China’s Annual Government Conclave Set for This Week

China gets its annual two-week dual conclave off the ground Monday with 3,000 delegates in Beijing for what is being called the most important such meeting in recent memory. The concurrent meeting of the National People’s Congress, the country’s parliament, and the Chinese People’s Political Consultative Conference, a broader advisory body, comes at a time of growing concern over the world’s second-biggest economy as it attempts to switch direction from the triumvirate of exports, investment and consumption that has powered the country for decades to one led primarily by domestic consumption while continuing to maintain at least 7.2 percent average annual growth. While the bodies do not actually debate anything publicly and disagreement is unheard of, they are important gatherings of officials in one place at one time. The bodies will issue pronouncements that have already been decided but the outside world will eagerly await the marching orders that will be handed down to the state apparatus. The world has grown used to a Chinese juggernaut headed by leaders who can seemingly put programs in place by waving a wand – in this case President Xi Jinping. Prime Minister Li Keqiang, the architect of the economic transformation, faces the considerable headwinds of slowing credit growth while seeking to tighten local government expenditures and clean up their debts, estimated at a breathtaking RMB19 trillion (US$3.1 trillion) and attempting to slow overproduction of state-owned manufacturing sectors such as steel and coal by bosses who in the past saw never-ending expansion as the key to promotion. The country also faces disastrous pollution that is so severe it is slowing plant photosynthesis and leading to vast numbers of lung cancer cases. It is a nation also bristling with tensions that coexist with pride at its fast pace of economic development. The Chinese Academy of Governance in 2012 said there were 180,000 reported "mass incidents," responses to issues such as primarily official corruption, government land grabs, Tibetan autonomy and environmental problems. The conference opens against the horrific backdrop of an attack yesterday on a Yunan train station, allegedly by Uyghur separatists, that killed at least 29 and wounded more than 140. C H Kwan, a Senior Fellow at the Nomura Institute of Capital Markets, warned recently that the economy could be facing signs of overheating despite a sharp slowdown in economic growth – stagflation – suggesting that, constrained by a dwindling labor supply, potential growth might have fallen significantly from its past level. With both the US and European Union economies mired in lackluster growth, China won’t be able to rely on exports unless it sharply devalues the renminbi, something Li has vowed not to do. Urbanization – the movement of huge numbers of rural citizens to the cities – has become Li’s signature mantra for modernization and the stimulus for domestic consumption, although at the moment it remains a concept rather than a concrete program. Li is expected to get the show on the road by unveiling tangible prescriptions for action to a country growing more anxious to learn how it’s going to work. Existing social security and medical care systems are being extended to rural residents although they require revision of effective regulations or allocation of new funds and thus need to be approved by the parliament. But pulling off a task involving the movement of as many as 260 million people into new housing, jobs and social programs will take enormous amounts of money, straining already-strapped local and regional budgets. According to the Chinese Academy of Social Sciences, it would cost RMB131, 000 to provide urban citizenship for each migrant over the entire migrant population. The total bill is expected to be RMB34 trillion (US$5.59 trillion), or 65.5 percent of 2012 gross domestic product. Also, issuing orders from Beijing, especially for the breakneck construction pace envisioned by the government, is a lot different from what happens in cities thousands of kilometers from the capital. There is still a culture of bribery to contend with, no matter how many chickens are killed to scare the monkeys. Businesses get a break Li famously favors “small government, big market.” In his first year in office, he has dramatically relaxed restrictions on business registration, making it easier to establish a company and begin operations. At a Feb. 11 State Council meeting, Li elaborated that enterprises “can do whatever is not forbidden by the law” and government departments “are banned from doing anything they are not authorized by the law.” That is equally difficult to pull off in a government whose cadres have long built their incomes on a cascade of bribes for issuing permits, licenses, certifications and any other documents that would allow anybody to do anything commercially or socially. But if the government can enforce the rule of law in market operations, it can expect that the economy would open up even more, boosting domestic consumption and growth. Its ancillary effect should be to help to curb official corruption, eliminating the raison d’etre for the thousands of officials with their hands out at every step in the process. This unofficial license raj has enabled officials to spirit as much as US$1.08 trillion illegally out of the country since 2002 and into accounts in the British Virgin Islands and real estate from Vancouver to New York to London to Florida, according to a recent investigative report. Wang Qishan, a protégé of the incorruptible Zhu Rongji, was put in charge of the CCP’s Central Commission for Disciplinary Inspection, resulting in the arrests and convictions of many senior party officials, although cynics postulate that many of the arrests have been to subdue anti-Xi elements. Zhou Yongkang, a retired member of the Politburo Standing Committee – and chum of former Chinese leader Jiang Zemin -- has long been rumored to be under investigation. Zhou’s son, Zhou Bin and many of his former aides and cronies have been named in the Chinese media as having been given preferential treatment in making television programming for state-owned channels. Increasing per capita incomes China’s first challenge is to double its per capita income of just over US$6,000 by 2020. Detailed measures have yet to be unveiled, however. Li is expected to address long-awaited wealth redistribution reforms, but again he will be dealing with a growing wealthy class that has precious little interest in seeing wealth redistributed downward. China’s gini coefficient, the measure of income inequality, is one of the highest in the world. At the moment, there is a three-fold income gap between rural and urban areas and a four-fold gap between workers in the most profitable industry and those in the least lucrative industries, according to a Reuters report in January quoting the chief of China’s statistics bureau. The two-child experiment Reforms mooted by China’s Third Plenum last year famously include reform of the one-child policy to allow couples to have two children if both the husband and wife are only children themselves. All 31 provinces and municipalities in mainland China, at least Beijing, Shanghai, Tianjin, Anhui, Jiangxi, Zhejiang, Yunnan and Guangxi have already started to implement the policy, and the rest of the regions except Tibet and Henan have set timetables to do so. It is hoped that would boost child-related consumption on baby goods, toys and education. The Ministry of Education has already started to work out plans to expand the capacity of the country’s nurseries and kindergartens. But as Asia Sentinel reported on Feb. 18, it is unlikely that the policy will have much impact on the total fertility rate. Birth rates depend on income, schooling, whether the mother has to work and other issues. In many of China’s major cities today, fertility rates have fallen well below replacement – not because of government policy but because of social issues. The Third Plenum also opened the state sector to private investors to take shares in state owned enterprises (SOEs). Sinopec has taken the lead, restructuring its retail business to private investors. Shortly afterwards, Gree Electric Appliances, a big air conditioner manufacturer, said it would sell up to 49 percent of its shares to interested investors. In addition, despite Beijing’s usual cautious approach, three banking licenses are likely to be issued and the Internet is playing a new and vital role. No more tea girls One thing that will be missing from this year's gathering are comely young tea girls and cigarettes. It used to be common that when high-profile meetings were held in the Great Hall of the People in Beijing, attractive women would walk around to serve tea to senior officials often puffing away on the rostrum. Former President Jiang Zemin was captured in snapshots several times peeping at the tea ladies. Not anymore. No hot tea will be served and the government recently banned smoking by officials in public. Instead, everyone, leaders included, will be given bottled water, and won’t be given a second bottle until the first bottle is finished. No doubt, this is in line with Xi’s call not to waste any public funds. But photographers will have to work harder to give us some entertaining snapshots.