Central Economic Work Conferences aren’t as boring as they sound. In fact, a few of the meetings, which generally set the economic agenda in China for the coming year, have seen the forces of reform collide head on with stubborn conservatism.
If political factions clashed at this year’s meeting, which wrapped up on Friday, only a handful of people in Beijing know about it. Power struggles and infighting behind the scenes can elude historical records for decades – or perhaps indefinitely.
The communique issued at the close of this year’s four-day meet shows that technocrats stuck to their scripts, touching on several important but predictable issues such as food safety and financial reform. The document also corralled support for the social and market reforms posited at the Third Plenum last month, a clear success for party boss Xi Jinping and his agenda.
And now, for the numbers
The conference is often a venue for setting the economic growth target for the following year – although this is not disclosed to the public until March.
Barclays Research said in a note that the government will likely target 7.5% GDP growth next year. Analysts at Bank of America Merrill Lynch agreed, but noted the chance that Beijing could lower the goal to 7%. ANZ Bank said China will “very likely” target the lower figure.
China’s GDP is expected to expand by 7.5% this year, down from 7.8% last year. Lowering the target to 7% would demonstrate the leadership’s willingness to reduce state investment at the expense of jobs and potentially even some social stability. Yet, they hope to balance out that growth with financial reforms such as those planned for the Shanghai free trade zone, which got a mention in the statement.
Another major topic highlighted at the work conference was local government debt. For almost two decades, regional authorities have shouldered a heavy responsibility for fueling economic development, racking up a heap of debt estimated at US$3.4 trillion as a result. In a list of six tasks, the conference communique said resolving the problem was one of the government’s top priorities in 2014.
Conferences of the past have witnessed disputes between Beijing and local governments, reformers and conservatives. Details of these never find their way into official communiques.
At an economic work conference held in September 1990, factions among China’s top leadership butted heads over the level of power held by local governments, as well as over the role of central planning.
During the 1980s, provincial governments gained some autonomy from Beijing in the name of robust economic growth. As central planners drafted the country’s eighth five-year plan for economic development, conservatives led by then-Premier Li Peng sought to rein in the power of local governments. Li, who led the crackdown on demonstrations in Tiananmen Square a year prior to the 1990 meet, also stressed the importance of central planning as opposed to market forces.
Reformers led by then-Shanghai party chief and future premier Zhu Rongji pushed back, fearing recentralization would hurt growth. As China scholar Joseph Fewsmith notes in The Politics of China, the issue came to a head at the work conference. On the eve of the event, partially retired top leader Deng Xiaoping gave his support to the local government leaders. Even so, conservatives got the upper hand that year, stressing a designer economy over one governed by the market.
Any disputes that matched Xi, or Premier Li Keqiang, against the country’s powerful state industrialists (the conservatives of today) won’t be noted in history books for some time. Those days when leaders rooted for central planning seem long past.
Last week’s meeting marked out several issues that are much more likely to resonate with the masses. Improving food security and safety, for example, was ranked as the No. 1 task to be accomplished in 2014. Food safety is one of the Chinese people’s biggest concerns, next to worries over pollution and access to healthcare.
New graduates who can’t find jobs and workers laid off in industries with excess capacity, such as steel, shipbuilding and glass making, could get extra support next year, according to the communique. The government will even attempt to tackle regional disparities in wealth, a problem that has led to the sense among many Chinese that economic development isn’t for the benefit of everyone.
These are necessary reforms – albeit costly ones that won’t produce instant GDP growth.
If China plans to let economic growth slow, these objectives will help reduce any social unrest that follows from mass layoffs. That’s the name of China’s development game: “Maintain growth while preserving social stability.” Only leaders that can execute the two principles in tandem will consolidate power and further their political agenda.
Any faltering on this and they can expect confrontation and challenges at the end of next year, when it comes time to draw up the plans for 2015.