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UPDATED: November 12, 2012 NO. 46 NOVEMBER 15, 2012
The Middle-Income Kingdom
The 18th CPC National Congress builds on past successes
By Kerry Brown

One of the continuing problems of the last decade, which will need to be addressed in the coming years, is social inequality. China has become a continental-sized economy, with great variations between the coastal area and the inward western provinces. While areas like Zhejiang and Fujian have per-capita GDP of around $10,000, respectively, areas like Xinjiang, Gansu and Tibet are half to a third of these. In his speech at the Copenhagen UN Climate Change Conference in 2009, Wen recognized that China still had around 150 million people living in poverty, on less than $2 per day. The World Bank and others have recorded poverty issues in some parts of rural China. So on the one hand, there has been huge wealth creation over the last decade, with Forbes stating that the country now has over 200 billionaires in dollar terms, and on the other hand, with the country producing most of the wealth creation globally since 2002, the spread of this prosperity has been uneven.

Since 2004, the Party and the government have introduced policies to try to address this. In terms of social welfare, they have lifted taxes on farmers, and put more money into education and healthcare. The extraordinary increase of urbanization in the last decade, with the national census in 2010 showing that for the first time ever as many people lived in the cities as in the countryside in China, has created pressures on the living environment and on the ways in which welfare has to be structured. China's pension system remains a huge problem as the elderly population grows. How to address the imbalance between the rich and the poor has remained a constant challenge. While not wanting to impede people's entrepreneurial talents, policies have also had to be developed to work out how to try to redistribute wealth socially, and also in terms of geographic spread.


The issues that the Party outlined in Hu's speech in 2007 will continue into the new leadership, building on the progress made in the last five years. Maintaining decent levels of growth will be critical. Doing so sustainably will also be fundamental. Meeting people's increasingly high expectations of government while preserving social stability and allowing people to express widely divergent demands and interests is another major issue. China introduced an "open government act" in 2008, similar to freedom of information acts elsewhere. It has also introduced important processes for consultation about new laws, through the National People's Congress. Legal reform is important in balancing interests in a society that is increasingly dynamic and diverse and where there are often differences that need legal redress.

The journey to middle-income status, which will dominate the coming decade, is a difficult one. This was something recognized by Hu in the 2007 report to the 17th CPC National Congress. The move toward a per-capita income of around $8,000 or $9,000 has been a challenging time for other societies, as they have had to readjust and change their economies, and the ways in which management happens in society. China is going through this process on a far larger scale than any other society has attempted. For this task, one of the key issues will be not so much growth (although of course that will remain important) but efficiency—efficiency in the deployment of capital, in the use of resources, in the supply of food, and in the ways in which society is governed and managed. Efficiency is a critical term for both the leaders of the 17th CPC National Congress, and for those coming in at the 18th CPC National Congress.

High levels of growth similar to those that occurred from 1980 onward as the reform and opening-up period progressed will no longer be possible. Levels around 7 percent are set for the period to 2015, with probably similar or lower levels afterward. For a rich society, maintaining double-digit growth is next to impossible. For China, therefore, the real challenge will be to continue to find growth in ways that are sustainable and efficient. Movement toward less capital investment, more innovation, more balance, and more economic interlinking are critical. These are the ongoing key tasks and they will be the ones that the new leadership from this November after the 18th CPC National Congress is over will have to focus their attention on.

The author is executive director of the China Studies Center of the University of Sydney

Email us at: yanwei@bjreview.com

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