The meetings of the National Peoples Congress (NPC) may not be notable for the quality of debate. But they do provide insights into the pressures that the leadership faces. China may be a one-party state but as its conflicting economic and sectional interests become ever more numerous, their reconciliation becomes much more difficult.
Indeed, one might conclude that the era of reform begun by Deng Xiaoping is over, supplanted by a new era of trying to find a balance between the various forces which the very success of reform have brought about.
At the broadest level, there is the conflict between macroeconomic policy and social and egalitarian goals.
Since President Hu Jintao and Premier Wen Jiabao assumed the leadership, there has been constant emphasis on the need to reduce rural-urban imbalances and speed up the development of central and western provinces which have fallen behind. Various measures have been implemented, including the abolition of some rural taxes and infrastruture investments financed by the central government. But these efforts are still far from sufficient to halt the widening of the gap.
Likewise, well intentioned efforts to raise energy efficiency, reduce water consumption per unit of output, and stop the deterioration in air and water quality have fallen far behind their goals.
This year's NPC has seen frank admission of some of these failings and renewed commitments to reduce income imbalances and rectify what for the long-term is an even greater threat to the nation than current income inequality – the education gap between urban and rural areas.
Rural areas may also benefit from a new law to protect private property rights – though in practice it may well help urban property owners but be ignored in rural areas where officials often ride roughshod over peasants' land claims.
At the same time as needing to speed up progress in some areas, it is necessary, for reasons of macroeconomic stability, to slow down the rate of economic growth and prick some of the asset price bubbles that have emerged.
But there is an inner contradiction here. One of the best ways to reduce urban-rural imbalances is to maintain strong enough urban growth to facilitate a natural reduction in the underemployed, low income rural population. This requires continued easy access to capital and low-cost urbanization – which often means paying little regard to pollution and choosing cheap but dirty sources of power.
Above target economic growth also makes the government averse to provide additional stimulus through the budget.
The deficit is a mere 1.1% of GDP and government spending under 20% of GDP. An increase is almost certainly required if poorer regions are to get adequate help to improve health and education, and industrialized regions persuaded to invest in cleaning up rivers and closing polluting power stations.
Loath to spend
Fiscal policy remains very conservative at a time when monetary policy is quite lax with low interest rates, high monetary growth and a currency which has only appreciated modestly against the US dollar and fallen against all European and many Asian currencies.
For sure, the center sees a need for fiscal caution due to fears of costly recapitalizations of state banks if the recent lending boom goes sour. Defense spending is also rising rapidly – up 17.8% this year, according to the official figures – reflecting China's shift from regional to global power status.
One possible solution – increasing taxation to fund increased government spending on social and environmental issues – runs up against powerful opposition, particularly among major state corporations and the richer provinces. For them, growth remains the main yardstick of success, which means re-investing profits and keeping the wage share of GDP, which has fallen from 53% to 41% in a decade, low.
However, much as the party as a whole may desire redistributive taxation to achieve social harmony, the interests of individual party members and state functionaries are often opposed.
So long as political and economic power remain so closely intertwined, regardless of the nature of corporate ownership, it may prove difficult to shift resources from the quantity of growth to qualitative measures.