The meetings of the 14th Chinese People’s Political Consultative Conference and the 14th National People’s Congress, known as China’s most important annual political event, have begun. They are known in the West as the ‘Two Meetings’ and in China as the ‘liang hui’ because they begin one day apart. The Chinese People’s Political Consultative Conference, attended by more than 2,000 delegates from eight parties other than the Communist Party of China and various sectors of society, is, as its name suggests, a consultative body. The National People’s Assembly is the highest legislative body, with around 3,000 delegates from the CCP and other parties.
Delegates elected by the People’s Assemblies from the remotest corners of the country, from provinces and cities to counties and townships, are also important for understanding political participation in China. In his article for The Diplomat, Patrick Meyer of Peking University preferred the term ‘capillary democracy’, while the Chinese media’s coverage of the two sessions in 2023 emphasised that the process was a living example of ‘full-scale democracy’. These concepts, highlighted at a time when US President Joe Biden claimed that autocracy and democracy fronts were at the heart of international alignment, were later followed by the Chinese Foreign Ministry’s report entitled ‘The State of Democracy in America’.
What does the data say about China’s economy?
Coinciding with the 75th anniversary of the founding of the People’s Republic of China, the narrative of this year’s meeting of the two leaders is dominated by the economy. While the Western press declared that the ‘Chinese miracle’ was over, US President Joe Biden likened the Chinese economy to a ‘ticking time bomb’.
There are three interrelated reasons for these assessments in Western capitals. The first and most important is the 5.2 per cent growth rate that the Chinese economy is expected to achieve in 2023. Although this rate is above the global average of 3 per cent and satisfactory for many countries, it is the lowest level for China since the 1990s (excluding the pandemic period).
The performance of China, which has become the world’s second-largest economy and the engine of global growth with an average growth rate of 9% for many years, is thought to have been affected by policies geared towards the property market. It should not be forgotten that stagnation in the property sector, which accounts for a quarter of China’s gross domestic product, is a source of employment for millions of people and increases unemployment rates.
The second reason for the pessimistic picture of the Chinese economy is the declining share of exports in economic growth. According to the 2023 data, China’s exports fell by 4.6 per cent to $3.38 trillion. It is clear that geopolitical tensions are behind this contraction rather than the ‘invisible hand’ that regulates markets.
In order to prevent the rise of China and maintain its hegemonic position in the global system, the United States and its allies have for some time been trying to diversify their supply chains in the name of ‘de-risking’. It is not surprising that by 2023 Mexico will overtake China as the largest exporter to the US for the first time in 20 years.
The third reason for believing that China’s growth will eventually cease to be a ‘model’ is the country’s changing demographics. While this change may not set off alarm bells in the short term, Chinese experts recognise that it is a serious challenge.
While China’s National Bureau of Statistics reports a population decline of 850,000 by 2022, models by the United Nations Population Division suggest that China’s population could fall below 800 million by 2100. Beijing is also concerned about its growing elderly population, with the National Health Commission predicting that the number of people over 60 will rise from 280 million in 2022 to 400 million in 2035.
Geopolitical pressures and new productive forces
Western pundits are analysing policy failure, arguing that China’s high growth rates have come to an end and that the success story based on external demand is eroding. Such a judgement (if not wishful thinking) may be premature. Indeed, the economic policies that China has been pursuing for some time point to a paradigm shift rather than failure.
According to the Chinese leadership, which believes that analysing the economy in terms of short-term growth rates is short-sighted, what is needed is to succeed in changing the means of production and the relations of production in a way that captures the spirit of the times, however painfully. This technology-centred concept, known as the High-Quality Development Plan, was introduced by Chinese leader Xi Jinping in 2017, then included in the 14th Development Plan in 2021, and finally elaborated at the 20th Party Congress.
As a result of the two current sessions, the concept of ‘new productive forces’ is expected to serve as a guide for China’s journey towards ‘high-quality development’. Based on the fact that traditional intensive labour has been replaced by data and artificial intelligence has transformed production relations, the Beijing administration laid out nine basic tasks at the Central Economic Work Conference in December, with the statement ‘scientific and technological innovation should lead the development of the modern industrial system’ at the top of the list. In short, China will stop devoting most of its resources to the traditional labour-intensive model and talk more about ‘chips’, more ‘bio-manufacturing’, more ‘artificial intelligence’ or ‘humanoid robots’, as we have seen in recent years. In this context, it is worth remembering China’s efforts to close the gap with the US, the leader in this field, by investing $456 billion in R&D by 2023.
It is clear that the changing geopolitical landscape is also affecting China’s focus on the New Development Plan. The trade wars that began under former US President Donald Trump and continued under current President Joe Biden, as well as the rise of global protectionism, have increased the importance of domestic demand for the Beijing government.
By increasing the share of domestic consumption in GDP growth by 43.1% to 82%, China is taking a serious step towards weaning itself off its dependence on external demand, and this share is set to increase as the consumer confidence index rises. It should be added, however, that China has not given up the expectation of exports or foreign investment. In line with the high-quality development model, sales of electric vehicles and solar panels are expected to increase by 30% and 54% respectively by 2022. This model, which relies on the domestic market but does not postpone exports, was announced by the Chinese at the end of 2020 under the name of ‘double circulation’.
In terms of demographic change, which could be a long-term concern for China’s economy, the country aims to increase the number of newborns in the long term while investing in systems such as artificial intelligence, robotics and automation that will help close the employment gap. In China, once known for its one-child policy, the new family planning law makes it easier for a third child to receive state support.
Potential challenges for China
It would be overly optimistic to expect China’s high-level development framework and the notion of new productive forces, which we will discuss more in the future, to be implemented without challenges. For example, China needs to increase the purchasing power of consumers as a prerequisite for its reliance on the domestic market. This requires the expansion of the middle class, currently estimated at 400 million out of a population of 1 billion 400 million.
Aware that China is going through a ‘special period’, Sheng Laiyun, deputy director of the National Bureau of Statistics, said at the announcement of the 2023 data: “The Chinese economy is currently at a critical stage of transforming its development model and optimising its economic structure.”
The extent to which a country as large as China will successfully complete this paradigm shift is one of the most important issues to watch. The success of the process, the speed and the sustainability of the transformation may bring a new version of the debates on the Chinese model, once famous in Turkey, to our agenda.
