BOFIT Viikkokatsaus / BOFIT Weekly Review 2022/42

With China’s National Congress of the Chinese Communist Party (Oct. 16–22) winding up, it appears Xi Jinping will continue as party head for a third term. Perhaps the most important messaging from this congress is that major policy trends already in place will remain undisturbed. Security issues and ideology have been given more emphasis than earlier, while economic matters have been largely relegated to the back burner. Self-sufficiency in high-technology fields and supply chain security now have high priority. While Xi reiterated that reforms and opening-up policies would continue and that markets and the private sector matter, further government encroachment into Chinese economic life is expected to continue. Xi also gave no indication that changes in the zero-covid strategy were planned. China will continue to improve its military strength and capabilities. On Taiwan, Xi Jinping repeated China’s official policy stances. Xi warned that turbulent times may lie ahead, so China needs to be prepared.

Many of the policy targets stated this week originate from the previous party congress in 2017 (BOFIT Weekly 42/2017). China will continue to strive for leadership in the spheres of education, science, technology, culture, sport and health, as well as join the elite group of innovation-driven countries by 2035. The party will also continue its quest to reduce poverty and significantly increase the share of middle-income earners. Increases in the birth rate, the quality of senior care and pensions were also targeted. Raising the retirement age, a long overdue reform, was also mentioned. Xi reiterated that narrowing China’s income and wealth disparities are in core of “common prosperity.” Monitoring means of accumulating wealth will be stepped up to assure assets were acquired through legitimate avenues.

While China did not announce any specific numeric long-term GDP growth target, the party set an implicit GDP target, i.e. China’s GDP per capita should match the average for developed countries by 2035. Given that reaching this target would put China roughly on par with Finland in terms of GDP per capita, most observers see this ambitious target as unrealistic. IMF figures show that China’s purchasing power parity adjusted GDP per capita in 2021 was about a third that of advanced economies. For China to meet its new GDP per capita target, the economy would have to grow roughly 7 percentage points faster each year than the average GDP growth in advanced economies (assuming population growth trends are similar).

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