March 10, 2008
The annual session of China’s 2 987 member parliament met last week and will meet all this week. China’s government runs in five year cycles, starting with the first congress in 1956. This year marks the first annual session of the 11th congress.
The Communist Party’s priorities for the coming 12 months are routinely ratified and NPC meetings are not known for surprises. However, the congress pulls together the various policy strands and confirms the new government appointments. It will take some time before a considered analysis is possible, but here are some early outcomes:
• Premier Wen Jiabao, in his ‘state of the union message’ addressed the risks posed by inflation to China’s social fabric and to its double digit growth. The inflation target has been set at 4.8%, which will be supported by further price controls and measures to curb soaring investment. The 2008 growth target is 8% (11.4% in 2007). China’s government budget deficit in 2008 is projected at 180bn yuan (200bn in 2007).
• The premier also promised to make China’s exchange rate system more flexible, acknowledging the increased pressure to do this.
• Central government spending on agriculture, rural areas, education and social welfare will be increased to bring about a more equal society. Education spending is being increased by 45%, healthcare by 25% and social security by 20%. Free, nine year compulsory education will be extended to urban children from this autumn. The government is earmarking 7bn yuan to build low rent houses for the urban poor. ]113bn yuan will also be set aside for the science and technology sector (26% increase).
• China will accelerate banking sector reforms, with a particular focus on improving financial support in rural areas.
• Plans to upgrade the status of China’s environmental watchdog, the State Environmental Protection Agency, to that of a full-fledged ministry will be discussed.
• China’s main energy and environmental targets for 2006-10 are to lower energy intensity by 20% and emissions of pollutants by 10%.
• Backward production facilities in the electricity, steel, cement, coal and paper-making industries will be closed down. China will work to make major breakthroughs in key technologies for producing vehicles powered by new energy sources and to develop high-speed rail transport.
• China will also step up protection of rural drinking water sources and work to provide safe drinking water for another 32 million rural residents this year.
• Wen emphasized that the ultimate goal is to achieve sustainable development, which demands “energy conservation, ecological recovery and environmental protection.”
• He criticised irresponsible officials and conceded that the Government’s achievements still fall short of what is required and people expect. “We need to work harder” to resolve problems with employment, the safety net, education, health care, income distribution, the environment and work & product safety. He promised a more equal society.
• Even greater importance is attached to fighting corruption and encouraging integrity.
• More than 7 700 national standards for the safety of food, drugs and other consumer goods will be adopted or updated this year, as part of the efforts to ensure product quality and safety.
• Punishments for companies that violate product quality and safety laws and regulations will be increased and supervision and control systems improved.
• In order to expand employment, business start-ups will be encouraged,job training strengthened.
• Wu Bangguo, China’s top legislator and number two in the Communist party’s hierarchy, said that the lawful rights and interests of workers must be properly protected and ensure the healthy growth of children ensured through the implementation of the labour contract law, the compulsory education law and the law on the protection of minors,”
• The NPC must further expand the orderly participation of ordinary citizens in legislative work. For laws such as the Food Safety Law that are closely tied to the interests of the people, the draft laws should be publicly posted so that the opinions of all sides can be heard, particularly those of ordinary people.
• Wen talked about a system of governance, “by the people at the community level” and said that, “We will “deepen reform of political institutions and advance socialist political channels,” and “carry out democratic elections” at the level of local institutions in order to “expand people’s democracy”.
• He also spoke about the need to protect the rights of religious minorities and “enable religious figures and religious believers to play a positive role in advancing economic and social development”.
• The government will make improvements in the system of supervision to ensure implementation of the people’s right to be informed and to participate in the affairs of the government.
• “In particular, we need to tackle the problems of excessive concentration of power and lack of checks on power,” he said, referring to irregular practices relating to environmental protection, food and drug safety, workplace safety, land acquisition and expropriation and housing demolition
• The congress is expected to discuss a plan to re-organize the government bureaucracy so as to streamline decision-making. It will explore the possibility of merging overlapping ministries and creating a number of ‘super ministries’, eg energy, industry and transport – highly desirable in the light of the poor cooperation between different ministries, but by no means certain to be achieved, and almost certainly not for energy.
• Congress will install the likely successors to President Hu Jintao and Premier Wen Jiabao . Xi Jinping is expected to be appointed Vice President and thus putative successor to Hu Jintao in 2013. Li Keqiang, favoured by Wen Jiabao, is likely to become a Vice Premier, with the unenviable responsibility for makro-economic policy
• The Premier reasserted that a strong defence force was a central plank of China’s modernisation, and must be suited to the country’s growing economy and global role. This comment follows the announcement of a 17.6% rise in military expenditure in 2008. The US has complained about China’s growing military power.
• Wen Jiabao said that Taiwan cannot unilaterally decide its political future as the island prepares to hold a contentious referendum on whether to seek UN membership. ignoring warnings from the US, France, Japan as well as China
• Hu spoke in a much more conciliatory tone, saying that they are willing to have exchanges and dialogue, consultations and negotiations, with any Taiwan political party “so long as it acknowledges that the two sides of the Strait belong to one China.”
A few comments:
• There appears to be little new in the growth, inflation and exchange rate policies.
• China’s twin aims are to keep inflation under control and avoid economic overheating, while maintaining political and social stability and the monopoly of the Communist Party.
• The US economic slowdown will make this more difficult. Interest rate differentials could attract an unwelcome inflow of capital.
• This appears to be borne out by substantial fall in the trade deficit in February, although the extent of the influence of the bad storms and other factors is unclear.
• Trade protectionist sentiments are growing and trade frictions increasing. This is not the best environment for China to cope with her economic and social challenges.
• The increasing gap between rich and poor, the lamentable education and health services – a contrast to the obvious affluence to be seen in the large cities – the poor quality air and the rising water pollution problems, are deep causes for concern to the leadership and the legitimacy of the Party.
• Premier Wen China continues to advocate political reform at the grassroots level beginning with efforts to “develop democracy at the community level” (democracy with Chinese characteristics), ie limited local government elections.
• It is realized that greater transparency at local government level can facilitate public participation in ensuring better implementation of legislation and a reduction in corruption.
• The yuan is expected to continue to appreciate against the US dollar, but not fast enough for Washington.
• However serious the other issues,Taiwan remains the number one emotive concern.