Amid the ongoing coronavirus pandemic, all eyes, yet again, are on China, which many expect, equally enthusiastically and alarmingly, to become the world’s largest economy over the next few decades. The economic growth, though, does not automatically root out all sources of disparity even if it shrinks the overall scope of inequality.
Being almost exactly in the middle on the Gini line between total inequality and full equality at 46.7, mainland Chinese wealth distribution is now more unequal than it has ever been in the nation’s history. This figure is even more startling considering the fact that the country had a very low inequality level in the 1980s, so the Chinese population is fully aware of the problem and its severity. Historically, the peaks of economic disparity have coincided with major national events, especially the Great Famine in the late 1950s, the Cultural Revolution in the late 1960s and early 1970s, and the global integration that began in the late 1990s. Although the highly centralized and deeply bureaucratic nature of the Chinese government allows for the efficient implementation of inequality solutions, official poverty-reducing policies at such peaks had minimal effects.
In contemporary China, the state of inequality is essentially determined by regional differences and the countrywide urban-rural divide. Kanbur and Zhang  claim that the share of heavy industry in gross output values, the degree of decentralization, and the degree of openness are three main driving forces of inequality across regions. The urban-rural divide, on the other hand, is sustained by top-down regulations that affect basic human rights, such as health, housing, and mobility. One of such regulations is hukou, a system of household registration linked to social programs provided by the central government, which assigns social benefits based on the agricultural and non-agricultural residency status. As such, hukou has been a structural source of inequality since the establishment of the People’s Republic of China in 1949, as urban residents receive benefits, ranging from retirement pensions to healthcare, that are unavailable to rural residents. Chan  asserts that to reduce rural poverty is to end hukou, which directly impedes with rural-to-urban migration, the main means of escaping poverty in rural areas. The internal migration, including the interprovincial one from the thinly populated and deprived Western regions to the densely populated and affluent East Coast, has intensely accelerated since the 1980s. Referred to as the ‘floating population,’ rural migrants tend to circulate in-between cities rather than settle, making them in a way statistically invisible. Yet their presence in the urban landscape critically influences workforce and housing markets. Given the unparalleled magnitude of the Chinese population, housing registration, obviously, needs to operate for practical purposes, but not in its current caste-system resembling form.
Furthermore, the government has to instill lawful procedures for assimilating rural emigrants, who, alongside their children, confront serious predicaments in the multidimensional process of urban societal integration. Having crossed 250 million by 2015, the Chinese migrant population is the largest in the world; however, due to official restrictions, especially hukou, the interprovincial migration in China is even more administratively challenging than the state-to-state migration in the United States. These restrictions equally impact children, both who stay behind in rural areas, the so called ‘left-behind children,’ and those who with their parents move to or are born in cities. Liang  suggests that further research on the internal migration be devoted to the mobility of minority groups, such as Muslims, and finding out if the importance of hukou is declining for the new generation of migrant workers. Even if this were true, the government is not free from providing additional ameliorating measures for migrants, for example, a cheaper, less complicated way of making remittances to countryside family members and other relatives and food stamps until the job acquisition.
Big companies, in turn, should offer educational enrichment programs to their urban and rural employees to meet the international employment competition. Despite its unchallenged advantage in sheer numbers, the Chinese workforce is relatively weak in terms of education levels, which in long run can create a human capital crisis in mainland China, as the upper secondary school attainment is a crucial ingredient for the country’s continued economic growth. Khor and others  estimate that only less than 25% of the Chinese labor force have completed secondary education, a significantly lower figure than around 55% average across all G20 countries. The Ministry of Education pompously inflates official figures. Considering that China is gradually transitioning from an upper middle-income state to a developed economy and that this transition means supplanting low-wage, labor-intensive manufacturing with high-wage, high value-added industries that require knowledgeable cadres, the Ministry of Education is obliged to bring education programs and workplace demands in unison. Lamentably, the government routinely overlooks school attainment levels of its citizens, because service and manufacturing industries, the titans of national employment, hire staff based on discipline indicators and occupational skillsets rather than school performance.
The guiding principle of reforms must be making the Chinese education system more inclusive. Wu and Zhang  claim that recent expansions in this field have benefited urban women more than any other social group and that despite an overall increase in educational equality, the urban-rural contrast is ever stark; however, this is in line with the worldwide trend, which shows that educational inequality as a whole is declining with the continued economic growth, but the urban-rural divide permeates in face of modernization. To reduce this divide, the government must rescind educational policies that favor city students, starting with the elimination of standardized testing as an upper secondary school entrance requirement, which highly favors urban over rural students. Having completed superior middle schools and resources to private tutoring, urban students disproportionately beat their rural counterparts out, keeping the cycle of urban-rural divide in education spinning.
Beyond the education system, the government has to transform workplace structures, foremost by substituting danwei, a work unit with communist roots that in the form of ‘organized dependency’ maintains the state administrative hierarchy, with non-state labor unions or guilds. Xie, Lai, and Wu  assert that even if some of its original functions, such as housing and health subsidies, have declined with the rise of private sector, danwei continues to play a central role in the social stratification and occupation mobility in post-reform China, influencing earnings (salaries are low in mainland China) more than benefits — a reverse was true in pre-reform China. Not as interested in maximizing occupational profits as in maintaining ties with the ruling authority, danwei stratifies the contemporary Chinese society because of its more equal nature than the market justifies. That is why independent labor unions, which can provide not only similar benefits, such as a health coverage, but also guarantee adequate wages that the current work unit system compromises for the sake of social advantages, ought to overtake danwei.
Another factor hampering the national progress is the Great Firewall, the combination of legislative actions and technologies enforced by the government to regulate the Internet domestically. King, Pan, and Roberts  emphasize that as opposed to the popular assumption that any government-critical content is taken down, the Internet censors are actually oriented to the content with a collective action potential, notwithstanding with its underlying attitude towards the government. Yet history, in particular the Great Famine, has shown that the Chinese people, in accordance with the Confucian values, tend to blame not the ruling authority, but local officials for their problems. This, coupled with the fact that a common Chinese online user self-censors, demonstrates that the Internet censorship is an excessive administrative measure. This measure deters the info-communicational advancement of the mainland Chinese population, which lacks a unified intention for the regime change.
Abolishing hukou, danwei, and the Great Firewall schemes, as well as reforming the education system, requires a coordinated national effort between the central government and provincial leaders. The majority of regional officials, though, behave not as much in response to the countrywide market-preserving federalism as within the multidivisional-form structure of the Chinese economic sector. As the political status of a Chinese province directly correlates to its economic power, the post-Mao China witnessed political conformity being largely supplanted by the economic performance as a chief competence-related indicator. Li and Zhou  confirm that the local GDP growth rate is directly proportional to the official’s turnover, which is nonlinear due to the effect of performance during tenure as a whole over a single year being more important. Besides promotion as an instrument of personnel control, the ruling government exercises termination, transition, and retirement, for example, successful Chinese officials, whose merits are almost exclusively measured in financial terms, receive honorary, albeit powerless, titles before their official retirements.
The economic performance endures as an effective political tool as long as the Chinese economy continues to grow; however, in light of 6% economic growth rate as the new normal and the ongoing trade war with the United States, securing successful operations of local officials principally through economic incentives seems myopic from the central government. This needs to complement its existing economic leverage in governing localities with more stable social factors, especially given that governors are inclined to artificially boosting financial figures of their provinces. This not only results in distorted reports on living conditions of people, but also in the national prevalence of the economic growth at all costs, which only exacerbates intra-regional inequalities in terms of education and employment prospects. Xie and Zhou  note that despite being comparable in both the total area and income distributions as well as the subordination of state/provincial officials to the federal/central government, USA, where a family structure combined with race and ethnicity significantly influences lifetime earnings of every person, has had a smaller rate increase in economic inequality over the last decade than PRC.
Evidently, the Chinese economy is neither laissez-faire nor Leninist, but rather a unique case. Oi  claims that the economic growth of China is embedded in the system in which local officials, acting as CEOs, treat local enterprises under administrative control as parts of a larger corporate whole. Accordingly, the national economic growth rests largely on the rural industry, which has experienced an upsurge following a few amendments to the Maoist system, especially de-collectivization of agricultural production and the fiscal reform that allows for the autonomy over any local surplus. To strengthen corporatism in their provinces, officials pursue one of three methods: misappropriating marked funds coming to local farmers from the central government; licensing non-bank credit institutions that avoid central regulations — a more legal way; and granting small loans from bureau funds. Having been long ignored by the central government because of its quintessential role in the Chinese economic expansion, local state corporatism is directly responsible for the accumulation of debts worth $5.8 trillion. This issue is especially problematic in light of the Chinese market leaning more and more towards privatization — a process catapulting a new type of corporate elite into prominence in the midst of this managerial revolution.
Whether the new corporate elite will push the country to approach the capitalist economy model established in free states is a critical question. Walder  notes that both economic assets and ties to the central government of this new elite are equivocal, so each sector — state-owned, privatized, transactional, and entrepreneurial — demands to be separately analyzed. Corporate networks mapped via interfirm webs can also point to China’s course moving towards or away from being a state where wealth and political power are synonymous. Arguably, the new corporate elite will maintain close political ties with the ruling government. Alternatively, it can act as a political opposition by challenging the status quo whenever appropriate. The ruling party is absolutely creditable to a degree for the country’s success, but being completely unrestrained, it will fail to perceive overstretched borders of its regulations, including the Great Firewall, as the established framework is self-damagingly hostile to change. The new corporate elite has a potential to become a powerful intermediate agent safeguarding the consolidation of the social contract between the Chinese people and state, and it should not miss this exciting chance. Still, where there is the elite, a clash with interests of people is inevitable, and China has yet to match its powerful economic status with a benevolent state image internationally.
Considering Chinese citizens’ rising awareness of universal human rights violations in the country, especially with regard to family and religious domains, both of which an almost uninterrupted nature of the Chinese civilization has substantially burdened by its institutional emphasis on the former and a lack of such emphasis on the latter, the ruling party can no longer afford to ignore its obvious shortcomings in dealing with ethno-linguistic and religious minorities and novel family structures emerging out of the tension between persisting cultural customs and changing social behaviors in the contemporary Chinese society. Raymo and others  claim that the second demographic transition, which is characterized by a variety of living arrangements and a disconnection between marriage and procreation, is more conspicuous in the East than in the West. Traditionally, East Asian families are patriarchal, patrimonial, patrilineal, and patrilocal, but the global rise of the women’s socioeconomic status has undermined this organization.
Although women in mainland China have advanced their social status over the last decade, they continue to be disadvantaged in terms of household labor, education, salaries, and leadership positions due to gender bias. For example, parents disproportionately put educational resources in sons at the expense of daughters, as they expect the former to materially support them in their old age and the latter to be taken care of by husbands’ families. Men, on the other hand, face an extreme competition not only in employment, but also in the marriage market. Xie  notes that Chinese men find it increasingly difficult to marry partly because of the prevailing social hypergamy exacerbated by present economic pressures. In addition, men massively outnumber women as a result of a higher cultural and economic value assigned to them. Of course, a growing number of single, unemployed men has a socially disruptive potential, but being an authoritarian state with Confucian values, China would be resistant to the gang culture that has eroded Latin America.
Without taking demographic changes into account, the government cannot adequately address such issues as population aging, labor force shortages, public health care, family planning, and retirement arrangements. The rapid pace at which China has been modernizing since its global integration began in the late 90s only intensifies this challenge. Peng  states that as the age of first marriage has gone up to twenty-five, the birth rate has dwindled (Japan has the lowest in the Far East), more individuals prefer not to marry (childbearing outside wedlock is still very rare), and more couples choose to cohabitate. China is achieving its second demographic transition in a relatively compressed period of time.
It is ambiguous how official Family Planning Commission programs have influenced this transition.` For example, the One-Child Policy, which the government ended after 35 years, might not have caused a supposed fertility decline in the country given that Chinese families have been naturally leaning towards having two or less children since 1990s. Family policies in general apply differently to urban and rural areas. For instance, while the urban implementation of pensions has lifted an adult’s traditional economic duty to provide for elderly parents, transforming the nature of monetary support from financial to symbolic, this duty remains in force in countryside. Xie and Zhu  emphasize that in cities compared to married sons married daughters give more money to their parents contrary to custom. This can be explained by the fact that over the last decade, women have outranked men in educational attainment, bolstering their job income.
Beyond adjusting its family policies to emerging social norms, the government has to offer an integration path for ostracized ethno-linguistic and religious groups. Gladney  claims that China, which is home to the largest Muslim minority in East Asia (around 20 million people), has so far failed in incorporating Muslims, whose self-preservation is at risk, in the national fabric in a way that is neither full accommodation nor complete separatism. Obviously, Islam and traditional Chinese beliefs have distinct worldviews. For example, Muslim Chinese evaluate development levels of majority-Muslim countries far more favorably than the Han Chinese do , but their co-existence over several centuries means that common ground can be found. Moreover, China’s dependence on the Middle East as an oil supplier and an export market mandates for Muslims’ acceptance in the Chinese ‘leviathan.’
Like religious ones, ethno-linguistic minorities bear discrimination in China. Wu and He  state that despite of the regional distribution of ethnic minorities being relatively stable from 1982 to 2005, the Han-minority disparity in education and employment amplified in the same period. After it had started identifying all 55 minorities (around 10% of the national population), which are geographically isolated not just from the Han Chinese but each other, the communist party has taken a few steps to stimulate their socioeconomic mobility, such as granting college admission bonuses. However, the country’s forceful economic transition has widened the gap instead of narrowing it, as the profit-driven private sector values economic efficiency over social equality. That is why the government must pass anti-discrimination laws that will subdue institutional prejudice against ethno-linguistic and religious minorities.
Finally, if the Chinese government makes a conscious decision to contain ever-expanding state machine or apparatus from permeating every aspect of citizens’ daily lives, allowing the society to ‘breath normally,’ it will be able to competently respond to polit-economic and socio-cultural challenges that contemporary China is confronting, such as a slower economic growth rate and elevated ethnic tensions.
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Xie, Y. 2014. “Gender and Family” in The Oxford Companion to the Economics of China, pp. 495-501. Oxford, UK: Oxford University Press.
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Xie, Y. and Zhu, H. 2009. “Do Sons or Daughters Give More Money to Parents in Urban China?” Journal of Marriage and Family 71, pp. 174-186.
Gladney, D.C. 2003. “Islam in China: Accommodation or Separatism?” The China Quarterly 174, pp. 451-467.
Lai, Q. and Mu, Z. 2016. “Universal, yet Local: The Religious Factor in Chinese Muslims’ Perception of World Developmental Hierarchy.” Chinese Journal of Sociology 2(4), pp. 524-546.
Wu, X. and Gloria He. 2016. “Changing Ethnic Stratification in Contemporary China.” Journal of Contemporary China 25(102), pp. 938-954.
From our partner RIAC
Predicting the course of US-China relations in the post Covid-19 era
Authors: Ayush Banerjee and Dhritiman Banerjee*
The coronavirus pandemic is a natural threat to the geopolitical order. And it is needless to state that this majorly affects the currently international paradigm in a manner that the world has not seen before. Although there have been a few instances where pandemics have shaken the mortality rates, no pandemic has spread this amount of sheer panic among the public at large. This is largely due to the growing interconnectedness and the advent of the cyberspace. Just as the internet has influenced the lives of the most privileged public, data has been influential in academics and politics alike. However, this argument has its own set of problems that continue to affect public-politic relations in ways more than one.
In the same regard, one of the most strained and keenly debated relations in international politics is that between the United States of America and the People’s Republic of China. In the context of the virus itself, the virus originated in Wuhan, a province in China while the most number of fatalities have resulted in the United States of America. This idea fuelled with the new world media at the public level created an atmosphere of tension on such platforms. On Twitter notably, there were several instances of a tweet naming Covid-19 as ‘Chinese Virus’ spread like wildfire. This sparked a major controversy even at the diplomatic level. Even Donald Trump momentarily subscribed to the idea and deliberately worded his speech to use the phrase ‘Chinese/China virus’ to refer to Covid-19 at least 20 times between March 16th and March 30th 2020. The US Secretary of State- Mike Pompeo went on to accuse China of its lack of transparency, even scrapping a joint G7 statement after its members refused to refer to the virus as the ‘Wuhan virus.’ China has remained apologetic ever since. Hence, it can be rightly inferred that the relationship shared between China and USA have strained ever since the Covid-19 outbreak.
However to predict how the outbreak might jeopardise the current paradigm of world politics we must look no further than the Phase One Trade deal signed between the two countries. This deal previously ended an 18-month long trade war between USA and China. Through this deal, China committed to purchasing $200 billion additional foreign goods and services in the sectors of agriculture, energy and manufacturing. However, it is evident that in the post-Covid19 era, it will be rather implausible for China to adhere to the terms of the deal due to reasons more than one. The IMF estimated the reality of an unprecedented economic slowdown in which China is expected to grow at only 1.2% this year. Several reports suggest that investors are planning to pull out their investments from Chinese industries to fit in with the Western bandwagon.
The outbreak turned pandemic coupled with the authoritarian nature of China’s response to the entire situation has had a detrimental effect on their domestic economy creating various tremors in the anticipation of demand for various products and services. For instance, the 12 most Covid-19 affected countries account for over 40% of the Chinese exports. Nations like India and Italy that also make that list of twelve may voluntarily pull out of importing to China as they are set to gain from deferring of investments. These nations are also top suppliers of intermediate goods for the Chinese economy. The Chinese economy is quite dependent on external demand stimuli from the US and most western European states such as the United Kingdom. Therefore, until the point in time the US and EU economies completely recover from this pandemic, Chinese policymakers are bound to hold back domestic stimulus efforts as it will only have little effect if the global economy is in shambles.
The Chinese economy has crippled down considerably due to the ongoing trade war that has led to a disproportionate ratio of debt to the annual Gross Domestic Product. This ratio reached an overwhelming 248.8% by the end of March 2019 and it has only increased ever since. China has also been forced to restructure the debts of the Belt and Road initiative (erstwhile OBOR). This restructuring meant that the capital owed to China as loans by the contributing states have been readjusted to affect the projected collection considerably. As Covid-19 nearly decimates the economy of most developing nations, it is becoming increasingly difficult for these states to pay their loan back to China within the stipulated timeframes. Thus adding to the stress on the Chinese economy at large.
There has already begun a region-specific boycott of Chinese goods and industries, especially in conservative parts of USA, among the southern districts. Instances of racial abuse against ethnic Chinese communities have been on an unfortunate rise. These are all deterministic factors of public consciousness, if not, public opinion for the future that lies ahead of us. This reaction has already seen international spillovers and investors have become more anxious about investing in Chinese companies.
According to Deepanshu Mohan, the world may experience radical shifts in the global political economy post-Covid19 based on two factors namely, the relative degree of economic recovery in the affected nations and the existing domestic political scenarios in such nations. He further states that in the post-Covid19 era, protectionist trade policies are likely to increase in the developed nations who in the name of ‘supply security’ may disentangle trade relations with China which will inversely affect the current geopolitical world order. Donald Trump could also make the pandemic a focal point in the 2020 election campaign and therefore aim to capitalise on the anti-China fervour in the US and thus strain relations even further. There lies evidence for this as well. Trump recently presented his anguish towards China being categorised as a ‘developing’ state under the World Trade Organisation list and due to the low contributions of China to the World Health Organisation. Although this may seemingly appear appropriate accusations, this is far from the whole truth. The USA, themselves have cut major proportions of its funding capacity towards the United Nations especially concerning peacekeeping and security operations.
Minxin Pei, on the other hand, stated that the Covid-19 outbreak has led the average American to view the Chinese political system with chronic scepticism as Americans blamed the repressive Chinese political system for the pandemic with the Harris poll indicating widespread American dissatisfaction with the alleged Chinese cover-up of the virus. This poll also showed overwhelming support for US punitive measures on China and the removal of US investments and businesses from China. These developments could lock the two countries into a cycle of escalation that could trigger another potential international diplomatic conflict leading to numerous security issues and economic degradation. USA and China remain the two largest economies in the world. Hence, it can be inferred that this fallout of diplomatic and economic ties between the two states might amount to significant damage in the entire global political order and the globalised system of economies and markets. In the US itself, the number of jobs created since the recession in 2008 has been washed away in two weeks.
The trade war between the two economic giants had already shaken the world before the outbreak. And the prevalent fault lines will only widen in the post-Covid19 era just as a global economic slowdown is expected. Thus, it is imperative for the world economy that this US-China relation remains amicable and stable. However, the available narratives indicate a significant detour from the ideal stability that USA and China should normatively maintain to protect the global economy from crumbling down like biscuits. The USA has resorted to legislations that are actively anti-China in terms of financial relations and international trade while China has strengthened its protectionist response system both politically and economically during this outbreak.
The Covid-19 outbreak has not acted as an impediment to Chinese aggression in the South China Sea region either. China has recently renamed 44 features in the disputed region, a decision that is considered illegal under international law. This has been time and again criticised by the US Secretary of State Mike Pompeo. With increasing US-China missile competition a reality in the region post the abrogation of the INF treaty, the post-Covid19 era will likely see more prominent conflicts in the South and the East China Sea regions which is a strategically important waterway for both the countries alongside other nations such as Japan, Vietnam, Philippines and India.
*Dhritiman Banerjee is an undergraduate student at the Department of International Relations at Jadavpur University, Kolkata, India. He has recently published for the Millenniumpost, a Kolkata based newspaper as well as contributed to publications like the Geopolitics and South Asia Monitor. His interests lie in International Relations in general and Strategic Studies in particular.
Political unrest in Hong Kong and Global Pandemic
Things started from a murder of a girl in Taiwan ending up into an unseen scenario in Hong Kong. Rising tensions in the region of China and Hong Kong, situation is getting worse. First of all the episode of extradition bill and now becoming the series of different surprises, the advent of National Security Bill is not acceptable among the Hong Kong citizens. According to the 1984 Sino-British Joint Declaration, Hong Kong is ought to be the autonomous and free liberal region along china being constituted as a “one country, two systems.” As per this treaty, China is violating International law: which is a direct threat to its soft policy and international image.
Secondly, the role of United States in Hong Kong is mainly concerned about the large number of U.S. Nationals working there especially at naval ports and their security. While on the national level the sustainability of democratic values and freedom in Hong Kong to whom these acts of China’s Communist party are challenging. United States being the global hegemon owns the responsibility to protect and keep the check on practice of international laws and its violation in any region of the world. Although the whole global community is concerned about the present situation of Hong Kong and its upcoming outcomes. States sign treaties and agreements on the basis of one’s predetermined political and social culture and works accordingly, so following the current scenario the Protest in Hong Kong is going to be game changing event. If the bill passed, Hong Kong will be a Chinese administered territory like another small city of Chinese Communist party but on the other hand if failed to pass this bill Hong Kong can have a victory to win the democracy and write the fate of their state in a new way.
Furthermore, the wave of global pandemic in the form of COVID 19 has already questioned the worth of human security. Millions of people are dying due to this disease originated from Wuhan, China. World is already questioning the Chinese role. Above all the differences, we all are human beings living in the world of chaos. Divisions led towards the more divisions. There is a dire need to fight collectively to this coronavirus. Being humans, we need to apply the only global value that is being human fellow. Social distancing is the new normal now but Hong Kong’s political situation is getting more anti distance campaign due to the political unrest. China needs to slow down the process. Human security needs to be the priority. Although to raise the voice of Hong Kong’s people social media can be a better platform. Let’s shake hands for peace rather than division.
All eyes on China’s post-lockdown Twin Sessions
Even though parts of the country are still battling a minor rebound of Covid-19 cases, the general message is clear: China has emerged from the abysmal months of lockdown and is ready to resume business. This was made clear to the entire nation on 29 April with the announcement of new dates for the “Twin Sessions” meeting, the country’s most significant annual political and legislative affair, involving the National People’s Congress (NPC) and Chinese People’s Political Consultative Conference (CPPCC).
Starting from 21 May, thousands of legislators and political advisors will gather in Beijing’s Hall of the People to discuss and vote on pressing issues facing the country. The gathering, which should have happened in early March, was postponed for more than two months this year due to Covid-19. Now its restart, reportedly cut short from a two-week event to just one week, is widely considered a reflection of the top leadership’s confidence that a level of normalcy can be restored in Chinese society.
Despite the reassuring symbolic meaning of the Twin Sessions, the social and economic landscape is bleak as China begins its slow recovery from Covid-19. The country’s economy shrank 6.8% in the first quarter of 2020, and a full recovery is far from a certainty given the ongoing nature of the global pandemic. The unemployment rate has risen in the same period. The world will be watching how the Chinese government addresses these challenges through the outcomes of the annual conference. Measures will not just shape the trajectory of the Chinese economy but also global objectives of economic recovery, fighting climate change and achieving long-term sustainability. Here are a few key items to watch for at the Twin Sessions.
Economic growth target
At every year’s Twin Sessions, the Chinese premier will make a formal report to legislators about the government’s work in the past year and, more importantly, lay out key economic and social development targets for the coming year. These targets include rates of GDP growth, unemployment, Consumer Price Index (CPI) change reflecting inflation, and poverty reduction. By the end of the meeting, legislators will vote to adopt those targets to make them binding for the executive branch. That is the order of business in a normal year.
In a year of pandemic, the severe disruption to economic and political processes have made setting the 2020 targets a contentious business. Now all eyes are on Premier Li Keqiang’s Report on the Work of the Government as the country enters the last week of May without a clear idea how the central government plans to set the speed for the economic engine this year.
This is a year of paramount importance for the Party. By the end of 2020, the country’s GDP is supposed to achieve a doubling from 2010 levels, a key political commitment made by the Party to Chinese society. The growth rate needs to hit about 5.5% this year to secure the objective. But Covid-19 has knocked the economy off track by a wide margin.
Prominent Chinese economists have weighed in. Justin Lin, a top economic advisor and former Chief Economist at the World Bank, recommended a moderate target of 3% to avoid maxing out China’s monetary and fiscal policy tools. As the economy shrank in the first quarter and is only mildly recovering in the second, China needs to achieve a 15% growth rate in the second half of 2020 to maintain the 2020 “doubling” goal. Lin argues that even if China is able to stimulate economic expansion to that level, it should opt for a slightly lower target to save some ammunition for next year. “It is totally acceptable to defer the (doubling) goal to next year,” he told the audience of a Peking University webinar on 15 May.
On the other hand, Ma Jun, chairman of China Green Finance Committee and a member of the People’s Bank of China’s monetary policy committee, has advocated for an outright abandonment of any economic growth target for 2020, citing concerns that chasing unrealistic targets will lead to massive stimulus measures in debt-driven infrastructure building that is often short-sighted and ill-considered.
A 13 May article by He Lifeng, the head of the National Development and Reform Commission (NDRC), China’s top economic policymaking body, indicates that the government may still choose to adhere to its original economic goal. “We should make sure we complete the task of building a moderately prosperous society,” he wrote. Doubling GDP by 2020 is a key component of that vision.
The growth rate target is closely linked with how China determines the size of its economic stimulus package. According to the 2015 Budget Law, key components of the fiscal toolbox, including quotas for central government and local government bond issuance, must be approved by the National People’s Congress.
Liu Yuanchun, vice president of Renmin University, told Caijing magazine that to create 1% GDP growth, fiscal spending should reach 1.2-1.4 trillion yuan (US$170-200 billion).
By the end of April, the Ministry of Finance had front-loaded the local government bond issuance quota to the tune of 2.29 trillion yuan (US$320 billion), and before total annual quotas could be approved at the Twin Sessions. The majority of local government special bonds go into infrastructure projects such as railway construction and public transportation, whose carbon footprints will have implications for global efforts to address climate change.
Green legislation and planning
Covid-19 has triggered a national conversation about the relationship between humans and nature, as scientists have linked the novel coronavirus to human contact with wild animals. The conversation was quickly followed by legislative actions. On 24 February, the NPC Standing Committee passed a decision banning consumption of wild animals for food, leaving only limited exemptions for certain species commonly bred in captivity. The national legislature is expected to revamp the Wildlife Protection Law following the decision. According to a legislative plan released by the NPC Standing Committee, the law revision process will likely culminate in 2021. Therefore, this year’s Twin Sessions probably won’t see definitive progress on the Wildlife Protection law, even though legislators may use the platform to submit proposals and recommendations.
Meanwhile, deliberations on the 14th Five Year Plan (2021-2025) will start in earnest this year, ready for its delivery to the next Twin Sessions in 2021 for final approval. According to schedules released by national authorities, draft versions of sectoral 14th Five Year Plans (such as for renewable energy) should be available for comment in late 2020.
In a critical year for China’s political and economic calendar, the pandemic has created unprecedented disruption. The coming week will demonstrate how China plans to pull itself back on track, with outcomes that will have far-reaching global consequences.
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