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China's traditional economic paradigm, according to Xi Jinping, is a thing of the past. The new one, on the other hand, is just getting started.
Some China observers have questioned the country's economic trajectory as the geopolitical tension between the US and China continues to escalate. China's economic direction is perhaps the least apparent it has been in decades, as the country transitions from fast growth and reform to "high-quality" growth and development. Because of Xi Jinping's strong leadership, the best way to comprehend China's long-term economic path is through his statements.
So, what do we have to say about Xi? Xi Jinping is significantly influenced by Marxist ideology, especially from a Chinese perspective. While Marx advocated for the abolition of capitalism, Deng Xiaoping, China's first economic reformer, declared, "Both planning and the market are economic methods." The essence of socialism is to unleash, develop, and destroy productive forces. Eliminate exploitation and divisiveness, and establish common prosperity in the end." This was in contrast to Marxist views, which held that a market-based economy, which was seen as unique to capitalism, should be repudiated. Deng thought that following economic development, socialism will lead to communism: "Socialism is the basic stage of communism, and China is at the primary stage of socialism, the stage of underdevelopment."
Xi has indicated unequivocally that China will depart from its prior economic trajectory in 2021, and this is exactly what has transpired. "After my nation has constructed a moderately wealthy society in all aspects and attained its first centennial goal, the '14th Five-Year Plan' period begins," Xi stated. "Our country will enter a new stage of growth in the first five years." This stage of development entails a shift toward people's shared prosperity rather than a focus on GDP growth rates. Xi has said that “we must strive to promote the common prosperity of all people and achieve more obvious substantive progress. … [We must] no longer simply talk about heroes based on the growth rate of GDP.”
Xi goes on to emphasize that development must be both sustainable and healthy, while also being in accordance with consumer interests and not breaking the law. "Practice informs us that development is a continually changing process," according to Xi, implying that the development process will alter over time.
Xi has also endorsed market forces, declaring that "market allocation of resources is the most efficient form....the market should play a significant role in resource allocation." A component of the 14th Five-Year Plan is dedicated to boosting market vitality. In this section, it is written that “we will be unswerving in consolidating and developing the non-publicly owned sector and in encouraging, supporting, and leading the development of the non-publicly owned sector.” This section also commits to continued support for the state-owned sector.
It's difficult to understand these words given China's ideological complexity and the absence of examples for a Chinese-style socialist market economy. Perhaps the easiest way to comprehend them is to look at what China did in 2021, when the nation entered "a new stage of growth," as its officials put it. New rules have been enacted since then, including a policy outlining plans to further control the economy over the next five years. Consumer data has been protected, inappropriate marketing methods have been curtailed, gaming time has been reduced, monopolies have been broken up, and tutoring profitability has been reduced. Such restrictions appear to be a strange jumble of rules tossed out by an overly concerned administration. They are, however, in accordance with what Xi Jinping has promised to do: safeguard the people in the Communist tradition.
The new legislation, as well as Xi's own statements, do not target the private sector in the sense that some analysts worry. While the restrictions have targeted digital companies in particular for growing too large or damaging consumer interests, they have not aimed to eliminate private businesses, and this is not in the plans, according to Xi's words and the 14th Five-Year Plan. If this were the case, Xi's economic path would be more apparent; instead, we're left with an uneasy cohabitation of a heavy-handed Communist government and a market economy. This domestic economic stress occurs at the same time that the Western world, led by the United States, adopts a more hawkish perspective of China, with worldwide economic implications shown in tariffs, blacklisting, and sanctions. This has resulted in significant economic instability, as seen by China's decreasing growth figures.
As a result, China's long-term economic development prospects are much more subdued than in prior decades. It's uncertain if China can manage internal and foreign conflicts, which raises several challenges, such as whether government economic involvement can promote shared wealth without suppressing market forces. Will the international order sanctioned by China compel China to pursue a different path? What will be covered under the banner of "shared prosperity," and will this term be used as a euphemism for harmful practices? Finally, is China's new reform stage consistent with its expected position on the global arena?
While China's long-term economic reform aspirations have been stated out in speeches and theory, and represented in recent changes, this shift occurs at a moment of enormous uncertainty. China intends to achieve high-quality GDP development; nevertheless, it is unclear if China will be successful in implementing a phase of shared prosperity.
