It can be said that China's move is preparation for escalating and prolonging its confrontation with the United States. China's long-term plan calls for a shift from an export-led economic model to one that emphasizes domestic demand. But it will not be easy to realize the shift to this model.
The Chinese Communist Party held an important meeting and decided on a five-year plan starting in 2021 and a long-term goal for 2035.
The focal point of the five-year plan is that China has come out with a "circulation" strategy focusing on the expansion of domestic consumption. It advocates promoting the concept of "dual circulations" in combination with another "circulation" centering on trade.
In reality, "external circulation" has been forced to shrink due to escalating trade friction between the United States and China, and the worsening global economy caused by the spread of the novel coronavirus. The actual situation is that China has no choice but to rely on internal circulation to sustain its economic growth.
For its long-term goal, China aims to increase its per capita gross domestic product (GDP) to that of a moderately developed country, with the apparent assumption of raising the figure from the current level of about 10,000 dollars to the 30,000 dollars range, which is the same as that of Italy and South Korea.
The target is to increase the number of middle-income earners and have the increase in personal consumption lead to economic growth. But many challenges remain before the target can be realized.
It was five years ago that China abolished its one-child policy and relaxed its controls on childbearing. The number of births is still hovering at a low rate. A rapid increase in the number of consumers cannot be expected.
The gap between rich and poor is also serious. The number of people whose average monthly income is around 16,000 yen is said to reach 600 million.
The current situation, in which workers who moved from villages to urban areas experience poor working conditions due to delays in establishing social security infrastructure, such as medical and pension systems, has led to a limited increase in personal consumption. The question is whether the rigid systems can be reformed.
Reflecting Chinese President Xi Jinping's emphasis on China's technological innovation on its own and self-reliance, the five-year plan calls for independence in science and technology. China apparently has in mind competition with the United States for supremacy in artificial intelligence and the 5G standard that enables high-speed, large-capacity communications.
China has used foreign investment and technical cooperation to improve its technological capabilities. It has also been pointed out that China has stolen intellectual property. Given that the United States and Europe have been keeping a distance from China following Xi's hard-line stance on foreign affairs, there may be limits to how much technological innovation it can achieve on its own.
The decision to set the long-term goal is seen as a strategic move for Xi to remain in power as the supreme leader. It is feared that the stronger Xi's power becomes, the more criticism of him will be contained, and even if he makes a wrong decision, he will not be able to correct the course.
China must recognize the great impact of its policies on the global economy and international politics, and act in a manner considered appropriate for a "developed country."
-- The original Japanese article appeared in The Yomiuri Shimbun on Oct. 31, 2020.
Read more from The Japan News at https://japannews.yomiuri.co.jp/
