Leadership meetings indicate commitment to reform

The “lianghui” (or “two meetings”) ran concurrently, with news coverage outside of China predictably focusing on the NPC’s approval of leadership changes signalled last November, of Xi Jinping as president and Li Keqiang as premier.

At the closing of the NPC, President Xi talked about the growing inequality in the country and emphasised the need to reject “hedonism and extravagance, and resolutely fight against corruption”. He also said he would fight for “the great renaissance of the Chinese nation”.

Premier Li highlighted environmental protection and economic reform, and promised to fight against corruption and wasteful spending. He mentioned the need to make sure “power will be exercised in an open and transparent fashion”.

But what were the signals from the meetings to the outside world about the future direction of China’s economic policies, and their impact both domestically and internationally? 

The NPC set the gross domestic product (GDP) growth target for 2013 at a robust 7.5 per cent, the kind of growth most nations would be delighted to achieve. Specific goals for the current year include:

_ Accelerated development of the service sector;

_ An increase on R&D spending, to 2.05 per cent of GDP;

_ Inflation to be contained at around 3.5 per cent;

_ Creation of more than 9 million urban jobs;

_ An increase in real income of both urban and rural residents; 

_ Accelerated development of social programmes;

_ Natural population growth rate to be kept under 6.5 per thousand;

_ Completion of 4.7 million units of government-subsidised housing in urban areas and construction started on a further 6.3 million units

One of the areas of focus for China’s new leaders will be boosting domestic consumption, which will be welcomed by anyone doing business in China, given insufficient domestic demand in the past. The leadership’s determination to reduce income inequality and raise incomes in general will help in this regard. 

In terms of foreign trade, the NPC committed to opening new markets and increasing imports of raw materials, advanced technology and equipment, and key spare parts and components, as well as undertaking services outsourced by other countries.

China will seek to improve the security review process for mergers and acquisitions involving foreign capital. Non-financial foreign direct investment is expected to increase slightly from 2012, to $113 billion in 2013.

Chinese investment will certainly continue to make its presence felt around the world. The NPC cited efforts in the year ahead to improve the policies and processes of industry and country guidance for outward investment, targeting an increase in non-financial outward direct investment of 15 per cent to $88.7 billion. 

Overall, the NPC signed up to making a very long list of reforms and improvements. In the past, the pace of reform has been slow, which is not surprising given China’s huge size and the many complicating external factors it faces. But as observers have noted, the important thing is not so much whether the reforms will be happen fast enough, but whether they will be good enough to last.

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