Chinese president have given slight hint of the economic policies he is going to impliment once he is given the third term power by National Congress.
The policies will focus on common prosperity and stricter regulation of capital, both of which spell disaster for the monopoly businesses of China.
President Xi will prioritise five economic issues, in this order: Common prosperity, capital, primary products, risks, and carbon. The order in which he presents the issues gives a peep into his mind, on how he grades his priorities.
It is clear that he sources all of China’s current economic inadequacies to inequality of income and wealth accumulated in the country since the reforms process began. He now wishes to apply the Xi Thought and Chinese Characteristics to rein in the shortcomings.
Xi says about his idea of common prosperity and why it is non-negotiable for him: “In the past, we were egalitarian at a low-income level. After the reform and opening up, some regions and some people became rich first, and the income gap gradually widened. The improper accumulation of some wealth has brought risks and challenges to the healthy operation of the economy and society.”
The China strongman revealed his thoughts in a speech given at the Central Economic Work Conference last December and circulated by the state media only now. He puts the economic problems in a perspective defined by him: “After the reform and opening up, some regions and some people became rich first, and the income gap gradually widened. The improper accumulation of some wealth has brought risks and challenges to the healthy operation of the economy and society.”
That is what brings him to the concept of common prosperity: “(it) is the essential requirement of socialism with Chinese characteristics. What should the path to common prosperity look like? We are currently exploring this. To achieve the goal of common prosperity, we must first make the “cake” bigger and better through the joint efforts of the people of the whole country, and then correctly handle the relationship between growth and distribution through reasonable institutional arrangements, so as to divide the “cake” well. This is a long-term historical process. We must create conditions, improve systems, and steadily move towards this goal.”
The President prefers reining in unruly capital even as he promotes employment generation as that is the best way to implement common prosperity.
“We must adhere to the principle of distribution according to work, increase the proportion of labor remuneration in the initial distribution, and improve the policy of distribution according to different factors. It is necessary to give full play to the role of redistribution, and increase the adjustment of taxation, social security, transfer payments, etc., and improve the accuracy of record keeping.”
Simultaneously, he wants promotion of “welfarism” in order to improve the public service policy system by “taking care of the most basic needs of life for people in need, without raising the expectation of welfare to cover all expenses, or providing empty promises”.
President Xi goes into the theories of capital and capital accumulation and distribution and seeks to distinguish between classical communism as envisaged by Marx and Engels and his own principles explained in Xi Thought.
“Marx and Engels did not envisage that a market economy could be developed under socialist conditions, and of course they could not foresee how socialist countries would treat capital….The key to uniting the people is to manage their wealth appropriately. We should explore how to play the positive role of capital under the conditions of a socialist market economy, while effectively controlling the negative role of capital. In recent years, due to lack of awareness and lack of supervision, capital has expanded in a disorderly way, manipulated arbitrarily, and made huge profits in some areas of our country. This requires regulating the behavior of capital, seeking advantages and avoiding disadvantages, not allowing “capital predators” to act recklessly, but also giving full play to the function of capital as a factor of production. This is a major political and economic issue that cannot be avoided.”
How does he propose to fight what he describes as the “savage growth of capital”? His solution explains why the Chinese government has in recent months come down heavily on big businesses and curtailed their powers. “…we must fight against monopoly, profiteering, sky-high prices, malicious hype, and unfair competition. Effective supervision of capital should be strengthened in accordance with the law. To curb the disorderly expansion of capital, it is not the absence of capital, but the orderly development of capital. Relevant laws and regulations that are not perfect should be improved as soon as possible, and those with existing laws and regulations should be strictly enforced and supervised.”
Food security is something Xi is adamant about achieving. He lays down a policy initiative: “I have repeatedly said that Chinese people’s rice bowls should be firmly in their hands at all times, and our rice bowls should mainly contain Chinese grains. It is necessary to put the improvement of comprehensive agricultural production capacity in a more prominent position, continue to promote the construction of high-standard farmland, deeply implement the revitalization of the seed industry, improve the level of agricultural machinery and equipment, ensure the reasonable income of farmers who grow grain, ensure the absolute safety of grain rations and the basic self-sufficiency of grain, and improve the production and self-sufficiency of oil and soybeans.”
He then turns to the economic risks China faces at present and which, according to him, can dent the socialist system propagated by the Chinese Communist Party.
“Serious oversight of corporate governance of financial institutions, and unsuitable financial supervision capabilities and levels. The management of local debts has been lax, and some localities have disguised and illegally borrowed, and the debt burden has continued to increase. The third is the barbaric behavior of the borrower. Some large enterprises are blindly impulsive, irrational diversification, excessive reliance on financial leverage, and excessive industrial capital entering the financial industry.”
He also flays the investors in big capital for the economic ills: “Some shareholders and actual controllers operate and manage financial enterprises in violation of laws and regulations, with insider control, manipulation by major shareholders, financial fraud, and wanton misappropriation of funds. Fourth, collusion and corruption between officials and businessmen is rampant. The heads of some financial institutions and government officials are derelict of duty, corrupt, enriching their own pockets, and relying on the generosity of the country, resulting in heavy losses.”