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“Two Sessions” Lifting the Curtains of “13th Five-year” Plan

By CGCC Vision

Spring is not only the best time to make a year’s planning, it is also when the “Two Sessions” were held. The development of China raises concerns worldwide. The annual sessions are now an important window for the world to get a glimpse into China. This year, they also symbolize the beginning of the “13th Five-year” Plan. Taking a good look into its contents could help Hong Kong companies gain an early advantage.

Dou Shuhua: consensus favorable to the construction of a moderately prosperous society

Deputy Secretary-General of the NPC Standing Committee Dou Shuhua praises the recently concluded sessions highly, citing that they have made good preparation for the work of 2016, which would help bring the wisdom and strength of the people together.

Outstanding accomplishments achieved

Dou pointed out two main influences that the sessions have on the country and the public. First of all, they established common objectives for the country and promote democratic ideas. Secondly, they are the window to China’s image and help foreign countries gain a comprehensive understanding about China.

First Charity Law demonstrates significance

Dou also talked about the Charity Law, which he considered an important law to drive the development of the charity sector in China. It connects the country’s charitable and poverty alleviation work, and goes deep into helping the poor through charitable efforts. Considering the actual needs of China and benchmarking global experiences, the Charity Law is the first law to govern China’s charity sector and is extremely important to its mechanism and system. Last but not least, the Law also provides reliable legal protection to the development of China’s charitable industry.

Chang Rongjun: CPPCC must actively offer strategic advice and participate in policy discussion

Deputy Secretary-General of CPPCC Chang Rongjun stressed that since the government has been valuing highly of CPPCC members’ opinions, and committee members have confidence on the government’s work, all members have shown much enthusiasm in policy discussion during the sessions.

Quality, constructive proposals

Chang thought that China’s confidence in economic development has come from a comprehensive reform and efforts from every direction have to be converged. He praised the rather high quality of proposals put forward during the current “Two Sessions”.

Resolving responsibility issues from their roots

Regarding how CPPCC should play its role in putting strategic advices forward and in policy discussion, as well as how members perform their duties actively, Chang reckoned that relevant issues must be resolved from their roots, which is why he suggested the tactic called “1420”.

Hong Kong and Macau must grasp the opportunities

Chang quoted the comments of some Hong Kong and Macau committee members, who said the “13th Five-year” Plan has offered invaluable opportunities for the future development of the two locations. Hong Kong and Macau must put their own competitive edges to full play and actively take part in the “13th Five-year” Plan and the implementation of “One Belt and One Road” initiative, playing the role of “super connector” between the Mainland and the international markets.

Lastly, he commented the sessions must act as a bridge and help achieve consensus among divergences. He also quoted Yu Zhengsheng, Chairman of CPPCC, pointing out that the community of CPPCC members should actively participate in the realization of a moderately prosperous society, doing its best to demonstrate to the public that members always put the public first and are right next to them.

Liu Shijin: reforming supply side; focusing on reducing production capacity

Many people are keen to know which direction the future of the Chinese economy would go under the “13th Five-year” Plan. Former Deputy Director of State Council Development Research Center Liu Shijin believed that China’s economy is still facing rather strong downward pressure at the moment.

The research of Liu shows that, after a long period of economic growth, when the per capita GDP reaches 11,000 international dollars, slowdown in economic growth happens without exception. As such, he deduced that China would also follow the trend and turned from high-speed growth to medium-speed growth around 2013. The deduction has now become the “new constant”.

Unsynchronized supply and demand resulted in over-capacity

So when will the pace of economic growth hit its rock bottom? Liu thought that from the demand side, the Chinese economy is basically stable, and a more accurate estimation is the second half of this year till the first half of the next. On the supply side, export and real estate are both recording negative growth, but industries such as construction materials, steel and petrochemicals are not slowing down as quickly, resulting in serious over-capacity.

Liu commented that the solution is to eliminate over-capacity, so that both the PPI and the corresponding profit can bounce back. China will only be able to align its supply and demand, allowing both to reach their lowest point, by achieving so.

Efficiency enhancement most critical

The core to the reform on the supply side is to increase efficiency. Liu pointed out that there is a lack of market-oriented adjustment mechanism in the Mainland. As such, an environment favorable for competition should be created for the market to regulate and to lower prices on its own.

He also suggested that the Mainland should speed up industrial transformation and upgrading; it should also reduce and eliminate different kinds of economic bubbles. He thought that an innovative environment should be nurtured based on a respect on the laws of innovation. The government should not interfere too much, but it must work hard to protect property rights, in particular intellectual property rights.

Growth trend to appear as “big L and small W” after all time low

Liu believed that it would be more likely for the growth trend to take the shape of an “L” after hitting the rock bottom. In other words, the pace of growth will stop going down. However, some smaller fluctuations will take place during this time, which will form a new growth platform in the shape of a big L with small Ws. He estimated that the situation would last for 10 years or longer. Liu stressed that “the reform on the supply side would be a long-term battle. Changes must be made in state-owned businesses, land, tax, finance, social security and government functions in order to obtain actual progress and to lay a strong foundation for quality, effective, undiluted and sustainable growth.”

Wang Tongsan: distinguished progress with emerging conflicts

Academician of Chinese Academy of Social Sciences Wang Tongsan analyzed this year’s Government Work Report and said that the Mainland had achieved the goals set out in the “12th Five-year” Plan in multiple aspects. Yet, there are a number of threats as the country made progress.

Development milestones of the “12th Five-year” Plan

According to Wang, China’s GDP is now twice as much as that of Japan’s and standing strong as the world’s second largest economy. He estimated that China will surpass the US and becomes the world’s number one within 10 years’ time.

Wang pointed out that the “12th Five-year” Plan made significant progress in structural adjustment. The service industry is now the biggest sector in China, while consumer spending is a major drive to support economic growth. The urbanization rate in China is now over 50%, with evident improvement in people’s standard of living.

Decelerating growth

But he pointed out directly that a number of domestic and external issues are gradually surfacing. At present, the global economy is recovering weakly. Wang estimated that the global economic growth of 2015 would not exceed 3%. Growth in international trade is just as lackluster, which poses a great impact to China. Diverging monetary policies among advanced economies have also added many external uncertainties for the country.

At home, Wang saw downward pressure for the economy. The quarter-on-quarter growth for GDP over the past four quarters has been continuously slowing down. Growth in investment was also weak during the past year. Wang was also concerned about the drop in import and export trade volume saying that “Whether it was calculated in RMB or USD, the total volume in both import and export in the Mainland dropped last year.”

Certain companies facing difficulties

Another domestic issue is the diverging trends in the regions and sectors. Wang said that there are obvious differences in the growth of regional GDP. Growth in fixed asset investment in different areas also saw evident variances. New and high-technology industries are growing stronger in the Mainland and they also yield higher profit. Resource industries such as coals and steel, etc. have shown clear profit decline.

The operational difficulties of companies are also reflected on the total profit of state-owned businesses, which fell 6.7% year-on-year in 2015. Compared to the 5.6% decline among central state-owned enterprises, regional ones recorded bigger drops. Wang explained that, economic slowdown led to decelerated growth in the salary guidelines of various locations.

Conflict in fiscal balance

He also pointed out that the National General Public Budget income of last year was 15.2217 trillion dollars, while the expenditure was 17.5768 trillion; the lever effect resulted in a contradicting fiscal balance.

Wang saw risks and threats in the Mainland’s financial industry. He said, “Fluctuations in the stock and foreign exchange market are quite obvious. Property prices are also polarized between first-tier cities and other cities, in particular, third and fourth-tier cities. Property prices of first-tier cities are increasing quickly, but third and fourth-tier ones find it rather difficult to destock.” Last year, foreign reserves dropped 13%, that is a few hundreds of billions of US dollars less. The amount shrank more than US$ 100 billion within one month in February alone and that reflects instability.

Lau Siu-kai: Hong Kong’s participation in “One Belt and One Road” an irresistible trend

Vice-President of the Chinese Association of Hong Kong & Macao Studies Lau Siu-kai analyzed the importance of “One Belt and One Road” for Hong Kong. He reckoned that “in the long run, it will be related to the pace, method and direction of Hong Kong’s development in the future; it also connects to Hong Kong’s position, role and function at the national and the international levels.”

Lau pointed out that “One Belt and One Road” is on one hand an active and positive response made by the country to address the changes in the international setting and its own development needs; and on the other, a move to change the prevalent international setting. If it turns out to be successful, significant changes will happen in the international setting and global relations. Under such circumstances, the global importance of Asia will be lifted, and China will become Asia’s most influential country. He also described “One Belt and One Road” as a “westward strategy” that China puts forward in response to the “Rebalancing toward Asia’’ strategy of the US, aiming to further expand and widen strategic space for China.

Hong Kong will rely less on Western economies

Lau analyzed that, if “One Belt and One Road” is successful, Asia will become the center of gravity of the global economy and the locomotive for economic growth. Much of Hong Kong’s progress will come from Asia, in particular, eastern Asia and Southeast Asia. As a result, Hong Kong’s reliance on Western economies will constantly reduce.

Lau added that, with the European-Asian- African free trade zone made possible by “One Belt and One Road”, Hong Kong will gain more new development opportunities, service targets, job opportunities, and more importantly, international position or role. These will help strengthen and develop “one country, two systems”, and will be favorable to tighten the relationship between Hong Kong people and Mainland Chinese.

Hong Kong people should adjust their mindsets according to changes

According to Lau, “Hong Kong people must understand that big changes are taking place in the mainland environment and international setting, and that keeping the existing status is impossible. The past attitude that put little emphasis on Asia and the tendency to over-rely on the West have to be appropriately adjusted and balanced.” He stressed that while “One Belt and One Road” would have limited influence and impact on Hong Kong in the short run, it has long-term connection to whether Hong Kong can continue to develop prosperously, its value to the country, as well as its international standing.

As for the challenges faced by Hong Kong in taking part in the “One Belt and One Road” initiative, Lau reckoned that while “opposing powers’’ and “nativists” have raised their doubts and are setting up hurdles, we must understand that shutting our doors and exclusivism do no good to Hong Kong; they also go against the greater global trend. He suggested that the SAR government and all sectors of the society should work on explaining to the people of Hong Kong about the significance of “one country, two systems” for our territory, as well as to overcome the hindrance created by opponents.

This article was firstly published in the magazine CGCC Vision 2016 May issue. Please click here to view the full article.
(Remark: This is a free translation. For the exact meaning of the article, please refer to the Chinese version.)

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