The “New Cycle and Phase” of China’s Economic Growth
In the agenda for China’s next five-year plan, Xi said that national rejuvenation would be a fantasy without the leadership of the Chinese Communist Party. Urging consolidation of the Party’s role that had been weakened by the obscurity of marketization since Deng’s Reform and Opening policy, the 19th Party Congress “called for the strengthening of the party’s leadership role in almost every aspect of public life”, including foreign corporations and private businesses, reported South China Moring Post.
To the extent that the nation gradually internalizes global capitalism, the Party has concerned itself with the goal to grow the economy with the least social cost and political risk. Rather than a hurried market environment, Yang Weimin, now Secretary of the Development and Reform Committee, expects a greater push for market reform and more comprehensive restructurings of state-owned enterprises (SOE), rather than a rapid growth of gross domestic product. He also said at the press conference in interpreting the report of the Party Congress that economic development in China “has moved away from the speed of expansion to a new cycle and phase of stable and high-quality growth”.
The state’s strategy to capitalize on the meaning of “regulatory mechanism of economic development” takes various forms. According to guidelines issued by the central government in 2015, the mixed-ownership reform program aims to rejuvenate the state sector by “allowing private capital to invest in government-run enterprises” and “boosting performance of its SOEs”.
Yet, as the profitability of SOEs in China continues to improve, the state’s excessive reliance on debt for economic growth poses a challenge to the sustainability of the country’s economic development. The local government’s dependence on the market capitalization of government-owned companies in paying its debt entails a process through which state and private interests intertwine. According to Wei Benhua, former deputy director of the State Administration of Foreign Exchange, “Guizhou province has a very high level of government debt, but all its debts could be repaid if it sold just one company—Kweichow Moutai”. The state-owned Kweichow Moutai Company produces high-end Chinese liquor that enjoys a long-standing history and worldwide reputation at local distilleries.
As the structural transition of SOEs is enabled by the market reform, companies are more inclined to identify with functions of the market economy and less disposed to challenge the political orientation of the state. According to Lin Wen, people’s representative of the Party Congress and CEO of Shehua Company Group, “the restructuring of SOEs has both the advantage of an arranged marriage, and the freedom to choose one’s spouse”.