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CCP leadership have a very complex programme of economic and political transformation
ahead. Some important elements of the transformation will be beyond CCP control and
this will cause political friction within the CCP, with some elements in the Party embracing
reform and others looking to retrench. The dynamics here are very unpredictable.
Future Direction
The Chinese government has a policy to re-balance the economy away from over reliance
on manufacturing and exports, towards consumer spending through moderate increases in
wages and the provision of social welfare programmes. This policy-led approach aims to
slow GDP growth to around 7%, 53 to prevent the economy over heating. Premier Wen
Jiabao said: ‘we are keenly aware that we still have a serious problem in that our
development is not yet well balanced, coordinated or sustainable.’ 54 The latest CCP
programme provides targets for urbanisation, education, social security provision,
increases in minimum wage and medical insurance. Many elements of the programme
would look entirely at home in a European centre/left political manifesto.
There are, however, notes of caution. The Economist, 55 reports on a working paper by
National Bureau of Economic Research (NBER) on ‘why fast growing economies slow
down.’ The paper described that when Purchasing Power Parity (PPP) reaches $16,740,
the economy tends to slow the growth rate. In China, adding in the risk factors of an aging
population, low levels of consumer spending and an under valued currency, the odds of a
slow down in 2016 are high. 56 Whilst not definitive, the CCP knows absolute command of
the economy is slipping away from them. Following the opening up of the economy, the
CCP still holds some of the economic levers, whilst other levers are unattached - the
leadership has less control now. The change from being a ‘command’ economy to a
‘socialist market economy’ is profound and resonates throughout society – from the top to
the bottom. The ramifications are important politically too, because economic development
is central to the CCP’s plan for the entire country to emerge. However ‘market forces’ have
a habit of surprising, especially when exposed to the vagaries of the global market, and the
CCP has considerably less control as the economy moves beyond even their extensive
tentacles.
Economic Maturity
In international business, China is making significant inroads. Chinese companies are
active in the global ‘mergers and acquisition’ market, financed by cheap loans from the
China Development Bank. This supports the government policy of Chinese companies
‘going global.’ 57 This changes China’s perception of national interests and gives China
another dimension to her rapidly expanding global web of economic interests. Equally, the
very nature of business in China is changing too. It should have a bi-lateral focus, if foreign
companies can gain access to the Chinese home market. ‘A lot of companies are looking
at China as a burgeoning consumer market, and with [Chinese] wage increases in certain
Provinces of 10 to 20%’ 58 there are huge opportunities for those exporting into China too,
53 Xinhua China Daily, ‘Economic News Report,’ http://www.chinadaily.com.cn/china/2011-
04/07/content_12289265.htm. (accessed 20 Jun 2011).
54 Premier Wen Jiabao speech at the NPC 5 Mar (2011), http://wenku.baidu.com/view. (accessed 20 Jun
2011).
55 The Economist, ‘BRIC Wall,’ The Economist, April 16 (2011):84.
56 Eichengreen Barry, Donghyun Park, and Kwanho Shin, ‘ When Fast Growing Economies Slow Down -
China.’
http://www.nber.org/s/search. (accessed 20 Jun 2011).
57 Jamil Anderlini, ‘Deal and Deal Makers,’ FT, 6 Apr (2011): 4.
58 De Swaan (Princeton University) ‘Rising Chinese Consumer,’ http://www.cfr.org/china/rising-chineseconsumer,
14 Oct (2010): 1-3. (accessed 20 Jun 2011).
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