26 February-11 March 2023

Fortnightly newsletter tracking high-level policy signals sent by China’s top leaders. For more information, visit About Five Things.

Commentary

The last two weeks, with the holding of China’s annual National People’s Congress meeting (plus the far less significant annual gathering of the Chinese People’s Political Consultative Conference), have told us various things that are on China’s leaders’ minds. This sitting of the so-called Two Sessions was particularly significant as it outlined the direction of the next five years of China’s government.

In the fortnight’s second most widely circulated article, “First session of 14th National People's Congress opens in Beijing” (Original, Machine Translation), outgoing prime minister Li Keqiang itemized the government’s eight economic priorities for the year ahead:

First, to focus on expanding domestic demand; second, to speed up the construction of a modern industrial system; third, to effectively implement the “Two Unwaverings” [两个毫不动摇 – “Unwavering consolidation and development of the public sector; unwavering encouragement, support and guidance for the development of the private sector”]; fourth, to attract and utilize foreign capital with greater efforts; fifth, to effectively prevent and resolve major economic and financial risks; sixth, to stabilize food production and promote rural revitalization; seventh, to promote the green transformation of the development model; and eighth, to ensure the basic livelihood of the people and develop social undertakings.

A useful list, but one that masks the broader underlying ideology guiding overall policy making, and which can be summarized in the following five points:

1. First principles. Since the holding of the CPC’s national party congress last November, we have been waiting to see what policy initiatives would emerge; there haven’t been any. But while Xi clearly has aspirations for China (“rejuvenation of the Chinese nation”), and numerous statements of principles governing the way in which China should be run (“Five Firm Grasps”, “Four Comprehensives”, “Two Establishes”, etc), at the heart of his ideological project stands a policy vacuum.

That Xi’s leadership team is now filled with promoted those he knows from having worked with them in the past, not technocrats, points to this absence of an overall framework continuing. While Xi wants technocratic policy successes, the people and the policy machinery needed to deliver them are largely absent.

The one positive from the Two Sessions is that it was far more economically-focused than any of those of the previous five government administration. As this first meeting is only for outlining aspirations, it remains to be seen whether or not it will mean much. And the meetings were of government and advisory bodies, rather than the more powerful Party bodies.

2. Continued centralization of powers. In his first decade of office, Xi Jinping showed a clear preference for greater central direction, seen in his administration’s emphasis securing total compliance with Party directives.

However, it is not clear whether the machinery is there to back this up. When things work, it can appear that localities are implementing orders. But as the demise of China’s zero-Covid policy revealed, when directives are ambiguous or not backed up with adequate resources, provincial and city officials can find themselves abandoned.

With less power to influence central decision-making, localities will be less incentivized to take risks or come up with their own solutions. The local decision-making that drove the success of locations such as Shenzhen will be harder to come by and Hong Kong’s slow fade could become the model others follow.

3. Reform is not a priority. For China to realise the technological and other advances its leaders want, two things are necessary: first, the appropriate incentives, and second, engagement with the rest of the world. Neither of these have been foregone, indeed various arguments can be made that leaders have continued both to liberalize and open the economy wider to the world in recent years with the lifting of foreign ownership caps on key sectors such as finance and automotive.

Yet, reforms aimed at improving the efficiency and effectiveness of the economy play at best a minor role in the thinking of China’s leaders. An example of this was the rationale behind the establishment of the new regulatory body to oversee financial markets, the National Financial Regulatory Administration, which will “deepen the reform of local financial regulatory systems” via “enhanced centralised management”.

Such moves do not point to a return to the planned economy. But they indicate how control mechanisms, not market ones, will be the ones China’s leaders will use to guide the direction of development.

4. Private enterprises. Recent weeks have seen broad statements of support from China’s for private enterprises. These pledges, however, have caveats. As is noted in the final paragraph of “Correctly guide the healthy development of the private economy and high-quality development”, the fortnight’s fourth most widely circulated article:

It is necessary to strengthen ideological and political guidance, guide private enterprises and private entrepreneurs to correctly understand the principles and policies of the Party Central Committee on “Two unwaverings” and “Two healthys”, eliminate worries, let go of burdens, and boldly develop.

Private companies cannot be allowed to go their own way, but must develop in line with the Party’s demands. That was not the recipe that allowed entrepreneurial businesses to flourish from the 1980s to 2010s. Whatever one might think of ideological incentives, the meetings to propagate them chew up time and focus — and make entrepreneurs worry more about what Party officials are telling them rather than what their customers are saying.

5. International ties. While national security featured less prominently during the NPC and CPPCC meetings than at last year’s national party congress, China’s leaders continue to harbour deep suspicions about Western policies towards China, believing that undermining their regime remains a key goal, certainly for the US.

To counter this, a key goal is securing greater recognition for the influence China now wields internationally. Among non-Western nations, that is happening – witness both China’s success in brokering a re-establishment of Saudi Arabia-Iran diplomatic relations and the kudos that brought with it.

However, as China’s power has grown, so West and Western-aligned nations in Asia have become less interested in recognizing what a more internationally involved China might have to offer the world, preferring instead to focus on how to address that power.

Bridging this divide would call for greater Sino-Western engagement. China’s leaders, though, are ambivalent about adopting such a course. While attracting foreign investment and expertise continue to be important, their eventual goal is a greater alignment of international norms to China’s preferred ways of operating, while more immediately a greater priority is advancing self-reliance in science and technology.

Those are unsurprising directions given the Biden administration’s efforts to hinder China’s ability to develop its semiconductor, AI, and other high-tech industries. Yet they are also ones that benefit leaders who want to minimize China’s exposure to Western thinking and ideas, and who have control at the heart of their political outlook. However, that too leads to problems: it presumes that China’s leaders will put their own ideas out to replace what they don’t like. Otherwise, something will arise to fill the void, and there is no sign that China’s leaders know what that something might be.

Top-ranked articles for 26 February-11 March 2023

% = percentage of publications carrying the article

1. Firmly grasp the primary task of high-quality development
牢牢把握高质量发展这个首要任务
Xinhua News Agency, 5 March 2023
Chinese / Machine translation / 71%

2. First session of 14th National People's Congress opens in Beijing
十四届全国人大一次会议在京开幕
Xinhua News Agency, 5 March 2023
Chinese / Machine translation / 69%

3. Second Plenary Session of 20th CPC Central Committee held in Beijing
中共二十届二中全会在京举行
Xinhua News Agency, 28 February 2023
Chinese / Machine translation / 68%

4. Correctly guide the healthy development of the private economy and high-quality development
正确引导民营经济健康发展高质量发展
Xinhua News Agency, 6 March 2023
Chinese/ Machine translation / 62%

5. Second Plenary Session of First Session of the Fourteenth National People's Congress
十四届全国人大一次会议举行第二次全体会议
Xinhua News Agency, 7 March 2023
Chinese/ Machine translation / 60%

6. Wang Huning elected chairman of National Committee of the Chinese People's Political Consultative Conference
王沪宁当选全国政协主席
Xinhua News Agency, 10 March 2023
Chinese/ Machine translation / 57%

7. Adhere to the original intention of the party school, strive to educate talents for the party and provide suggestions for the party
坚守党校初心 努力为党育才为党献策
Xinhua News Agency, 1 March 2023
Chinese / Machine translation / 55%

8. CPC Central Committee holds democratic consultative conference
中共中央举行民主协商会
Xinhua News Agency, 28 February 2023
Chinese / Machine translation / 48%

9. “Seeking Truth” publishes important article by General Secretary Xi Jinping:
“The Only Way for the Party and the People to Forge ahead in the New Era”
《求是》杂志发表习近平总书记重要文章
《新时代党和人民奋进的必由之路》
Xinhua News Agency, 28 February 2023
Chinese/ Machine translation / 48%

10. Members of the Political Bureau of the Central Committee, secretaries of the Secretariat, members of the Standing Committee of the National People’s Congress, the State Council, and members of the Party Leadership Group of the National Committee of the Chinese People’s Political Consultative Conference, the Party Secretary of the Supreme People’s Court and the Supreme People’s Procuratorate report to the Party Central Committee and General Secretary Xi Jinping
中央政治局委员 书记处书记 全国人大常委会
国务院 全国政协党组成员 最高人民法院
最高人民检察院党组书记向党中央和习近平总书记述职
Xinhua News Agency, 2 March 2023
Chinese/ Machine translation / 48%

For more information about Five Things on China’s Leader’s Minds, visit About Five Things on China’s Leaders’ Minds or email fivethings@bilby.ai.