The "Four Comprehensives" aim at putting China on track to achieve its economic and social development targets. In an effort to avoid a hard landing from the economy, China should face the current downward pressure on its growth by boosting effective demand and progressively switching to a new growth model.
At the opening of the annual National People's Congress (NPC) in March, Chinese Premier Li Keqiang announced that the official growth target for China in 2015 will be approximately 7 percent--sensibly lower when compared to past years. The announcement came as no surprise as it had been anticipated in a speech by the premier in Davos in February stating that the country had "entered the stage of the "new normal," shifting from high-speed growth to medium-to-high-speed growth." Li told that China is likely to face even more serious difficulties in the years ahead, as "downward pressure on China's economy is building up" quickly and the country is facing "deep-seated problems in development" that can no longer be postponed. Li assured that the "new normal" will be consistent with the government's goal of "building a modestly prosperous society."
Li added that slower growth makes "structural reform all the more necessary." In a sense, shifting gears to a more appropriate growth rate will help China to achieve modernization of its economy.
By putting herself on a more sustainable development path, China aims to avoid falling into the "middle-income trap." To do so, structural change--rather than the rapid growth of GDP--is needed to achieve a level of average income equal to that of advanced economies. The main ingredients of structural change are increasing agricultural productivity through the mechanization of sowing and harvests; progressive urbanization allowing millions of rural workers to move from agriculture to manufacturing and services and find better-paid jobs in urban areas; investment in infrastructure and advanced production technology in manufacturing; and the development of a dynamic and innovative business private sector including foreign multinationals. Moreover, Li said it is vital for China to go ahead with the reform of state-owned enterprises to improve efficiency and productivity and further liberate the banking system and financial markets.
Fiscal and market reforms are particularly high on China's reform agenda. The fight against pollution and corruption has contributed to the slowing economy, as dirty industries have been downsized, and the anti-graft campaign has had a chilling effect on business activity.
Although China's policymakers are currently tackling short-term emergencies, in the long run, they seek to boost consumption in order to reduce dependence on export markets and cut wasteful investment. In a similar vein, market reforms--implemented in the Made in China 2025 strategy--will pursue innovation-driven development, apply smart technology, refocus on green development, tackle overcapacity in polluting heavy industries and move its factories up the global value chain. Li also promised a greater role for private business in the economy, which will be further opened up by halving the number of industries in which foreign investment is restricted.
The four parts recall the main political campaigns promoted by President Xi Jinping since his ascension. Achieving a wealthier society is one of the core concepts of Chinese Dream, while the others emphasize reforms, the rule of law and anti-graft campaign. Many commentators in the Chinese media by and large referred to this new strategy as a tool aiming to finally return the nation to its prosperity that preceded the First Opium War (1840-42).
Xi's "Four Comprehensives," thus, will be the formulation through which Xi's ideological contribution is registered within the Chinese Constitution and the Party's Constitution, as happened in the past with each generation's achievement: the theory of Deng Xiaoping, Three Represents by Jiang Zemin and Harmonious Society and Scientific Outlook on Development by Hu Jintao.
However, it is also key to note that Xi's "Four Comprehensives" put the spotlight on domestic goals. This inward-looking approach is important at a time when China is called upon, by international and domestic observers alike, to rebalance its economy by shifting some of its expenditure from investment toward private consumption. In line with this approach, the recent description of pollution as a blight on the quality of life by Premier Li, speaking at the opening of the NPC, neatly
complements Xi's "Four Comprehensives" and is an answer to national and international calls to focus on pollution and climate change. But Xi's initiative may turn out to be wishful thinking if, at the same time, they are not complemented with a clear international strategy or with the identification of global objectives in terms of reform of the global economic governance and contribution to a stable and sustainable global growth.
The joint U.S.-China announcement on climate change in November 2014 goes in the right direction as it puts together national needs and global targets. It will hopefully set the stage for a broader and more comprehensive agreement on the occasion of the Conference of the Parties of the UN Framework Convention on Climate Change to be held later this year in Paris.
By the same token, China is legitimately and correctly calling for a greater role in international economic governance, mirroring its growing role in international trade and finance. As recently as January, the yuan broke into the top five world payment currencies, while it was 13th just two years ago.
There is no doubt that the yuan is taking a role as an international currency and many call for its inclusion among the Special Drawing Rights of the International Monetary Fund (IMF), a basket of key international currencies reviewed by the IMF every five years (last time in 2010) by taking into account currencies' global standing both in terms of contribution to international trade and foreign reserves of central banks.
However, Chinese requests should follow, instead of anticipate, the commitment to contribute to the provision of global public goods, such as international monetary coordination, financial stability, free trade, reduction of global macroeconomic imbalances and such like. As mentioned above, legitimate national ambitions and requests should be included in a clear global strategy built upon the acknowledgment that the international multilateral system was key in China's impressive economic track record. It therefore needs to be preserved and improved by China itself.
In this context, the legitimate request to scale up the international role of the yuan should follow the decision of its full convertibility. The same holds true when it comes to the Chinese request to increase its votes and quotas in the IMF and other Bretton Woods Institutions. This should go hand in hand with a clear engagement on multilateral goals. Furthermore, Chinese initiatives such as the New Development Bank and the Asian Infrastructure Investment Bank, should be clearly included in the context of existing multilateral Institutions with a view to complementing them instead of replacing them. This approach may easily win support in Europe and help overcome the opposition of the U.S. Congress on the voting system of the IMF.
In a nutshell, the very economic future of China, like any other country, still depends on the proper functioning of the multilateral system. As a result, the viability of the "Four Comprehensives" also depends on the possibility and willingness to add a "Fifth Comprehensive": to comprehensively contribute to global public betterment.
Alessia Amighini is an Ispi associate senior research fellow and professor of economics at Università del Piemonte Orientale, Novara, Italy.
Antonio Villafranca is an Ispi senior research fellow and head of the European Program
Copyedited by Kieran Pringle
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