The Path to Building a Well-Off Society

Caixin | The Communist Party’s 18th Central Committee released a proposal for a major economic development plan on October 29 at the end of a four-day plenum, the fifth time the body has met.

The related 13th Five-Year Plan will be finalized in March, and its implementation is not only key to China’s hopes for building a well-off society by 2020, but it is also crucial to efforts to transform the economy.

In the proposal, which lays the groundwork for the next-five year plan, the party notes that China still has a lot of room to grow, even though it is facing an array of challenges stemming from shifts in the domestic economy and uncertainty abroad.

As economic growth continues to slow, the country is facing mounting pressure to introduce structural reforms that nurture potential new sources of growth. While government-backed investment helped China weather the global financial crisis, stimulus has caused problems such as overcapacity and environmental damage. It is also to blame for causing the wealth gap to widen. To meet the target of building a better-off society, we must discard this old way of development, which was noteworthy for putting excessive emphasis on economic growth.

Instead, we must push for economic transformation through deepened reform and innovations to facilitate all-around development.

Growth is the key to finding a solution to the problems we face, but single-minded pursuit of higher GDP growth rates is neither possible nor sustainable. As the country’s demographic dividend fades and labor costs rise, high growth driven by government investment is no longer attainable.

This is not necessarily bad. Various studies have found that China only needs to maintain economic expansion of 6.5 percent growth annually to meet its goals for society.

When the party endorsed a vision for building a well-off society in a communiqué at the end of its 16th congress in November 2002, it said the target entailed developing a sound democracy, gaining an edge in science and technology, becoming more prosperous, enhancing social harmony and of course growing the economy.

In the new proposal for the next five-year plan, the party has reaffirmed its commitment to a target of doubling both the GDP and per capita income from 2010 to 2020. It has also stressed the need for balanced and sustained development across political, social, economic and cultural spectrums. These goals require efforts to upgrade manufacturing, spur consumption and continue to urbanize. It also said the government must do more to alleviate poverty and improve the environment.

The goals in the plan are ambitious, and each will require painstaking effort. To meet them, we will also need to play an enhanced role in the global economy. China may have a bigger economy than the United States by 2020, a change that could have a spillover effect on global markets. This means China has no choice but to better integrate itself into globalization so that it can continue to grow in a stable manner.

Even though China could one day boast the top economy in terms of output, it will still be a developing country that lags far behind many other nations in several ways. This means it must China can catch up with other countries by taking advantage of the latest push for trade liberalization worldwide.

To nurture a sustainable economy, the party has put a priority on innovations in areas such as ideology, governance, science and technology, as well as in cultural development. It has also said that future development will require changes to the state-owned sector and to the way the macro economy is controlled.

The party made reform the focal point of its work at the third meeting of this Central Committee two years ago. Some reforms, in fields such as interest and exchange rates, are well underway, but many others have either stalled or been compromised. For instance, urbanization, which holds great potential to spur growth, is proceeding at a snail’s pace because progress is not being made in areas such as the pension system, medical insurance and the household registration system.

In retrospect, the party’s plan for the 2011-15 period was solid in many ways. It stood out by laying out a vision for China to transform itself from the world’s factory to a country eager to buy goods and services from around the world.

Further, we have good reason to believe the latest five-year plan will be even better as the party draws upon the work of tens of thousands of policymakers and academics. A good plan can bring about solidarity, build a broader consensus and boost the morale of the people.

But actualizing its particulars will be very important. After the legislature approves the plan in March, we earnestly hope that it will be implemented in its entirety so that one day we truly do live in a well-off society