By Giancarlo Elia Valori
The fifth session of the National People’s Congress and the Fifth Session of the 12th National Committee of the Chinese People’s Political Consultative Conference are two epochal moments in the evolution of “Xi Jinping’s policy line” and China’ great transformation from great economic locomotive of the world into a multi-faceted and global power.
While, in the past, the People’s Republic of China could be considered an “Asian tiger” which, unlike the other smaller ones, had recorded large and stable economic development, currently – under Xi Jinping’s leadership – time has come to turn mere steady economic development into clear and firm international power living up to China’s new strategic role, namely being a major and fully-fledged world power.
The “tigers” which had led to the Asian booming economies had been undermined by the manoeuvres they did on the dollar. China saved itself also because it did not dollarized itself, but rather bought US public debt securities, thus becoming a “silent partner” of its main competitor.
Hence the support for globalization expressed by Xi Jinping at the recent Davos Conference.
Xi Jinping’s China does not want to reduce the globalization rate, because only the world market, as a whole, can sustain its harmonious development, without producing internal inflationary imbalances or productive crises. In the traditional Marxist thinking, the overproduction crises that Xi Jinping fears are typical of real capitalistic crises.
Those who win the Darwinian struggle between nations and strengthen their economies tend to spread their success and, hence, eliminate possible competitors.
Conversely, those who lose always want the closure of their markets, as well as protectionism and control of world economic flows.
It was also the idea of Adam Smith in his “The Wealth of Nations”, the book which is at the core of modern political economy.
Furthermore, in 1776 – namely the year of the American Revolution – Smith’s England wanted free-trade and liberalism in distant markets, but it kept its market tightly closed. Those who win are liberal (for the others), while those who lose the world economy game only want to avoid greater damage, thus becoming even more protectionist.
Therefore Xi Jinping’s China will conquer a large share of world economy, thus becoming leader of the unavoidable future globalization and outsourcing some of its assets, as well as replacing the old Western powers, which are no longer able to guide and direct economic, financial and cultural globalization.
Efficiency and representation do not often go hand in hand: the West is in the grip of “vested interests” which – through Parliamentary legitimate representation – distort and block economic, productive, financial and cultural reforms.
Thanks to its political structure, China can avoid these Western constraints and reach Xi Jinping’s goals quickly and effectively.
Incidentally, the People’s National Assembly (or Congress) is the highest State institution and the sole legislative body of the People’s Republic of China.
Unlike other Western representative institutions and structures, the current organization of Chinese representation is highly functional, considering that it provides for one single legislative House (namely the Assembly) which institutionally supervises the Presidency, the Council of State, the Supreme Court, the Army and the eight non-Communist smaller parties which, however, have pledged allegiance to the Republic founded by Mao Zedong.
In one single annual meeting, always held in March, the Congress ratifies the decisions often already taken by the Party bodies and basically discusses the “policy line” of legislation and, hence, of China’s future policy.
The Political Consultative Conference, too, is a body of the Chinese State and represents the various political parties present in the People’s Republic of China, which have accepted the direction and leadership of the Nation by the Communist Party.
It is an institution also made up of members from other non-directly political associations and includes members of political parties and many associations from Hong Kong, Macao and Taiwan.
The Conference also includes major personalities, independent from the various parties.
Later the Communist Party of China (CPC) will elect a new Party’s leadership during its National Congress scheduled early next year.
Therefore this is the phase in which Xi Jinping is definitely strengthening his power over the Party and hence his specific policy line. Five of the seven members of the Politburo Internal Committee shall leave office at the beginning of 2018, and only Xi Jinping and Prime Minister Li Kekiang will remain in office.
Some outgoing members of the Politburo Standing Committee will be likely investigated on corruption charges.
Also the Armed Forces will change radically when the Communist Party of China is fully in Xi Jinping’s hands.
The four general headquarters of China’s Armed Forces have already been cut down to size and merged into the Central Military Commission.
The second military reform implemented by Xi Jinping – of which we will soon see the results – is designed to place the four Armed Forces on an equal footing, by putting an end to the primary role played by Ground Forces.
Obviously, today China is no longer a regional power that must be defended mainly from ground invasions – which are the most geopolitically likely invasions – but a global and globalist power that must protect its new status with a large Air Force and a strong “blue-water Navy”, as experts call it.
Hence separate Commands also for the ground forces that previously led the whole Chinese military structure.
Basically, Xi Jinping wants to cut the Armed Forces down to size (300,000 soldiers and officers have been dismissed), but he wants them to be always “combat ready”, namely capable of combined operations and, above all, suitable for operating outside the traditional Chinese scenarios.
Furthermore, Xi Jinping knows the structural weaknesses still threatening China’s development: corruption, which has taken huge liquidity away from China’s productive economy, through one million officials investigated to date on severe corruption charges; technological innovation so as to avoid China remaining the old “world factory”, as the dollarized “tigers”, but excluded from the new production trends; finally agriculture and, above all, the stable growth of people’s wellbeing.
China runs the risk of experiencing the “middle income trap”, as economists call it, namely that development stops when everyone has reached a satisfactory income.
It happened to most Eastern developed economies. After the “middle income trap”, another trap inevitably comes, namely the “poverty trap”, as in current Latin American economies.
In Xi Jiping’s mind, this project includes the State reform, streamlining and simplification, which go hand in hand with China’s full entry into the group of economies recording the highest rate of innovative technologies, which – in many respects – is the economic face of the State political reform that Xi Jinping has undertaken.
This project also includes a financial market with private equity and the other forms of cash and private debt management; the increase in competition between companies; a skilled workforce capable of moving between different technologies and factories; the readjustment of the hukou traditional agricultural welfare; finally, the entry of traditional rural overpopulation into the urban labour force.
As Mao Zedong accelerated China’s development, often with mixed results, Xi Jinping wants the “Fifth Modernization”, the modernization not written by Deng Xiaoping but the most important one – namely the State Modernization, which will inevitably drive the modernization of civil society and the economy.
The relationship between rural and urban areas is the issue which is at the core of Mao Zedong’s thought and the best Marxism – the issue that General Marshall took into due account in his famous Harvard speech in which he outlined the “Marshall Plan” for Europe in the aftermath of the Second World War.
If Xi Jinping succeeds in reducing corruption – and so far he has managed to do so – but particularly in reforming the State to eliminate the old protectionist privileges and near monopolies of the centralized economy, China will not fall into the “middle income trap” and will still have huge development opportunities that Xi Jinping will focus on the technological innovation of products and processes.
As often happened in the history of Socialism, if the State preserves large pockets of unproductive income, inefficiency and unnecessary costs – all problems that we Italians know all too well – Xi Jinping’s fight, which is the only one currently possible in China, will take too long to be won.
Nevertheless the current rationale of the Chinese leadership – that will also deal with pollution (which is a serious obstacle to globalization, not its natural by-product), as well as with manageable and livable cities on a human scale, with the coordination, wanted by Xi Jinping, between Beijing, Tianjin and Hebei for investment in infrastructure – is still the traditional, Confucian and Taoist one.
Everything is based on the link between “Minyi”, namely public opinion, and “Minxin”, namely people’s hearts and minds.
Xi Jinping is undoubtedly a global leader beloved by the Chinese people, but certainly the impact of the old apparata, privileges and near monopolies will still be felt.
Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “La Centrale Finanziaria Generale Spa”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group and Khashoggi Holding’s advisor. In 1992 he was appointed Officier de la Légion d’Honneur de la République Francaise, with this motivation: “A man who can see across borders to understand the world” and in 2002 he received the title of “Honorable” of the Académie des Sciences de l’Institut de France.