Wandering China

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Chinese leaders pick stability over reform [The Age]

From the Age: Setting the tone for the new five-year plan starting 2012, China’s National Peoples’ Congress (Premier Wen Jiabao and President Hu Jintao address the country’s annual parliamentary session for the last time) moots for the cautious yet flexible approach. Arguably however, the ‘grand show’ of the National Peoples’  Congress is said to be less important than the National Party Congress in October. Indicators should be clearer then.

According to this report, reforms for rising income gaps, food safety, and energy preservation are to take a back seat for the next generation of leaders to tackle come 2013.

For more, see

China Daily – China sets 2012 growth target at 7.5 percent (March 6, 2012) –

“We aim to promote steady and robust economic development, keep prices stable, and guard against financial risks by keeping the total money and credit supply at an appropriate level, and taking a cautious and flexible approach,” Wen Jiabao in his annual work report to the National People’s Congress (NPC).

– – –

Chinese leaders pick stability over reform
Wei Gu
Source – The Age, published March 6, 2012

China's reforms won't get much of a lift this year. Photo - The Age

Wei Gu is a columnist for Reuters Breakingviews

Wen Jiabao didn’t throw any curveballs in his last government report as Chinese premier. Instead, his opening speech for China’s annual national parliament meeting focused on economic continuity. That gives a clear sign that big reforms will have to wait for the next generation of leaders, who take over in early 2013. By then, the cost of the necessary changes may be higher.

Wen’s speech, which will help set the tone for the Five Year Plan that starts in 2012, delivered some big numbers. China’s GDP growth goal was lowered modestly to 7.5 percent from 8 percent, and its inflation target kept stable at 4 per cent.

The fiscal deficit was targeted at 1.5 percent of GDP, up slightly from 2011 to reflect more spending on housing and welfare. All worthy but unexciting revelations.

What was missing was news of the reforms China badly needs. Rising income gaps, food safety, and energy preservation are key issues, but were given little air time. Reform of the managed exchange rate was also lacking.

In fact, the central bank guided the yuan sharply weaker as Wen started his speech.

That suggests that stability, not change, will be the theme of 2012. That is understandable.

Far from wanting to stamp their mark on their final days, Wen and President Hu Jintao stand to gain more by allowing a smooth transition to their successors, whom they help to select themselves. That leaves the next generation room to put their own mark on the economy. Investors, too, should value stability.

But by postponing the much-needed structural reforms, Wen isn’t really doing the next generation a favour.

Wen and Hu have overseen the fastest growth period in modern Chinese history during their decade of power. Their likely successors, Li Keqiang and Xi Jinping, inherit an economy under threat from weaker external demand, rising social discontent, and strong interest groups. The reforms that would help counteract those forces look likely to remain largely undone for another year.

Context news

— China aims to grow GDP by 7.5 percent in 2012 by following proactive fiscal and prudent monetary policies to combat inflation and downward pressure on growth, Premier Wen Jiabao said on March 5 in his annual government report.

— The government also set a consumer price inflation goal of 4 percent, in line with the target set in 2011. The fiscal deficit was targeted at 1.5 percent of GDP, up from the 1.1 percent of GDP delivered in 2011. Wen also pledged to curb speculative demand in the property market.

— Wen was speaking at the opening of China’s National People’s Congress, the annual meeting of the country’s legislature in Beijing.

— Wen and President Hu Jintao, both 69, will step down early in 2013. The Communist Party is expected to announce a new cohort of leaders by the end of 2012.


Filed under: Beijing Consensus, Chinese Model, Democracy, Domestic Growth, Economics, Education, Environment, Government & Policy, Human Rights, Influence, Mapping Feelings, Peaceful Development, Politics, Public Diplomacy, Reform, Resources, Reuters, Social, Strategy, The Age, The Chinese Identity, Trade, Yuan

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