However, no major reforms were announced at the end of this meeting, but some adjustments were made. LThe resolution of the plenum published on July 22 confirms Xi Jinping’s course. “The economy is at the service of the Party’s project whose main objective is technological and scientific sovereignty with the underlying idea that the wealth of an economy and a nation is determined by its techno-industrial capacities,” summarizes François Chimits, economist at Merics, a research institute on China.
No transition from exports to consumption
In the second quarter, GDP growth slowed to 4.7% compared to 5.3% in the previous quarter. “Consumption is stagnant, unemployment is rising, especially among young graduates, foreign investment is in free fall, the expected rebound after Covid in 2023 has not taken place and the Chinese economy continues to rely on exports, in a context of geopolitical tensions,” summarizes Marc Julienne, Asia expert at Ifri. The transition towards domestic consumption is handicapped by a high household savings rate “who hoard money to meet their health, retirement and education needs because they do not have a solid social protection safety net,” the expert adds. As for the weak development of services, it does not allow for the absorption of generations of young graduates who arrive on the job market. “For the rest of the world, this policy does not solve the problem of a country that consumes so little and produces so much,” notes François Chimits.
Mastering key sectors
Especially since in terms of production, the government does not intend to stop there. It has the ambition with its concept of «new productive forces of quality” to surpass its rivals thanks to its technological advance and the improvement of the efficiency of its companies. Thus in the resolution of the third plenum, the word technology (singular or plural) is mentioned 45 times, the word science 25 times but only the word consumption 5 times and the word poverty 2 times. The document states: “Education, science and technology, and highly qualified human resources are the three fundamental and strategic elements of the modernization of the Chinese economy.” As Marc Julienne notes, “technology embodies a double dream of power: making a technological leap through mastery of areas such as AI and quantum and finding more efficient modes of production.” A bet that has come true in certain areas such as 5G or electric vehicles.
But the sectors that China intends to master are numerous and various lists are circulating. There is the list of sectors that fall under defense, that of dual technologies (AI, semiconductors, etc.), that of the sectors of the future (green industries, digital, e-commerce, surveillance, etc.). An ambition that is not fully achieved because many companies are not very efficient. The plenum therefore proposes adjustments.
Governance by law for greater independence
“There are no major changes in the direction of reforms at the end of this plenum. The party reaffirms that the market economy is at the service of political objectives, accompanied by adjustments in implementation, towards more market forces, more competition but under closer monitoring by the Party-State,” decrypts François Chimits. With this in mind, the central government wants to delegate more powers to local governments in tax and regulatory matters (based on the guidelines set by Beijing) and promotes governance by law that does not discriminate against private or foreign actors. The general objective is to strengthen the most innovative companies so that the more efficient Chinese production apparatus can eventually free itself from foreign dependencies. “Ultimately, this plenum confirms that Xi-Jinping is moving towards an extreme politicization of the economy with an internal objective of population control and an external objective of resilience in the face of geopolitical shocks,” advances François Chimits. With the hypothesis of a more conflictual international agenda.
Source: www.usinenouvelle.com
