Economy a key focus at the CPC Congress

People buy ice cream at a McDonald's, American fast food restaurant, in Beijing Friday, Oct. 19, 2012. Foreign investment in China fell again in September and a government spokesman said Friday it was too early to forecast a recovery in trade. The decline in foreign direct investment added to mixed signals about the health of China's economy following Thursday's report that growth slowed to 7.4 percent in the latest quarter. Retail sales and factory output improved, prompting suggestions a recovery might be taking shape. Photo:AP

Economy was a key political issue and topics related to the economy ran through the CPC National Congress from Hu Jintao’s report to panel discussions of the delegates and the press conferences.

Hu’s report reiterated the ambitious goal to build a moderately prosperous society by 2020. This is primarily an economic goal. Hu’ report put it forward for the first time that in the year 2020 China’s Gross Domestic Production (GDP) and the per capita income of urban and rural residents will be doubled over the 2010 figure.

How to achieve this? Hu gave the answer in the report - transformation of the economic development mode which for a rather long time has been based on cheap human labor, excessive resource use and investment and exports. Now China has achieved a high GDP growth and the economy ranks second globally, but is facing the challenge of an unsustainable approach of development marked by a depletion of resources and inefficiency. Besides, the world economy cannot withstand such a development mode considering the weight of the Chinese economy.

Therefore, the major concern of the Congress was the development mode rather than the speed. The good news is that the domestic demand has been expanded which is indeed a significant progress. Zhang Ping, director of China’s Development and Reform commission, said the contribution of consumption to GDP rose from 43.9% in 2002 to 55.5% in 2011, which means that consumption has become the third driving force for the Chinese economy together with investment and exports. The change also indicates that people’s income and wealth is rising, which is undoubtedly another good news.

Secondly, China’ economic development in the past was driven by its secondary industry, primarily the manufacturing industry, in terms of the industrial structure. However, now the proportion of the tertiary industry is slightly higher than a decade ago. And, in regional economic structure, the pace of economic development in central and western regions is faster than before.

Well, the speed matters, the structure matters, but what matters most is the economic results must benefit the people. The blueprint for doubling China’s per capita income is actually like Japan’s “national income doubling plan” in the 60s when Japan’s economy enjoyed a rapid development and the Japanese people’s income also increased simultaneously. But in the case of China, the proportion of worker’s share in the GDP has been declining, causing a serious wealth gap and leading to social instability. It is reported that the income-doubling plan was quite controversial when China was deliberating it because if the distribution reform lags behind where it should be, it’s difficult to achieve a balance between the economic development and per capita income. Therefore, to realize the goal of doubling the income, the key is to promote the distribution system reform. In a word, the problems in economic growth cause social problems which eventually lead to political problems.

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