China is drawing up an economic roadmap until 2029

There is hardly a better place to watch the four-day, twice-a-decade plenum of the Communist Party of China than in dynamic “one country, two systems” Hong Kong.

Hong Kong is located in the heart of East Asia – halfway between Northeast Asia (Japan, Korea) and Southeast Asia. To the west lies not only China, but also the Eurasian landmass that connects it to India, Persia, Turkey and Europe. To the east lie the Pacific Ocean and the west coast of the USA.

Moreover, Hong Kong is the ultimate multipolar, multimodal hub: a frenzied global metropolis created by centuries-old trade routes, attracting people from all latitudes interested in connecting trade, ideas, technologies, shipping, goods and markets.

Now reinvented for 21st century Eurasian integration, Hong Kong has everything it needs to benefit as a key node of the Greater Bay Area, the southern hub that is making China an economic superpower.

The plenary session in Beijing was a rather serious and sober affair, aimed at finding a balance between sustainable economic growth and national security until 2029, when the People’s Republic of China will celebrate its 80th anniversary.

The proverbial comprador elites, 5th columnists and Sinophobes in the West have been riled up over the current slowdown in China’s economy – with slumps on the financial and real estate fronts – which runs parallel to all the hybrid warmongering emanating from Washington to contain China.

The fact is that China’s GDP grew by about 5% in the first half of the year, and the plenary’s final communiqué, released at the end of the four-day meeting, stressed that this should remain the “unchangeable” target for the second half of the year.

The official rhetoric, of course, focused on stimulating domestic consumption and “new impetus” for exports and imports.

This key passage in the final communiqué sums it up when it comes to the new version of “socialism with Chinese characteristics”:

“We should attach greater importance to reform and comprehensively deepen reform to advance China’s modernization, so as to better cope with complex developments at home and abroad, adapt to the new round of scientific and technological revolution and industrial transformation, and meet the new expectations of our people.

It was stressed that in order to comprehensively deepen reform, we must remain committed to Marxism-Leninism, Mao Zedong Thought, Deng Xiaoping Theory, the Three Represents Theory and the scientific perspective of development, and fully implement Xi Jinping Thought on socialism with Chinese characteristics for a new era.

We should thoroughly study and implement General Secretary Xi Jinping’s new ideas, views and conclusions on comprehensively deepening reform, and fully and faithfully apply the new development philosophy on all fronts.”

And to make things even easier, Xi explained everything in detail.

The annoying ‘markets’

Nowhere in the world will you find a government that focuses on drawing up five-year plans for economic development (Russia now seems to be making its first attempts) that cover rural development, tax reform, environmental protection, national security, the fight against corruption and cultural development.

Because the word “reform” appears no less than 53 times in the final communiqué, it means – contrary to Western proselytizing – that the CCP is determined to improve governance and increase efficiency. And all of these goals must be achieved, otherwise heads will roll.

Science and technology will once again play a major role in China’s development, a kind of successor to the Made in China 2025 strategy. The focus will predictably be on better integrating the digital economy into the real economy, modernizing infrastructure and increasing “resilience” in the industrial supply chain.

It is fascinating to note how the communiqué stresses the need to “correct market failures” – a euphemism for reining in turbo-neoliberalism. The development of the “non-state sector” is to be “persistently supported and guided”, with Beijing ensuring that “all forms of ownership” in the economy compete fairly and legally on “equal terms”.

The plenum could easily be interpreted as a calculated exercise in Taoist patience. Xie Maosong of the China Institute for Innovation and Development Strategy at the Chinese Academy of Sciences said: “Xi has said several times that the easy part of reform is over and we are now in uncharted waters. The party needs to be careful where it steps, especially as external risks are increasing. We also touch on the interests of many groups.”

The main obsession of turbo-capitalist Hong Kong is, of course, the “markets”. From conversations with British traders who scout Asia for their clients, it is clear that they are not so keen to invest in China – but that does not bother Beijing’s planners. For the Politburo, the issue is how to achieve the economic, social, environmental and geopolitical goals set by Xi for the next five years. It is up to the markets to adapt.

Of course, planners in Beijing are already factoring Trump into the overall equation. The Western idea that China’s economy is struggling to stabilize may be questionable. But China’s economy may actually be in a more precarious position today than when Trump launched the trade war in mid-2018. The yuan appears to be under more pressure due to the gap between US and Chinese borrowing costs.

According to a JPMorgan estimate, every 1% tariff increase during the 2018-2019 period of the US-triggered trade war was associated with a 0.7% increase in the US dollar against the yuan.

Trump plans to impose tariffs of 60% on virtually all Chinese products. This would result in an exchange rate of about 9 yuan per dollar, 25% weaker than now.

What Hong Kong’s Chief Executive John Lee said about the plenary session is very revealing. He encouraged “all sectors of the community” to read the communiqué. And Hong Kong’s business elite have understood it: They interpret it as Beijing once again relying on Hong Kong’s key role in the development of the Greater Bay Area.

That would be expected. Hong Kong, Lee stressed, is a “super connector” and a “super value chain” that connects mainland China with the global north and the global south and continues to attract all kinds of foreign investment to China.

Now compare this with the prevailing opinion about Hong Kong in American business circles. The American Chamber of Commerce in Hong Kong is appalled, stressing that U.S. businesspeople do not understand the National Security Protection Directive passed in March last year, which supplements the national security law passed by Beijing in 2020.

For Beijing, these are very serious national security matters—ranging from cracking down on money laundering to preventing the proverbial fifth column from instigating a color revolution like the one that nearly destroyed Hong Kong in 2019. No wonder so many American investors don’t get it. Beijing couldn’t care less.

Let’s see what China’s leading mutual fund manager has to say about this.

Zhang Kun, manager of the Blue Chip Mixed Fund, which manages four funds with total assets of $8.9 billion, prefers to target Beijing’s goal of raising per capita GDP to Western levels by 2035.

If that succeeds, with or without a US trade war – and the Chinese will stop at nothing to achieve that goal – then GDP per capita could be around $30,000 (according to Chinese think tanks, it was $12,300 last year).

So foreign investment will continue to be welcome in China, whether through Hong Kong or not. But on every single front, national security trumps everything. Call it a practical exercise in sovereignty.

Author: Pepe Escobar

 

yogaesoteric
July 24, 2024