China’s next great leap forward
Karl Marx described the imperative of capitalism as “accumulate, accumulate”, but his soi-disant followers in the People’s Republic of China are learning a new mantra: “consume, consume”. In his farewell address ahead of retirement to the National People’s Congress, the country’s legislature, Premier Wen Jiabao spoke last week of a need to steer the economy away from dependence on investment and exports. “We should unswervingly take expanding domestic demand as our long-term strategy for economic development,” he told delegates in Beijing’s Great Hall of the People at their once-a-year meeting.
“To expand individual consumption,” Wen argued, “we should enhance people’s ability to consume, keep their consumption expectations stable, boost their desire to consume, improve their consumption environment and make economic growth more consumption-driven.”
Unleashing that untapped potential was vital to the future of the world’s second largest economy, he argued in setting a target for China’s economy to grow 7.5 per cent this year. The relatively moderate target reflects the continuing effects of China’s economic slowdown that saw it expanding in 2012 at only 7.8 per cent, its weakest growth in 13 years.
An important component of that growth in consumer demand will be driven by the Communist Party’s urbanisation programme – at a cost of some $6.4 trillion and bringing some 400 million people into cities. To do so, Wen argued, it will have to dismantle the hukou system, which leaves millions of its 158 million vulnerable migrant workers in a legal limbo in the cities, by reforming the household registration system, registering eligible rural workers as permanent urban residents, and expanding coverage of public services to all permanent urban residents. The government hopes 60 per cent of China’s population will be urban by 2020, from about half now, a transformation that a recent McKinsey report suggests could tackle many of its economic imbalances.
Crucially it could erode some of the huge, and very un-socialist disparities of wealth which have emerged – some 13 per cent of China’s population, overwhelmingly on the land, still live on less than $1.25 per day while the country now, according to one report, boasts a fifth of the world’s dollar billionaires. The government took a first step in January by introducing new taxes on the richest to pay for a social security net for those at the bottom.
Wen set out what was a familiar but ambitious programme, and record government spending, on behalf of successor Li Keqiang and president-designate Xi Jinping, who both take office at the end of the NPC later this week. The task of turning the juggernaut that is China falls to them.