Chongqing- Dr. Miguel Angel Hidalgo Martinez is from Queretaro, Mexico, and obtained a BA in International Relations from the Technological Institute of Higher Education of Monterrey (ITESM), Mexico. Dr. Martinez later moved to China to study the Chinese language and culture at the Dalian University of Foreign Languages in Liaoning province. He studied at Tsinghua University in Beijing, where he earned a MA in Public Policy.
For his Ph.D. dissertation at the University of Technology, Sydney, Australia, Dr. Martinez analyzed the development of urban infrastructure in China, focusing on Chongqing city's infrastructure. Currently, he is an Assistant Professor of the Department of China Studies at Xi'an Jiaotong-Liverpool University (XJTLU) in Suzhou, China.
The Two Sessions and Future of the Chinese Economy: a View from Chongqing
Miguel Angel Hidalgo Martinez Ph.D. Department of China Studies, Xi'an Jiaotong Liverpool University
During the first weeks of March, in the institutional context of the ‘Two Sessions’ (the National People’s Congress and the Chinese People’s Political Consultative Conference), the State Council of the central government announced the 14th Five-Year Plan for Economic and Social Development (2021-2025) as the main policy-planning platform to achieve long-term economic objectives in 2035.
The central government set an annual real gross domestic product (GDP) growth of ‘more than 6%’ for 2021. The macroeconomic and social policies proposed by the State Council are actually formulated around issues that have been discussed during at least two decades and constitute the core of the potential next wave of reforms in the country.
The government report delivered by the State Council during the ‘Two Sessions’ emphasized two general macroeconomic guidelines that would restructure the Chinese economy in the next years: the boost of domestic demand and the continuous development of the tertiary industries, particularly education and healthcare.
The tertiary sector became the main source of wealth creation in China in 2013, representing 46.7% of the GDP. Nevertheless, a substantial part of this share still comes from infrastructure development in real estate and other projects that do not generate enough revenue and consumption.
During the last three decades, the Chinese economy's accelerated development has been precisely based on developing urban infrastructure, roads, railway stations, airports, port terminals, real estate, and the like.
The contradictory part of this strategy has been accumulating a massive national debt representing approximately 260% of the GDP.
An increase of aggregated household consumption, underpinned by real growth of Chinese consumers' purchasing power, has always represented the main way to rebalance the system and avoid a potential large-scale crisis.
From a spatial perspective, mass consumption can only be possible through urbanization. According to the 14th Five Year Plan, the share of urban residents in the total population will be 65% by 2025.
In China, this is fundamentally achieved as an administrative policy based on the flexibilization and reform of the household registration system by which ‘citizenship’ is granted.
Therefore, the question of urbanization is inherently related to state capacity, especially at the local level. The inclusion of new urban residents into cities will incentivize consumption, assisting in reducing the debt-profit ratio of urban infrastructure, but it will also demand substantial social policy transformation.
Regional development and revitalization.
The 14th Five Year Plan presents a new set of complementary policies in terms of regional economic development: the acceleration of the integration of mega-city regions (城市群), such as the Chengdu-Chongqing and Beijing-Tianjin-Hebei regions, and the revitalization of the local economies of counties and towns.
The central government announced that it would continue supporting the development of large-scale infrastructural projects that drive the regional economic convergence of mega city-regions, suggesting the continuation of periodical financial capital injections to state-owned enterprises.
At the same time, the central government also announced that it would maintain direct financial transfers to prefecture- and county-level governments, which last year worth RMB 2.8 trillion.
Furthermore, the Plan includes grass-root initiatives to nurture local small business development in rural economies of counties and towns. During the last two decades, the central government has administratively empowered city governments by granting them access to more land areas.
Under this territorial setting, the countryside's revitalization seems to be a policy tool to control the inherent trends of economic and social centralization that will emerge as part of mega-city regions' development.
Additionally, the emphasis on small-scale local trade and mechanized agriculture are also policies that seek to avoid sub-urbanization.
The increase in urban aggregated demand underpinned by high purchasing power and stable disposable income is epitomized in the development of the all-around well-off society (小康社会).
This policy-line was launched in the first years of economic reform, aiming mainly to increase wealth production and subsequent equitable distribution.
Empowerment of wealth production circuits.
At the current political, economic juncture of China, the development of the ‘well-off society’ is a crucial policy line to overcome structural leverage in fixed capital and maximize the Chinese economy's innovative power.
The issue is not about producing and distributing wealth anymore; but how to structure interconnected circuits of wealth production that empower the Chinese consumer and nurture innovation.
As part of this idea, the 14th Five Year Plan emphasized education and healthcare reform through new investments, two main pillars in households' social economy.
Employment was also stressed as a strategic policy area, concomitant with the development of a well-off society. The central government emphasized maintaining manufacture as an integral part of the economy, presumably by considering the potentially abrupt unemployment rates that full-scale mechanization in production lines could generate in the short-term.
Furthermore, the plan emphasized generating 11 million new urban jobs and stressed the importance of ‘start-ups’ as new employers, being this particularly relevant in the mature urban economies of major coastal cities.
The financing and development of ‘start-ups’ in the Chinese economy have yet not received wide support as a strategic economic sector. Some of them have even faced severe setbacks and credit constraints during the last year.
Nevertheless, their highly innovative, flexible, and creative corporate profiles are a promising new field from where to transform the Chinese economy.
Chongqing leads industrial restructuring.
The establishment of Chongqing as a city-province in 1997 was a large-scale regional economic project based mainly on the imperative of infrastructure development and subsequently in pushing a new round of social policies.
Chongqing City Government has tested pilot policies, shaped mostly after central initiatives, related to urbanization, social infrastructure, and land-use change. As a territory directly under the central government's control and with a preferential administrative position that grants its city government vast funding, Chongqing reflects all the Chinese economy's challenges.
The government report delivered at the ‘Two sessions’ plenary explicitly mentions the strategic importance of developing the Chengdu-Chongqing economic region. The urban regional planning of the Chengdu-Chongqing city region was officially approved in 2016 by the central government.
In this context, the Chongqing city government has implemented several rounds of industrial restructuring in the local economy, particularly in the metropolitan territories that are integrated into the ‘Chengdu-Chongqing city region.’
Construction materials, pharmaceutics, petrochemical industrial inputs, and the automotive industry have been at the core of Chongqing's industrial restructuring. In the context of the 14th Five Year Plan, the Chengdu metropolitan region and the Chongqing urban core, represented by the nine central districts, still have a long way to increase urbanization under a decentralized pattern.
In this sense, the Chongqing city government has tried to nurture small-scale local development during the last decade by expanding towns' jurisdiction. This ‘town-based urbanization’ seeks to reduce urban agglomerations and provide more employment opportunities to migrant workers in their hometowns.
During the next five years, and certainly, the Chinese economy's qualitative transformation should reflect the economic interconnectivity between small-scale innovative and creative sectors, robust aggregated demand, and decentralized but sustained urbanization in the next decade.
English version of the full government report discussed during the ‘Two Sessions’ in Beijing, March 2021.
http://english.www.gov.cn/premier/news/202103/13/content_WS604b9030c6d0719374afac02.html