According to J. Mark
While China is struggling with a property crisis, high unemployment among young people, falling business and consumer confidence, as well as debts of local authorities, one would expect that the government would put all its efforts into bringing the country out of economic stagnation. But a meeting of China's top leaders this month is set to propose a completely different set of reforms.
Instead of focusing on China's current problems, the Third Plenum of the Central Committee of the Communist Party of China (CPC) will prepare China for a confrontation with the United States by creating industries that operate on the basis of large investments in advanced technologies. This program is aimed at strengthening the Party's influence on Chinese society. He will also emphasize China's departure from its long-standing economic strategy of growth for the sake of growth.
Among the political measures that are expected to be announced at the July 15-18 plenum are reforms to restructure tax and fiscal policy, as well as closer coordination of regional economic development. Both policies will strengthen the central government's role in guiding development. It is likely that statements will be made to support China's private sector, which accounts for more than 60 percent of the gross domestic product and more than 80 percent of urban employment. But Xi and his subordinates emphasized that the political pendulum swung decisively in the direction of statist decisions.
This strategy will not bring any respite to the population and businesses that have lost the will or means to invest. Beijing's aspiration to what it calls a "high-level socialist market economy" based on "new qualitative productive forces" will be supported by its willingness to see how the Chinese people, especially the youth, "swallow bitterness" in pursuit of national ideals. Government resources are directed to research and development and industrial subsidies, not to social programs.
Beijing is justifying this policy shift as a necessity due to national security concerns or what the State Council, announcing the plenum, called "increasingly tough international competition" with the United States and its allies as they tighten controls on the flow of technology and capital to China. As a result, Beijing prioritizes "high-level technological self-sufficiency", investing tens of billions of dollars in research into advanced semiconductors, quantum computing, new types of renewable energy, etc. This high-octane industrial policy forces government to prop up state-owned enterprises and pick winners among private companies to achieve rapid growth in a "single-minded pursuit of technological progress," as Arthur Kroeber wrote in a recent Brookings Institution article.
The plenum is also expected to announce measures to reduce restrictions on the movement of Chinese citizens from rural areas to cities, and thus, apparently, offer new opportunities to millions of people who have not benefited from the country's growth. But Beijing does not seem to have a policy of creating jobs for them. He also fails to take adequate steps — neither social programs nor fiscal stimulus to boost consumption — that would help all those feeling the burden of youth unemployment, declining incomes, falling housing prices, corporate downsizing, and stock market woes.
China has clearly decided to direct all available resources to the technology of the next generation, neglecting the support of the overwhelming majority of the population, which is struggling to make ends meet outside the technological sector. This suggests that Si will end up with brilliant new industries built on a weak economic foundation.
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