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article imageCommunist conclave seeks leaner, cleaner China

By Benjamin Dooley (AFP)     Oct 26, 2015 in Business

Economic malaise and the spectre of intractable pollution confronted China's Communist leaders Monday as official media reported they gathered to plan the nation's course for the next five years, following a surprise interest rate cut.

The world's second largest economy is riddled with structural inefficiencies and growth is at its slowest rate since the global financial crisis.

The Communist gathering, called the Fifth Plenum, follows a series of disappointing economic data prompting "increasing attention from observers both home and abroad", the official Xinhua news agency said.

It came after the People's Bank of China last week cut benchmark interest rates for the sixth time since November, and lowered the amount of money banks must keep in reserve, in an attempt to stimulate the economy and avoid a hard landing.

In a reformist move the central bank also abolished limits on what interest rates banks can pay savers, a step away from old-style controls.

The meeting will focus on the next Five-Year Plan -- the 13th since the People's Republic was founded in 1949, and a holdover from the days before China embraced capitalist reforms that have lifted hundreds of millions out of poverty.

China is entering a "key period of Chinese socialism as it trudges along the road of national r...
China is entering a "key period of Chinese socialism as it trudges along the road of national rejuvenation", the Communist Party mouthpiece, the People's Daily, said in a commentary
Mark Ralston, AFP/File

Although the plans might seem anachronistic in China's modern, more market-oriented economy, they still provide important guidelines for managing the nation's affairs -- from the boardroom to the bedroom.

They "create motivational targets and metrics... It's about having a unified message and having a managerial strategy," according to Anne Stevenson-Yang, co-founder of China analysis firm J-Capital Research.

- 'Defend to the death' -

China is a key driver of the world economy and analysts have urged more and broader structural reforms to sustain its long-term expansion in the face of vested interests resisting change.

The ruling party's legitimacy depends on projecting an aura of ultra-competence, but leaders have floundered in recent months as disjointed attempts at stemming falling stock prices raised doubts in global markets about their economic management.

China's focus on promoting growth has  among other problems  led leaders to ignore the effects ...
China's focus on promoting growth has, among other problems, led leaders to ignore the effects of the country's dependence on heavy industry powered by cheap but dirty coal
Frederic J. Brown, AFP/File

Beijing has set 2021 -- the 100th anniversary of the Communist Party's founding -- as the deadline for achieving a "moderately prosperous society", a goal that includes doubling income from 2010 levels.

Leaders have also pledged to establish a "new normal" of slower, more sustainable expansion after the double-digit growth of the past.

GDP expansion fell to 6.9 percent in the third quarter and a weekend posting on a government website reported Premier Li Keqiang as saying authorities may let growth rates slip below the previous target of around seven percent.

"We never said we must defend any target to the death," he said.

- 'National rejuvenation' -

China is entering a "key period of Chinese socialism as it trudges along the road of national rejuvenation", the Communist Party mouthpiece, the People's Daily, said in a commentary.

Beijing is reportedly considering loosening restrictions on its one-child policy
Beijing is reportedly considering loosening restrictions on its one-child policy
Greg Baker, AFP/File

The single-minded focus on promoting growth has, among other problems, led leaders to ignore the effects of the country's dependence on heavy industry powered by cheap but dirty coal.

That must change, according to an editorial in Monday's China Daily, which is published by the government.

"The government should resort to energy restriction, particularly of coal, in order to press ahead with the transformation of the economic structure," wrote Lin Boqiang, director of the China Center for Energy Economics Research.

Hu Angang, an economics professor at Tsinghua University, said bold environmental reforms cannot continue to have a lower priority than growth.

"We need to raise economic efficiency, but we need to raise environmental efficiency more," said Hu, who was on an experts' committee helping guide the planning process.

"We need to grow material investment, but we need to strengthen environmental investment more. We need to conserve energy, but we need to develop green energy more," he told AFP.

Beijing is also considering loosening restrictions on its one-child policy, which has fuelled public discontent and which experts say is now raising demographic dilemmas.

There have been many job switches in China's Central Committee  linked to a widespread anti-cor...
There have been many job switches in China's Central Committee, linked to a widespread anti-corruption drive under President Xi Jinping (pictured), which critics have compared to a political purge
Muneyoshi Someya, POOL/AFP

After 205 members of the Central Committee, plus around 170 alternates, burnish the plan at the four-day plenum it is due to be formally approved by the rubber-stamp legislature next year.

More than half the Central Committee have changed jobs or been removed from their posts since they were appointed in 2012, according to a social media post by the Beijing Daily, the official newspaper of the capital's Communist committee.

Many of the personnel switches are linked to a widespread anti-corruption drive under President Xi Jinping, which critics have compared to a political purge.

The Global Times, a newspaper with close ties to the government, described the "large-scale reshuffle" as "extremely rare" in the history of the party.

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