The upcoming 19th CPC National Congress will have to find ways to fast-track economic reform if the country is to maintain a health GDP growth rate
Chinese President Xi Jinping has days ahead of the 19th Communist Party (CPC) National Congress called for greater cooperative work to be carried out with non-Communist parties in the country.
Xi, who is also the general secretary of the CPC Central Committee, said such endeavors are necessary for China’s prosperity and rejuvenation.
He said that the CPC Central Committee will carefully study the opinions and concerns of non-Communist parties on major policies and decisions expected to be raised during the Congress on October 18.
“In order to reach the goal, we must make full use of democracy in the drafting process, and improve our investigation and research,” Xi said in a statement released by the CPC.
Xi also reached out to the All China Federation of Industry and Commerce and other political entities with no party affiliation to “developing socialist consultative democracy”.
The 19th National Congress comes at a critical time as emerging markets just begin to pull out of recession and/or stalled economic growth. Fast-tracking economic growth and maintaining a growth rate above 6.5 per cent will be high on the agenda.
The last time the Congress was held – the 18th CPC National Congress was held in November 2012 – China’s economy was growing at a rate of 7.9 per cent. Just a year earlier, GDP growth was at 9.5 per cent.
The CPC National Congress acknowledged at the time that market reforms were crucial and launched an aggressive program in that regard, coupled with fighting corruption on all levels. The Congress also recognized that political reforms were necessary to ensure the success of economic change, with particular emphasis on the growth model.
But in 2013 and 2014, commodity markets slumped and imports from emerging markets also fell. The economic pressures were also exacerbated by the US Federal Reserve’s decision to end its quantitative easing program. China’s GDP growth rate was 7.4 per cent at the end of 2014.
In 2015, the Federal Reserve began to raise interest rates, luring back major investors from emerging market investments.
Exports in China slumped as the economy was soon redirected toward domestic consumption and supply-side structural reform measures took effect.
But in the past year, one of the biggest factors making emerging markets lucrative again is Beijing’s economic policy has not only become adaptive to US market shifts – namely, Fed policy – but is also proactive by drawing up scenarios which include the prospects of US interest rate hikes.
In particular, Chinese investors were encouraged by manufacturing activity data which pointed to the fastest growth in five years this September.
It will be up to the CPC National Congress to ensure that the economy is maintained at a robust level and that confidence in the world’s biggest market is getting an uplift.
The ratio of foreign capital inflows in a wide range of sectors versus outflows has reversed the negative trends of previous years.
In the first two quarters, the net inflows hit $16 billion.
This is a remarkable turnaround when one considers that capital outflows in China reached $725 billion in 2016. Despite record Foreign Direct Investment (FDI) for that year, the net inflows were at a $416 billion deficit.
Although tens of billions of dollars have continued to flow into China since it devalued its yuan in summer 2015, the amount of outflow noticeably increased and created a net deficit.
January 2017 marked the first time that Chinese financial institutions reported an increase in net inflows in different sectors. And the trend would continue.
In its latest August economic outlook on China, the International Monetary Fund said that there will be 6.7 per cent for the year. But it said that “speedy reforms” are needed.
By Firas Al-Atraqchi for The BRICS Post with inputs from Agencies