Home  Contact Us
  Follow Us On:
Advertising Advertising Free Newsletter Free E-Newsletter
      2024       2023       2022       2021       2020       2019       2018       2017       2016       2015       2014       2013       2012       2011       2010       2009       2008

FEATURE STORY: New Leadership, New Challenges - The Chinese Government’s Economic Mission for 2013 and Beyond
Share to
 With the new year comes a new leadership and a new economic era for the People’s Republic of China. As President Xi Jinping adjusts to his new role, along with Premier Li Keqiang and the rest of the executive committee, china’s economic outlook is looking increasingly bleak. Although GDP is projected to have grown by 7.6% in 2012, according to the Beijing government’s official estimations, economic commentators are worried about a significant slowdown which is increasingly taking its toll on the country’s business sector. Since taking the reins of leadership from his predecessor, Hu Jintao, Mr. Xi has stated that his mission as the country’s president will be to guide his people through an economic revival and to ensure that his party carries out necessary economic reforms in order to build a stronger and more sustainable future. Whilst the new administration’s message is clear and optimism is high, the President and his team are well aware of the many economic challenges which China faces in the coming years:
Maintaining growth within the Private Sector and SOEs
One of the new leadership’s major tasks will be building upon the reforms of their predecessors in order to encourage growth within China’s private sector. Chinese businesses, which have enjoyed years of robust growth in consumer spending and increased prosperity, are increasingly feeling the pressure of the broader economic slowdown. The nation’s manufacturing industry in particular, which has driven private sector growth for decades, has been feeling the effects of weaker demand from both internal and external customers. As the BBC’s Asia correspondent Angus Foster points out, Xi’s administration must continue to support “small and medium sized companies because these are likely to be the providers of future jobs and growth”.
In conjunction with facilitating private sector growth, the government have made it clear that they will not neglect the SOEs (State Owned Enterprises), which collectively account for half of the country’s gross domestic product each year. In recent times, the central government has invested significantly in developing publicly owned enterprises, and in order to secure the growth and profitability of these organisations going forward, it will need to maintain its levels of investment and look at ways to enhance competitiveness against their foreign counterparts. 
Rebalancing the economy: Exports Vs Domestic Consumption
Changing the economic activities of a nation which is composed of 1.4 billion producers, consumers, savers and investors is no easy task. With weaker demand from Europe and North America, rising production costs and increased competition from other emerging economies, China is coming under more pressure by the day to rethink and restructure its economic model. The previous government were well aware of the dangers posed by an over-reliance on exports. As China’s economy matures over the coming years, they have already set the wheels in motion to shift the emphasis towards a more domestic consumption-orientated model. Many analysts are warning that the current regime needs to continue to do everything in its power to steer the Chinese economy away from sectors which are heavily exposed to foreign demand fluctuations and more towards the country’s burgeoning consumer base. The rapid growth of China’s domestic service sector is certainly encouraging, but more needs to be done in this regard. 
And this does not only include services and consumer goods- which are aimed at the growing middle classes. Former Premier, Wen Jiabao, was keen to emphasise that “stable agricultural output makes a stable economy and stable lives for people”. If China is to make its economy more sustainable going forward, the new leadership will have to focus on improving the productivity of all sectors and avoid the temptation of relying too much on exports to drive future growth. 
Housing bubbles and ‘hard landings’ 
Two of the big talking points amongst economic commentators at the moment are the possible bursting of a Chinese real estate bubble and the possibility of a ‘hard landing’ following decades of incredible growth. Whilst the previous leadership’s measures to cool down the housing market have seemingly succeeded thus far, the threat of sizeable and disruptive corrections in real estate remains an ever present danger. In such a rapidly growing nation, especially one in which investors have a strong appetite for real estate assets, there is always going to be a risk that over speculation will occur; particularly in big urban centres such as Beijing, Shanghai and Guangzhou.
In order to avoid the kind of housing sector meltdowns and toxic asset accumulations which crippled the US economy and subsequently triggered the ongoing global financial crisis, the Chinese government will need to keep a very close eye on both bank balance sheets and private investor activities. And to make matters even trickier, the Xi Jinping administration will also be faced with the task of balancing China’s demand for foreign capital inflow with the risks of speculative real estate, equity and currency investments from international players. In this regard, whilst the government can control interest rates and utilise other monetary tools such as the RRR (Reserve Requirement Ratio) in order to reign in domestic borrowing habits, it will need to consider its strategy for managing foreign investment into China very carefully.
Dealing with the Challenges of Urbanisation 
The number of Chinese people who are moving from the countryside to the nation’s major urban industrial centres is increasing year on year. Whilst this trend is undoubtedly advantageous for certain sections of the economy and society, it also presents a number of challenges for policymakers. As China’s urban populations increase significantly in the coming years, more strain will be put on infrastructure. For the government to develop better urban infrastructure going forward, it will have to work hard to encourage both public and private investment, as well as organising urban planning departments in a way that ensures maximum efficiency. The enormous population shifts may also eventually affect productive capacities within the rural hinterlands. China’s new Premier, Li Keqiang, is particularly well known for his support and advocacy of rural development as being a crucial aspect of his party’s future economic planning.
Building a Green Economy
Despite the ongoing efforts to promote environmental awareness amongst both businesses and consumers, it is clear that the Chinese government needs to continue its efforts to build a greener future. According to the International Energy Agency, China’s reliance on fossil fuels, particularly coal, will act as a major obstacle to improving in the country’s environmental integrity for years to come unless policymakers and private enterprises invest more heavily in renewable and cleaner energy sources. In addition to the problems faced within the energy sector, there are added environmental pressures coming from the rapid increase in vehicles on inner city roads and the harmful emissions produced by suburban industrial sites. There is also, of course, the ever present danger of water shortages. Joanna Masic, of the Asian Development Bank, suggests that “there are still 480 million people in China without access to sanitation, and nearly 120 million without access to water supplies”. 
In fairness to the Chinese government, they are already well aware of the environmental problems their country faces and openly acknowledge that more needs to be done over the new leadership team’s term in office. There are currently a number of major projects which are aimed at reducing the country’s reliance on harmful and non-renewable fuels. Transport networks are also receiving a great deal of investment from the government and there is talk of further measures being implemented, such as the those already in place across Beijing, aiming to reduce the volume of traffic within the big cities.
Caring for an aging population
As a result of the country’s rapidly aging population and relatively low fertility rates, many commentators are worried about how the country will be able to cover the costs of older generations after they pass the working age. It is estimated that by 2015, China’s working-age population will actually begin to decline. Therefore, programs such as housing, healthcare and pension provisions for the elderly, as well as maintaining a big enough workforce to drive future economic growth, are important issues for this government to tackle over the course of the next decade. In order to do so, President Xi and his colleagues will undoubtedly have to take bold action and implement reforms which address the demographic imbalances and facilitate the further development of the Chinese welfare system.
In sum, there is no denying that China’s new leaders will face a number of difficult economic challenges over the next few years. Given the dire global business circumstances and the historical transformations that are happening within China’s internal economy, the next decade may be one of the most economically difficult periods the country has faced for quite some time. The new leadership has undoubtedly come into office at a time whereby level-headedness and bold macroeconomic strategy is absolutely crucial. 
Ultimately however, as sizable these obstacles may be, it is important to remember that China is a nation of incredible resilience and its people have a strong drive to overcome socioeconomic problems. Like any great economic nation, there will certainly be some bumps on the road to development. But in the end, sustainable prosperity is achieved when a country’s citizens and decision makers make tough decisions and persist through periods of economic doom and gloom. 

By Josh Cooper 
    Subscription    |     Advertising    |     Contact Us    |
Address: Magnetic Plaza, Building A4, 6th Floor, Binshui Xi Dao.
Nankai District. 300381 TIANJIN. PR CHINA
Tel: +86 22 23917700
E-mail: webmaster@businesstianjin.com
Copyright 2024 BusinessTianjin.com. All rights reserved.