BOFIT Viikkokatsaus / BOFIT Weekly Review 2017/42
The Communist Party of China convened its 19th National Congress on Wednesday (Oct. 18). Party chairman and president Xi Jinping delivered a wide-ranging address that touched on China's rising global prominence, domestic development and long-range goals. He invoked the phrase new era into which "socialism with Chinese characteristics" is now entering.
Xi proclaimed that, under established party goals, the country is on track to becoming a "moderately prosperous society" by 2020. He added a new goal of becoming a fully developed and leading global power by 2050, measured both in terms of soft power and military might. As a mid-range goal, China will seek to become a modern socialist state by 2035, with a large middle class and a narrower income gap.
To meet the 2020, 2035 and 2050 targets requires Chinese industry to produce more efficiently and move up international value chains. Xi pointed out that China does not seek isolation, but continues with the process of opening up to the world and market reforms (e.g. opening up the services sector). Liberalisation of exchange rates and interest rates will continue, as will strengthening of state-owned enterprises, dealing with over-capacity branches ("supply-side" reforms) and reining in rising indebtedness.
Xi's speech elevated the roles of ideology and the party. Nothing should be allowed to challenge the party's authority. Democracy, rule of law and equality would be defined in terms of China's "socialist democracy." Corruption was seen as the largest threat to the party's legitimacy, so the struggle against corruption would continue.
Apart from the 2035 and 2050 targets, Xi's speech did not offer any new elements to economic policy that might be interpreted as a shift in economic policy stance or the near-term outlook. Even if the speech emphasised the quality of economic growth, Xi was unclear as to whether the party would scrap hard annual growth targets altogether in order to phase out current trend of piling on debt and put growth on a more sustainable basis. In any case, commitment to the "moderately prosperous society" goal for 2020 implies a doubling of real GDP in 2010–2020, so it may be difficult to give up annual growth targets anytime soon. From an economic standpoint, the current ideological emphasis clashes with the earlier more pragmatic approach and erodes the credibility of market reforms.
The week-long Party Congress, which convenes every five years, includes about 2,300 delegates, who appoint and elect the 205 member CPC central committee. The central committee chooses the party chairman, the 25-member politburo and the seven members of the politburo's standing committee. Xi's re-election and changes in the make-up of the top party organs are expected to cement Xi's already strong position.