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China’s12th National People’s Congress.

Posted in China Business, Recommended Reading

The following is a guest post from the good people at the Brunswick Group, reviewing the results of the 12th National People’s Congress.

Monday morning Beijing awoke to clear skies across the capital – the first clear skies for a number of days – if not the entire Lianghui.  It might be a stretch to describe this as a positive signal for the road ahead given today marks the first working day after the completion of the transfer of power to China’s fifth generation of leaders.

On Sunday 17th March, China concluded the inaugural session of the 12th National People’s Congress (“NPC”) five days after the Chinese People’s Political Consultative Congress (“CPPCC”) wrapped up its parallel session.  These annual meetings, which are held during the first two weeks of March each year, mark one of the most important events on the Chinese political calendar.  This year’s meeting was of even greater significance as it concluded the formal transfer of power to Xi Jinping and Li Keqiang.

A key task at this year’s NPC was to officially elect the incoming State Council and confirm the state positions of China’s new senior leadership.  In addition, this year’s Lianghui confirmed a new round of government restructurings that reduced the number of ministries and commissions from 27 to 25.  This round of restructuring included a range of changes that have arguably been in response to local citizen concerns – from food safety to health.  The focus and nature of the reshuffle indicate the authorities are taking concrete action to address what it sees as its biggest threat – a loss of credibility and declining levels of trust in the Party.

Since the conclusion of the 18th Party Congress in November last year there has been much analysis of the new leadership team – in particular the style, approach and priorities of Xi Jinping.  At this stage, it is still too premature to definitively place Xi on the political spectrum.  Much of Xi’s focus over the past four months have been focused on addressing public concerns and consolidating his support across a broad base of vested interests – including the military.

As anticipated, the incoming leadership has made no abrupt moves to alter the core priorities laid out in the 12th Five-Year Plan (2011-2015) or to other well-defined economic and political principals.  The leadership team will maintain continuity and take a gradualist path towards reform.  Reform has many interpretations and is a point for significant discussion.  Economic reform will continue, but, as Wu Bangguo has poignantly repeated, “we will never simply copy the system of Western countries or introduce a system of multiple parties holding office in rotation”.  We see no imminent change to that philosophy and approach.

KEY IMPLICATIONS AND TAKE-AWAYS

  • The China Dream: This Lianghui in many ways was all about the China Dream and addressing challenges laid in the vision Xi outlined in November.
  • No Distinct Policy Changes: The leadership team will maintain continuity with the previous administration and take a gradualist path toward new policies.
  • Economic Reform – Not Political: The new leadership continues to support economic reform and market opening.  Quality economic growth and quality investment remain paramount as officials work to transform China’s economic growth model away from exports and fixed investment.  Political reform is not on the cards and the strength of a unified Party is paramount.
  • Rebuilding Trust: Trust in the Party and the government has been severely undermined in recent years.  In his first four months in office Xi Jinping has taken multiple steps to reengage and address concerns.  While it appears political reform is not a near-term consideration, the leadership team does appear to be taking action to clean up the system.  Time will tell if they are successful and are able to achieve sustainable change.
  • Consensus Rule Continues: There will be no return to a paramount leader and decisions will be based on consensus.  Xi Jinping has been actively engaging key groups over the past four months to win support and consolidate power – including across the military.
  • Government Restructuring: It will take time for newly restructured government entities to start functioning smoothly as internal responsibilities are defined and clarified – and as internal politics are resolved.  Based on past precedent this can be a complicated and long process.  Those in impacted sectors need to be patient and update their engagement programs accordingly.
  • Environment Prioritized: The state of the environment and the level of environmental degradation was front and center in the Lianghui, with one in ten proposals submitted by delegates related to this issue.
  • Inbound and Outbound Investment: China’s Go Global strategy will continue to gather momentum through the next administration and it will diversify beyond large industrial state owned enterprises.  Meanwhile, opening-up was recognized for the benefit it has brought and it will continue to be encouraged.
  • Domestic Challenges: That being said, China’s vast economic and regional disparities and other domestic challenges continue to trump foreign concerns.
  • International Engagement: China’s leaders will become increasingly engaged in bilateral and multilateral issues at a global and regional level over the next administration.  However, a more confident China will also mean a more challenging geopolitical environment with greater potential for military tension.
  • Further Restructuring: Expect additional changes among the ministers as they reach retirement age and more organizational restructuring in 2018.

If you want to read more about this year’s Lianghui, its potential business implications, and what it may mean for China’s future policy direction go here for Brunswick’s full report.

  • cold fusion

    Forget “the news”. China is headed for democracy with “Chinese characteristics”. The CCP long ago recognized it was a dinosaur unable to compete with the new electronic environment, and permission to explore new possibilities was given by Deng Xiao Ping in the 80′s after the humiliation of Tiananmen Square. China has been looking to the West for solutions to old problems as much as the West has been going East to find inspiration and new markets for their old “hardware”. The popular image of China promoted on TV has been obsolete since the 1960′s. Xi is just the latest paid actor to prop up the confused media image of China. He mimes Barack Obama as an ambiguous “cool” actor who is all things to all people. The CCP is as confused as any centralized bureaucracy in how to deal with life in the global theater with its multiple conflicting messages and excess of information. Don’t expect consistency. China remains an innovators paradise for those who are savvy……….and a mess for those who are stuck in the rear view mirror of the past…….

    • ScottLoar

      “China remains an innovators (sic) paradise for those who are savvy…”

      I don’t understand. You mean China welcomes, encourages, and rewards innovation, no matter home grown or imported? You can give examples of China as an “innovators’ paradise”? Or, give examples of those who were savvy enough to make their fortune in such a paradise.

      • cold fusion

        Probes are meant to encourage dialogue………not necessarily to defend a “point of view”, which can not exist as long as we are living under electronic conditions……when the GROUND shifts so will the FIGURE. The old “ground” of China was the CCP and the radio/printing press(c 1960′s), the “figure” was its leaders. The new ground of China is the global theater and internet/TV landscape, its figure is the image of a wealthy and prosperous China against the old ground of a poor and suffering China. The image of Mao was retrieved after his death and took on mythic proportions to create the new dream of China. Xi’s “Chinese Renaissance” speech is another version of the “American Dream”. Both America and China have been living “mythically” since the 1960′s……Kennedy had Camelot, Mao had “the People”. The CCP is having an “image management” or PR problem as they say in the entertainment biz. Who can define what China is? Do you have to be “qualified”? Who has the “rights” to define what “China” is or is not? Another probe for the lawyers out there………

    • ScottLoar

      Addendum: Perhaps you confuse “copycat” (山寨) with innovation, because China is a copycat’s paradise for those who are savvy; reflect on many people’s experience of China and refer to that chapter of the same name in China in Ten Words (十個詞匯里的中國) by Yu Hua (余華).