Bulletin No50 septembre 2024 China: From the July Plenum of the CPC Central Committee
to the September economic stimulus measures
The Central Committee of the Communist Party of China adopted on July 18, at its 20th Plenum , a document [1] entitled: "Decision of the Central Committee of the Communist Party of China on Further Deepening Reform in All Areas to Promote Chinese Modernization." The decisions taken at this plenum aim to: " continue the implementation of the strategic provisions defined by the 20th Party Congress [2] . "
The Central Committee document first notes the importance and necessity of further deepening reform in all areas. It draws on the reform and opening-up policy that has enabled the Chinese Party and people to catch up with the times by leaps and bounds, referring to the Third Plenum of the 11th Party Central Committee [3] and the Third Plenum of the 18th Central Committee.
Let us recall that during this 3rd plenum of the 11th Central Committee of the Party, an orientation was adopted under the leadership of Deng Xioping opening the way to capitalism in China: " The 3rd plenary session of the 11th Congress of the Communist Party of China took place from December 18 to 22, 1978, in Beijing. During this session, a series of important decisions were taken. The leading group of the Central Committee of the Party, with Deng Xiaoping at its core, was formed. The tasks assigned to it were to steer the country towards democracy and legality. The session took new decisions concerning reform and opening up, and called for work to be focused on economic construction rather than on the "class struggle". The opening thus marked a real historical turning point. " As for the 3rd plenum of the 18th Central Committee in 2013 already under the leadership of Xi Jinping, it is according to Wikipedia: " The third plenum of the 18th Congress took place at the beginning and sets a political roadmap for the next ten years. While markets were previously called upon to play a "basic" role, this will have to be "decisive" in the future. President Xi Jinping and his Prime Minister Li Keqiang also believe that China must find new sources of growth while the country is "heavily indebted, less competitive and has industrial overcapacity " : this should result in the opening up to competition of sectors previously controlled by public groups, such as finance, energy, telecommunications, railways and air transport.
These references having been made and which mark the continuity with the fundamental orientations of the last PCC congress, what new does this declaration of the Central Committee bring?
The socialist market economy
The concept put forward by the decisions sounds like a strange oxymoron: it would be a question of establishing a high-level socialist market economy. The role of the market would be to allow the allocation of resources for optimal efficiency and maximum yield. Nothing here allows us to understand the specificity of this objective in relation to a capitalist market operation, which theoretically is also supposed to achieve an optimal allocation of resources, guided by the price signal (in a word, the law of supply and demand). In fact, since it is not explained how optimal efficiency is evaluated, nor how maximum yield is measured, it is permissible to think that the market economy is indeed synonymous with the capitalist organization of the economy.
Especially since the leaders say they are ready to give the " reins of national projects aimed at achieving breakthroughs in the field of key technologies, while giving them greater access to major national scientific research infrastructures " to private companies whose management criteria are clearly capitalist in nature. The public authorities say they are keen to set up a more favourable financing system and to review taxation. There is also talk of " honouring the entrepreneurial spirit ". China would therefore be implementing a supply-side economic policy, which would not be out of place in the Western capitalist context.
Especially since the document from the Central Committee of the PC specifies the need to "deepen the reform of state assets and public enterprises ". This would involve concentrating efforts in certain sectors, notably public services and emerging industries. It is planned to separate natural monopolies and " subject competitive links to market rules ". To clarify the point, this would involve, for example, separating electricity transport from electricity production or the railway manager from passenger and goods transporters. A situation that strangely resembles the directives of the European Union!
Another axis of economic policy concerns the decompartmentalization of the Chinese domestic market, which is clearly segmented. In particular, it would be appropriate to prohibit local initiatives (subsidies, fixed prices) in order to complete " the mechanism for fixing prices for production factors according to the law of supply and demand. " As a reminder, labor is considered a factor of production.
A chapter is devoted to the property system (including intellectual property) necessary for strengthening the market economy. It is also planned to lower market entry fees according to the most orthodox of liberal rules (with the aim of increasing competition).
As a first conclusion, we will say that the Chinese market economy does not present any particularities compared to any other market economy, except for the displayed determination to make it happen.
Industrialization, the race still in the lead
China is certainly not faced with the problems of deindustrialization. However, it is important not to rest on its laurels, according to the consecrated expression. The Chinese authorities do not want to let the new industrial revolution based on the digitalization of processes pass. It is about developing high-tech and strategic industries and ensuring " a healthy and orderly development of emerging industries ." Despite the capitalist logic developed in the document, there remains nonetheless a dirigiste will of the economy but ultimately especially in the sectors at stake. While the European Union is worried about its deindustrialization, China is seeking to accelerate the new industrialization with the prospect of developing " conglomerates of the advanced manufacturing industry. "
It is specified that this industrial ambition will be supported by adequate financing " so that the granting of funds corresponds to the strategic requirement of the country ". More generally, the manufacturing industry must maintain its place in the national economy and everything will be put in place to achieve this end (tax policy, reduction of charges, subsidized loans, etc.)
As for the relocation of industries, in China it is a question of changing region and a mechanism for sharing profits between the regions of origin and those of destination would be provided in this context.
Finally, the authorities are also concerned about training with a concern for the " optimal " distribution of educational resources between regions. A special fund for business R&D is proposed as well as a mechanism for aid for the development of SMEs specializing in technologies (start-ups in a word).
Economic policy, cautious opening and rural concerns
The State retains the role of strategic planner, which consists more in guiding economic activity than issuing precise directives to productive or financial systems. As for the internationalization of the Chinese currency, the approach remains cautious: it is a question of " progressing with circumspection ". The stakes are high: on the one hand, participating in the de-dollarization of international trade, on the other, exposing oneself to the risks linked to international speculation on currencies with even greater consequences for China, the world's leading exporter.
It is expected to open up the scope of investment in manufacturing to foreign investors and increase the level of opening up in Chinese regions that are currently somewhat isolated from globalization. Hong Kong and Macao will continue to play an important role in the country's opening up under the " one country, two systems " system, and Hong Kong, in particular, is expected to strengthen its position as an international financial center, shipping and trade hub.
When it comes to international trade, China fully subscribes to the WTO project, which allows it to occasionally give lessons in free trade to the West, by the way.
A section of the economic plan is devoted to the reform of agricultural exploitation with a desire to promote large farms. A concern about the preservation of agricultural land appears and a compensation mechanism of the zero net artificialization type is planned when arable land is transformed into building land.
The desire to improve the standard of living in the countryside is affirmed: by encouraging industries to set up, by protecting peasants (subsidies, agricultural insurance, guaranteed income, etc.) against relapses (sic) into poverty.
Thus, China's economic policy is part of a perspective of development, privatization and preparation for a new industrial revolution. The preeminence of the State for the general strategic orientation is affirmed in a measured concern for openness to foreign investors. In a certain way, the revision of property rights and more generally of business law participates in this policy of openness. A rebalancing of development zones is also planned, which is explained by the desire for a homogenization of the internal economic space. This cocktail of dirigiste and liberal measures is quite disconcerting, however, it does not deny the preeminent place of China in the field of globalized capitalism in which its leaders intend to preserve its position.
If improving and deepening are the key words of this document, there is no significant change in the direction of Chinese policy in its general economy in the implementation of the reforms that have been initiated. The question is rather how to respond to an economic and social situation that is marking time in an international context marked by an increasingly aggressive policy of the United States in the defense of its own capitalist interests and which translates into restrictions on trade with China and the attempt to isolate it from a military point of view which, beyond the partnership with Australia and the United Kingdom, would constitute an Asian alliance of which they would be the pivots with Japan, Australia and India.
The recent economic measures taken by the Chinese government are part of the strategy developed in the document we have just analyzed. We will return to this in a future article devoted to this question.