35 billion,
with about half being urban residents, as the
so-called urbanization rate is expected to exceed
50% this year. Thus, disposable incomes of Chinese
people totaled about 16.90 trillion yuan in 2010.
Suppose the urbanization rate remains unchanged by
2020, though unlikely given the rapid moves to the
cities, disposable incomes will already reach 33
trillion yuan, a sure signal of stronger
Other measures unveiled in
the party policy address, such as wealth
redistribution reforms including, establishment of
a universal social security network and
improvement to the medical insurance system, are
designed to help boost domestic consumption.
The policy address stresses "achieving
common prosperity" (instead of allowing some
people to become rich first) so that "the fruits
of development will be shared by the people". To
do this, no effort will be spared to boost
people's incomes by "deepening the [wealth]
It is thus expected
that the long awaited reform of the distribution
system is to start after the congress. Outlines of
the reform were unveiled last month, based on the
principles of "increasing the incomes of
low-income people, curbing excessively high
incomes and to outlaw illegal incomes, so as to
expand the middle income population."
document sets a goal of building a universal
social security network to cover the whole
population and improving medical insurance system
- another measure in favor of domestic
By setting the goal to double
people's incomes, the CCP leadership is well aware
that this means labor cost will rise rapidly.
Hence industries dependent on cheap labor will be
gradually eliminated. Beijing is aware that the
country can no longer rely on labor-intensive
production and trade to sustain high-speed growth.
But how to create new jobs when
labor-intensive manufacturing industries are
fading away becomes the principal new challenge.
All this means a dramatic economic restructuring
is under way.