One year ago, outgoing Chinese Premier Wen Jiabao gave his final government work report to the National People’s Congress. Wen’s work report was in effect the final effort to solidify the legacy of the Hu-Wen era, as Wen methodically went through the achievements of the past five years. Wen pointed to achievements from the concrete (nearly doubling China’s GDP, successfully hosting the 2008 Olympics, and creating over 58 million urban jobs) to the more general (keeping economic growth going despite the financial crisis, increasing Chinese innovation, and opening “a new chapter in building socialism with Chinese characteristics”).
Yet Wen also acknowledged areas where the Hu-Wen government fell short. Among his list of 12 problems still facing China, Wen mentioned “unbalanced, uncoordinated and unsustainable development,” risks in the financial sector, a wealth gap between urban and rural regions, the conflict between economic development and environmental protection, and the need for “transformation of government functions” to help clear out corruption.
If this litany of issues sounds familiar, it should. Current President Xi Jinping and Premier Li Keqiang have set their sights on reform, and many of the issues Wen listed are also priority areas for the new Xi-Li government. Xi and Li have placed a particular emphasis on rebalancing China’s economy, to counteract to “unsustainable development” Wen mentioned.
In his first work report to the NPC, Li pledged to continue to carry out economic reforms—but also set China’s growth target at 7.5 percent for the third straight year. Li said that keeping a “proper economic growth rate” is essential for China. He also stressed that reform is the “top priority” for Beijing. Should these two goals come into conflict, with reforms resulting in slower-than-planned economic growth, Xi and Li might have to make a tough choice between these two stated priorities.
In terms of specific economic reforms, Li announced that China will set up a deposit insurance system, which Xinhua took as a sign that Beijing will push forward with interest rate liberalization. The government is also expected to expand the floating range for the value of the renminbi, allowing more freedom for the market to determine the value of China’s currency while not entirely relinquishing government control. Over at the Pacific Money blog, James Parker has more on China’s motives for adjusting the value of the RMB.
Li also announced some small steps towards addressing the monopolies and inefficiencies of China’s state-owned enterprises (SOEs). Li promised to “carry out trials of investing state capital in corporate organizations” and also said that the government will allow more non-state capital to be used for state projects. Reining in China’s SOEs, all of which are backed by powerful vested interest groups, will be extremely difficult for Xi and Li.
As a part of China’s economic rebalancing, and also an important effort to narrow China’s wealth gap, Li has been emphasizing “people-centered urbanization.” This term also made an appearance in Li’s work report, where he called urbanization “the sure route to modernization.” A focus of urbanization is making sure that rural residents who already live in cities have access to the social benefits enjoyed by urban dwellers who hold the much-coveted hukou. China plans to grant urban residency status to “around 100 million rural people who had moved to cities,” although previous remarks suggest that this may only apply to smaller cities, rather than “megacities” like Beijing and Shanghai. These reforms all fit with Li’s announcement back in January that China was waging a “war against poverty.”
During his work report, Li also “declared war” against pollution, placing environmental concerns on the same level as the wealth gap. The government will “focus on mega cities and regions with frequent occurrence of smog,” Li said. The government has already been focusing on increasing energy efficiency and reducing emissions—Li pointed out that the government plans to shut down 50,000 small coal-fired furnaces and remove six million high-emission vehicles from the road. Still, most of these measures can be considered ‘low-hanging fruit’ when it comes to cleaning up the environment. The real test is whether China will prioritize environmental protection over economic growth. There are hints of such a priority shift, with the Party announcing last December that it will deemphasize economic development as a factor in evaluating local officials.
As for alterations to the way China’s government functions, this has also been a priority of Xi and Li. They have sought to make the government more accountable by implementing new anti-corruption policies and instituting a “mass line campaign” to increase government responsiveness. Li’s report stressed the success of these efforts, noting that central government spending on “official overseas visits, official vehicles, and official hospitality” dropped by 35 percent in 2013. China’s government will continue its efforts, Li said, promising to “penalize crooked officials without mercy in accordance with the law.”
The Xi-Li government has a plan, and hardly one of their speeches goes by without a mention of the need to “comprehensively deepen reform,” the main slogan of last fall’s Third Plenum. But it’s important to note that the problems they identify aren’t new, and the current Chinese regime certainly isn’t the first to notice them. Besides noting these issues in his 2012 work report, Wen Jiabao listed these same problems back in 2008. Six years later, these same problems are again a focal point of a NPC work report by China’s Premier.
Xi and Li seem serious about reform, and Xi’s ability to control the various levers of power (the Party, the military, and the domestic security apparatus) has already outstripped Hu Jintao’s. It’s an advantageous atmosphere for reform, if China’s government is willing to do the hard work necessary to implement changes. In this sense, it’s heartening to note one big difference between Li’s work report and Wen’s—Wen focused on extolling past government successes, while Li was more concerned with the direction of future progress.