CHINA PLUS MAGAZINE: 2 Sessions in Review

CHINA PLUS: 2 SESSIONS IN REVIEW

4

CHINA’S FLEXIBLE GROWTH TARGET IN 2016

7

ACHIEVING MEDIUM GROWTH CHINA’S DEFENCE BUDGET AMIDST ECONOMIC HEADWINDS EXPANDING CONSUMPTION

BY UPGRADING SUPPLY

10

TRYING TO CURE THE HUKOU HEADACHE

FOOD SECURITY

12

NEW POLICY, SAME OLD PROBLEMS

TWO SESSIONS: OPINIONS OUTSIDE CHINA

13

16

E-COMMERCE IMPROVING RURAL LIVING

18

21

DON’T EXPECT A HARD LANDING

8

9

11

CHINA’S UNEVEN PROPERTY MARKET

CONFIDENCE IN NEW ECONOMY

THE EV CHARGING CONUNDRUM

6

THE GREAT BALANCE OF THE CHINESE ECONOMY

14 22 PLUS

3 3

GROWTH

P

remier Li Keqiang set China’s GDP growth target at between 6.5 percent to 7 percent for this year. For the first time, the growth target has been given as a range instead of as a specific number. And for the second year in a row, the Chinese government has lowered the overall growth target.

China’s Flexible Growth Target in 2016 6.

5

In his annual government work report at this year’s annual session of the National People’s Congress, Premier Li Keqiang announced a flexible GDP target, calling it a reasonable growth range as China is gearing up its structural reforms.

The main development targets for 2016 include GDP growth of 6.5% to 7%, a CPI increase maintained at around 3%, and the creation of at least ten million new urban jobs. Back in 2014, Premier Li mentioned the “reasonable range” for economic growth in the government work report of that year.

This year marks the first time that the concept has been put into use for the country’s GDP target.

- 7 PERCE N N GE T RA

Dr. Bessma Momani from the Centre for International Governance in Canada says the change is noteworthy. Momani told China Plus, “I think suggesting that there’s a flexible range rather than a hard number is a good sign that the government is more open to different interpretation of what would be the final number.”

Likewise, renowned Chinese economist Xiang Songzuo also believes that a flexible GDP target is a good idea for the country.

Xiang noted, “I think that’s necessary. The growth rate of GDP is not the top priority for the Chinese economy. All these traditional sectors will be going down, we must rely on infrastructure, rely on the new industries to push up growth. But I don’t think the growing of the new sectors can compensate for the decline of the traditional ones.

So it is rational for Premier Li to set up a very reasonable or rational target of GDP.” Aside from being rational, Asian Development Bank Senior Economist Zhuang Jian believes that such a concept will also help the government, at all levels, steer the economy in the right direction. As Zhuang explains, “Setting a range for the target can help provide more chances, more time to make structural changes. That will ensure sustainable growth for China. You should set a growth ceiling in order to avoid inflation, but at the same time you should also ensure that growth cannot be lower than necessary for absorbing or creating more job opportunities.”

4

CHINA

PLUS

GROWTH Official statistics show that China’s economy grew 6.9 percent year on year in 2015, its slowest annual expansion in a quarter of a century. Therefore, structural reforms have been highlighted as one of the country’s key economic tasks. GDP growth rate is no longer a leading index by which to evaluate development.

Xiamen Airlines CEO and NPC Deputy Che Shanglun noted during this year’s session of the NPC that such an adjustment would enable local governments to focus more on the key tasks. Che believes that, “Setting a certain rage for the GDP target is more objective, more practical, and more suitable to Chinese realities. It emphasises that economic development should be of steadiness and of quality.”

Suggesting that there’s a flexible range rather than a hard number is a good sign that the government is more open to different interpretation of what would be the final number.

Deputy Deng Sanlong, Director of the Forestry Bureau of Hunan agreed, stating that the setting of a flexible growth target, along with cutting overcapacity and promoting the service industry, are part of the structural reforms that the Chinese economy needs, and will help the country emerge from its economic slowdown in the long run. “I think we should have a correct view of the growth rate of China.

Though it is experiencing a slowdown, economic development within China still ranks number one within the world.”

In this year’s government work report, Premier Li Keqiang did not speak lightly of challenges facing the country’s economy. However, the measures listed by him exerted confidence not only amongst NPC deputies, but also among a number of foreign officials who were invited to observe this year’s NPC session.

Canadian ambassador Guy Saint-Jacques was one of them, and as he told China Plus during the NPC session, “Overall, I remain quite optimistic about the situation in China.

And of course, I will be following very closely everything with regard to the economic reforms and how the Chinese government aims to improve the economic situation.”

5

GROWTH

GROWTH

Don’t Expect a Hard Landing

T

he country’s top economic regulator says there is no way the Chinese economy will suffer a hard landing, and the elimination of industrial overcapacity does not mean mass unemployment for the people. Xu Shaoshi head of National Development and Reform Commission (NDRC) said on the sidelines of this year’s session of the NPC that despite the slower pace of economic growth, China is not in for a hard-landing.

According to Xu, “Even with a growth rate of 6.9 percent (last year), it still proved that the economy operated within a reasonable range as we set our target at around 7 percent. Meanwhile, employment growth was also stable as 13 million more people were employed; over 3 million more than the target we set. Income increased steadily reaching a pace of 7.4 percent, faster than economic growth. CPI rose gently at 1.4 percent last year while our environmental quality kept improving.

Therefore, I can say that our economy operated within a reasonable range.”

Despite this, prior to this year’s sessions of the National People’s Congress and the Chinese People’s Political Consultative Conference, rating agency Moody’s cut its outlook on China’s credit rating from stable to negative.

Xu says the world should adopt a new perspective when judging China’s economy, which is robust and still has growth potential. He also refutes the belief in some quarters that China’s economic slowdown is dragging down the world recovery.

Even with a growth rate of 6.9 percent, it still proved that the economy operated within a reasonable range as we set our target at around 7 percent.

6

Every point increase in our economy will drive more employment than it could before.

“The quantity of our imports is increasing steadily despite a declining value,” Xu points out. He goes on to say, “Our import value still ranks second in the world. Our outward investment is increasing. Last year, our non-financial outward investment reached 118 billion US dollars, up 14.7 percent.

Our investment in countries alongside the ‘Belt and Road’ increased by 18.2 percent. This is also China’s contribution.”

Xu Shaoshi says the Chinese and global economies will be confronted with challenges and difficulties in 2016, but stresses that China has confidence in maintaining a stable growth rate. As Xu points out, “In terms of economic operation this year, we’re already well-prepared mentally and all works are ready. We will focus on advancing supply-side structural reform while enhancing consumer demand moderately. We will continue to develop new markets, invest in new areas, and generate new momentum.”

Xu notes that China will also actively boost effective investment to shore up economic growth and help industrial restructuring, stating that, “The central government plans to invest 500 billion yuan this year. We will focus on key areas and weak spots so as to support projects involving the residential sector, grain and water conservancy, railways in regions of central and west China, technological innovation, energy conservation and environmental protection, education, medical care, culture, sports as well as poverty relief.”

In response to concerns over job losses, Xu has stressed that eliminating industrial overcapacity and economic transition will not cause mass unemployment, because, “Firstly, although some of our enterprises are struggling, they are taking effective measures to keep job positions. Secondly, our economic aggregate is increasing. Therefore, every point increase in our economy will drive more employment than it could before. Thirdly, tertiary industry has more employment-producing power. Fourthly, mass entrepreneurship and innovation are booming and creating more jobs. And last but not least, the mobility of the labor force between regions and industries is increasing.”

Xu adds that the central government is spending money to help state-owned businesses to resettle laid-off workers and in terms of global economic cooperation, the official says China will step up exports of its advanced equipment and production capacity to countries joining the China-proposed Belt and Road Initiative.

CHINA

Achieving Medium Growth

O

fficials of the Chinese People’s Political Consultative Conference (CPPCC) maintained a confident outlook for the Chinese economy during this year’s Two Sessions, despite the challenges being faced in the current economic transition. Wang Guoqing, spokesperson for the fourth session of the 12th National Committee of the CPPCC noted that China’s economy is generally expanding.

As Wang stated during this year’s annual sessions, “Viewed against the backdrop of the performance of international economies, China’s 6.9-percent growth in 2015 is outstanding, and the Chinese economy is expanding with good quality. The fundamentals of China’s economy remain sound. It is resilient, full of potential and has ample wiggle room. The economic data in January showed positive signs. So we’re confident in China’s economy despite the complicated world economic situation.”

China is on a painful journey of economic re-balancing, trying to ditch its over-reliance on manufacturing and wasteful investment in favour of domestic consumption and services. However, China still saw a 6.9-percent rate of annual growth in 2015, accounting for about a quarter of economic growth globally, following active and efficient structural reforms to the country’s economy.

In such a context, Wang Gouqing says China is seeing good momentum in its structural reforms, noting that China’s economy “still maintains a good trend over the long term. Our economy still has tenacity, and enough potential. Our economy still has a good supporting basis and conditions. Our structural economic reforms continue to advance forward and these four factors make a difference.”

Wang Guoqing says China’s business environment for foreigners has improved, not worsened, and the government is firmly determined to build an internationalised environment featuring the rule of law and facilitation of foreign investment. “I believe China will continue to be the world’s popular destination for investment and profit can be made here.” Wang claims. He adds that, “Chinese leaders have reiterated on recent international occasions that China will create a good environment for foreign-funded firms and protect their legal interests instead of altering its policy of attracting foreign investment.”

PLUS

Data from the Ministry of Commerce shows that foreign direct investment in the Chinese mainland increased 6.4 percent and the number of newly registered foreign-funded firms grew 11.8 percent year on year in 2015. During the Two Sessions, Wang explained that advisors at the CPPCC had considered how to encourage innovation and entrepreneurship and improve financial services, and made relevant suggestions to the National People’s Congress, China’s top legislature.

CPPCC National Committee member Liu Shijin said during the CPPCC session that economic growth is a leading concern among the public. “In the short term, people are concerned about the current macroeconomic trend, as the downward pressure is fairly large.”

Last year’s growth figure of 6.9-percent is part of what authorities refer to as the “new normal” following years of growth, which hovered in-and-around the double-digit mark on an annual basis. There has been debate this year about what level of growth rate would be acceptable for China. Economist Jia Kang believes that it is necessary for the country to prevent economic growth from falling below 6.5 percent, adding that, “I think the growth range of 6.5 percent to 7 percent is acceptable. If the rate falls to less than 6.5 percent, we will have to bring in measures to stabilise growth.”

Many economic observers have suggested a growth rate of 6.5-percent is needed in China in order to ensure that job numbers remain at a reasonable level. Chinese President and CPC General Secretary Xi Jinping is on-record saying that annual growth of at least 6.5 percent will be required in order to reach the government’s goal of doubling the per capita income of people, compared with the level of per capita income in 2010, in the next 5-year plan.

CPPCC member Jia Kang has predicted that the Chinese economy is likely to bottom out at about 6.5 percent this year before stabilising. At the same time, Huang Yiping, a professor of the National Development Institute at Peking University, says stabilising growth will require action. In reference to academic concern, Huang noted, “What we are concerned about is not simply the speed of economic growth, but what measures will be needed for realising basic economic growth.”

Huang says this will require that the government follows a basic principle of reform, namely, “Cut down on excessive production capacity, leverage and inventories to dry up excess capacity and reduce costs. The motivation and the goals are obvious.” The country’s top lawmaking body, the National People’s Congress, endorsed a growth target of 6.5 to 7 percent for this year, as well as a more proactive fiscal policy.

7

UPGRADE

DEFENCE

China’s Defence Budget amidst Economic Headwinds

D

uring this year’s annual meeting of the National People’s Congress (NPC), China announced its smallest increase in defence spending of the last six years in the face of rising economic headwinds and personnel cuts in the armed forces. Officials from the top legislature stressed that China must improve national defence so as to enhance security and fulfil the country’s obligations.

According to the budget report delivered the annual session of China’s top legislature, Beijing plans to raise the 2016 defence budget by 7.6 percent to 954 billion yuan, or about 146 billion US dollars.

Chen says China’s defence budget has accounted for an average of 1.3 percent of the country’s GDP over the course of the past decade, which is significantly lower than the world average of 2.6 percent. Last year, China’s defence spending amounted to only 24 percent of that of the United States.

Chen says that compared with other world powers, China’s defence budget is rather low regardless of whether you look at it in terms of a proportion of GDP, or in terms of civilian per capita or military per capita defence fees. Military experts claim that the cut of 300,000 service people announced

by Chinese President Xi Jinping in September might also have helped drive down the defence budget growth figure.

Whilst delivering the annual government work report, Chinese Premier Li Keqiang stated that China will make its military more revolutionary, modern, and better structured; noting that the military works meticulously so as to ensure combat readiness and control of China’s border, coastal and air defences.

As a result, Li Keqiang has said that logistics and equipment development will be stepped up and the military’s size and structure will undergo reforms.

A

s part of the attempt to drive domestic consumption and keep personal spending from flowing outside the country, Chinese authorities have been instituting supply-side reforms. But how are these reforms impacting the daily lives of people in China.

In a city somewhere in China, a Chinese family sits down for dinner together. They are discussing arrangements for a party to celebrate their first baby’s one month birthday. The grandmother, Tang Lina, is also the sales director for two international companies and as a result has bought almost everything needed for the baby from abroad.

NPC deputy Chen Zhou and an expert on national defence policy and military strategy, explained that though the rate hike between 7 and 8 percent would be China’s lowest increase for defence spending in six years, increased defence spending must be a priority for the country going forward.

As Tang proudly explains, ”The cradle for the baby, as well as its five prams, were bought from either the UK or the US. I’ve never bought anything for the baby at home. The only exception is the towel, which I bought from a shopping mall in Beijing, yet that was produced in Japan.”

“No matter whether it is for the sake of security, for the need to meet the challenges of military reform, or for the need to deepen reform and fulfil our obligations, we must unswervingly increase our national defence capabilities continuously, so as to accelerate our technological innovation and breakthrough and accelerate our building of an elite combat force and promote our army’s transformation from quantity-orientation to a focus on quality and efficiency.”

Tang says she used to shop within China but now prefers to go abroad because of the high quality and relatively reasonable prices, free of tariffs. “If the prices of the products at home were similar to those in foreign markets, I would definitely do my shopping here,” Tang laments.

And the question of tariffs is exactly what the government is working towards. In a speech delivered during this year’s annual two sessions of parliament, Chinese Premier Li Keqiang said the government would remove policy barriers, improve the consumer environment, and safeguard the rights and interests of consumers, as a means of changing the trend towards high-end consumption.

Chen believes that the development of China’s national defence must be coordinated with the development of the economy. As Chen explained, “Our country should determine the scale of its defence budget, which should adhere to the principle of coordinated development of defence and economy. It should also comply with the need of national defence and the level of the country’s economic development.”

8

Expanding Consumption

by Upgrading Supply

Li stated, “We will cut import tariffs on some consumer goods and increase the number of duty-free stores. We will work to strengthen the growth of consumption in elderly care, health services, housekeeping services, educational and training services, and cultural and sports services.”

CHINA

PLUS

China still faces many challenges including a mismatch between supply and demand, and an increasing income gap between the urban and rural populations Cai Jiming, deputy of China’s National People’s Congress, is responsible for reviewing the government work report. Cai believes that the new policy will play a big role in expanding domestic demand, telling China Plus that, “I agree with adjusting our policies towards customs to attract more people to spend money at home. That way, the contribution of domestic demand to GDP growth will be substantially increased.”

Investment and international trade used to be the two main drivers of growth in the Chinese economy. Both sectors saw a slump after the 2008 global financial crisis, prompting China to move towards an economy where consumption contributes more towards the growth in GDP; with varying results. According to official statistics, consumption accounted for 66.4 percent of GDP growth last year, representing an increase of over 15 percent compared with 2014.

Some experts claim that the figures show China is successfully making the transformation.

But not everyone agrees with that view. Professor Yin Xingming of Fudan University in Shanghai, says China still faces many challenges including a mismatch between supply and demand, and an increasing income gap between the urban and rural populations. According to China’s 13th five-year plan, China will make efforts to transform itself into a manufacturer of advanced and quality products, with the scientific and technological sector set to contribute sixty percent of economic growth.

As for the income gap, professor Yin says one solution would be to provide more education opportunities for people living in poorer, remote areas, so as to increase their productivity and help them to get a better paid job in the cities. As Professor Yin points out, “It is unlikely any low productivity labour will be able to buy luxury products. So the best way for the government is to improve labor quality.

In other words, the Chinese government needs to spend more money on education for low-skilled workers.” The government plans to tackle this problem over the next five years by a gradual expansion of secondary vocational education.

9

FOOD

HUKOU

Trying to Cure the Hukou Headache

C

hina’s household registration system, or Hukou, determines where a citizen can access public services such as medical care, education, and pensions. This has been a constant source of grievance for many people within China’s cities. Hukou reform was high on the agenda earlier this year at the annual session of the National People’s Congress in Beijing.

Song Ying, a white-collar worker living in Shanghai, moved to the city two years ago from Ningxia Hui Autonomous Region. After some serious effort, she was able to acquire a local hukou. As a result, life has since become much easier for her.

As she attests, “It is far more convenient for me to process documents, licenses and the such. And it is easier to find a job because companies generally prefer to hire candidates with a local hukou.”

Song is lucky; acquiring a hukou in a big city is often next to impossible. According to the National Bureau of Statistics, more than 8 million people living and working in Beijing are doing so without a local hukou. Yang Liu is one such person.

Yang spoke with China Plus about her desire to gain that that elusive Beijing hukou, stressing that, “A Beijing resident can enjoy many social perks, which are not available to migrants. For example, if I want to travel to Taiwan on my own, I simply can’t when my hukou is from Hebei. I have to be a Beijinger to do that sort of thing.”

Yang is not the only one who thinks this way. In fact, social perks attached to one’s hukou are a big selling point for most people and that inevitably leads to problems.

Peng Xizhe, director at the State Innovative Institute for Public Management and Public Policy Studies at Fudan University, elaborates that, “We think the hukou system is very important because our social management and public services are based on this system. Despite being originally designed as a household registration system, it became much more than that. In effect, you can get different social welfare depending on where your hukou is (issued). That causes problems.”

10

You can get different social welfare depending on where your hukou is (issued).

The central government has been searching for an overarching solution for several years but it has been a difficult issue to address considering the pace of change within society.

NPC Deputy Cai Jiming suggested that government “can first list the differences between local residents and migrants in terms of housing, medical care, education, employment, unemployment insurance, and pension relief. Then, we try to abolish these distinctions one by one. If we can achieve that, we can say mission accomplished.”

But Cai’s vision cannot be realised overnight. However, there has been progress. Last December, provisional regulations on residence cards started being implemented in Beijing. Du Peng, director of the Information Centre for Ageing Studies in Renmin University of China, claims that residence cards contribute to social fairness.

He adds, “If I want to work in the city and I have a residence card, I can get access to related information and receive training. In other words, if residence cards can guarantee more welfare gradually, hukous will eventually become useless.”

On the broader issue of welfare in general, during this year’s session of the National People’s Congress, NPC Deputy Han Deyun called for action from the government to “make sure migrants who have residence cards can take their children with them and these children should have access to education.”

This is a common plea from those who have moved to major urban conurbations such as Beijing. Resident Zhou Zhaojun, who has lived in Beijing for 26 years, explains as much to China Plus, pointing out that, “I now have a proper job and I have also bought an apartment. The only thing that bothers me is my children’s education.

In Beijing, if you don’t have a hukou, you cannot participate in the college entrance examination.” And although the situation has not changed just yet, Zhou is optimistic because the issue is now firmly on the government agenda. It’s simply a matter of time before wide scale changes begin to be made.

CHINA

D

uring this year’s National People’s Congress (NPC) in Beijing, Chinese Agriculture Minister Han Changfu spoke out at a news briefing and highlighted the issue of safeguarding China’s food security as a “strategic” goal. Han Changfu noted that food security has always been and will remain a major issue in China, a country with a population of 1.3 billion people. He pledged that authorities will maintain a “zero-tolerance” attitude towards food security issues and will spare no efforts to solve problems no matter how minor they are.

“Basically speaking, we will continue to maintain a tough stance on both production and supervision procedures in a bid to ensure that people consume quality-assured food. We should not only eat well but also safely,” Han stated on the sidelines of the NPC. To that end, Han put forward several measures on the issue including a tough crackdown on illegal food additives as well as substandard pesticide residues. In addition, some of the most hazardous pesticides will be purchased under a real name system starting from this year.

The country’s demand for food will remain high in the long run as the population further increases with the ending of the one-child policy; as urbanization continues to progress; and as the country’s consumption structure changes. China’s grain output reached over 620 million tons in 2015; the figure has increased for 12 consecutive years. However, about one-fifth of the country’s grain output last year was actually imported grains, amounting to around 120 million tons.

PLUS

According to Han, the large amount of grain imports resulted from structural demand and price competition.

“Grain from foreign countries is indeed cheaper than ours; much cheaper. The scale of our agriculture is small and the cost is high. So we don’t have any advantage in grain prices. For that reason, we’ve imported a large amount of grain.”

Han added that China will not seek a consecutive increase in grain output during the next 5 years, but authorities will consolidate and improve grain output capacity. Furthermore, concrete methods will be taken to improve China’s soil quality, as intensive farming in certain Southern regions has left the soil vulnerable to pests and diseases.

On this issue, Han said, “Firstly, we will control the input to the soil. Secondly, we will treat contaminated soil.

The Agriculture Ministry, the Ministry of Finance and the Hunan Provincial Government are taking collective measures to treat heavy metal-polluted soil. Thirdly, farms should let the crops lie fallow and plant in rotation in order to reduce the pressure on the soil.”

As for the issue of international agricultural cooperation, China is actively encouraging enterprises to invest in Russia’s far east region with a belief that Sino-Russian cooperation could be deepened by enlarging bilateral trade as well as enhancing research on agricultural science and technology.

According to Han, “The two sides could launch joint scientific research, promote more exchanges on achievements and technology, as well as train more professionals from the other side. We expect more cooperation as long as it is beneficial for bilateral agricultural development and helpful to both peoples.”

11 11

POVERTY

CHILDREN

New Policy, Same Old Problems

T

he newly-adopted two-child policy was an important issue amongst lawmakers gathered in Beijing during the Two Sessions, but it is unclear whether families around the country are or will be rushing to start larger families.

Song Qiuxia, a white-collar worker living in Guangdong province, and her husband gave birth to their first child last year. Despite loving being a mother, Song is not enthusiastic about the new policy, telling China Plus, “I wouldn’t even consider having a second child.

Raising a kid can be very expensive. For example, the kindergarten fees for just one semester cost me an entire month’s salary.” Song is not the only person to express such views within the larger cities.

According to a survey carried out by the Population Research Institute of Guangdong, only some 34 percent of 12,000 families included within the sample would opt to have a second child. The reasons against having a second child include high costs, a lack of babysitters, as well as a shortage of educational and medical resources.

However, these reasons are also the common worries of those who plan to have or already have had a second child. Li Kun is a case in point. Li hopes that the government will help with two things in particular now that she is pregnant for the second time.

National People’s Congress, China’s top legislature. Chinese Premier Li Keqiang shed a certain amount of light on the issue when he delivered the annual government work report at the opening ceremony of the NPC session.

As Li stated, “We will improve the supporting policies to complement the decision to allow all couples to have two children. We will encourage the development of kindergartens open to all children.”

Kindergartens that are open to all children represents a new concept related to early childhood education. NPC Deputy Wang Meixiang explained this concept further, noting that, “When the tuition fees of private kindergartens are too high, it’s easy to see the significance of open-to-all kindergartens, as they can help people save money in kindergarten fees. Therefore, it is very important for the government to provide subsidies to develop this kind of kindergarten.”

China Plus spoke to several academics outside of China in an effort to gain a snapshot of opinions abroad regarding this year’s annual sessions of parliament. In no way are the views represented here representative of the entire academic community within the expert’s respective countries, and such views are only offered as an indicator into what kind of discussion is going on outside of China.

Speaking to China Plus, Brown noted that, “China’s development has two quite special situations. One is the speed; the speed is much higher than other countries.

The other is the scale; it is on a larger scale. Anything else is the same as other countries, but speed and scale are the most important factors. The quicker the speed is, the opportunity and ability to control development will become weaker. So, this is a problem: How to control the change. However, at the same time, it needs to change faster.”

However, supporting policies alone are far from enough.

Zheng Zhenzhen, researcher at the Institute of Population and Labor Economics of the Chinese Academy of Social Sciences, says that the initial challenge concerns changing the mindset of prospective parents.

As Zheng told China Plus, ”We have to change the traditional belief that it is better for one couple to have only one child. This outdated mindset would destroy our population’s sustainable development in the long run. Although on the policy level, we have said goodbye to family planning, the rooted belief cannot be changed overnight.”

Changing the mindset may be difficult, but it is definitely achievable. Li Kun, for instance, did not want to have a second child initially but as she explained, “I changed my mind when I noticed my first child’s need for a sibling. That is something we parents cannot provide. Also, the two-child policy has been officially implemented. I would love to give it a go.”

As Li explains, “The first one is longer maternity leave. That way, children can enjoy their mother’s company for a longer period of time. The second is early childhood education. It is really hard to find a decent kindergarten nowadays. I experienced the problem firsthand when I was looking for one for my first child. If there are more formal and reliable nurseries and kindergartens around when my second child arrives, that would be ideal.”

A

t this year’s National People’s Congress (NPC), Chinese Premier Li Keqiang officially set China’s GDP growth target for 2016 to range between 6.5 to 7 percent. While there is concern around the world about a possible hard landing for the Chinese economy, Park Sung-joon with Incheon National University in South Korea says the target growth rate looks sound, pointing out that, “China has projected its 2016 growth at between 6.5 percent and 7 percent. It will be and it is a rare growth rate worldwide nowadays. If China aspires to build a moderately prosperous state, it needs at least a 6 percent growth. So the projection is reasonably achievable.”

The new Five-Year plan also places a special emphasis on innovation. Stephen Perry, Chair of the 48 Group Club, a UK-based NGO known for its commitment to promoting the economic cooperation, trade and friendly exchanges between China and the UK, says the concept of innovation fits with the current economic growth strategy.

“Innovation suggests transformation and change, and always moving forward,” Perry told China Plus, “and if leaders can accept that things will always be changing, that there would be no plateaus, no stabilities, things will always be moving into more and more stages of development.”

Stephen Roach, with Yale University’s Jackson Institute for Global Affairs, says the global economy will stand to benefit from the changes in the Chinese growth model, because, “If China is successful in creating a new middle class, a new consumer-led growth dynamic, that’s an enormous new source of global aggregate demand for the world and Asia to benefit from.”

The new Five-Year Plan also anticipates average annual growth of above 6.5 percent from 2016 to 2020; this would be the lowest in over 3-decades. However, Kerry Brown, professor of Chinese Studies with King’s College in the UK, says there is little need to be concerned, provided the changes to the economic growth patterns are managed properly.

It seems as though the government has received the message loud and clear. How to better implement the two-child policy was one of the key topics during this year’s annual session of the 12

Two Sessions: The Opinions Outside China

CHINA

PLUS

13

HOUSING

HOUSING

Tackling China’s Uneven Home Market Recovery

F

luctuations in China’s housing market were a major topic of discussion at this year’s session of the National People’s Congress (NPC). Reducing housing inventories has been set as one of the five main goals of the supply-side structural reform program established at this year’s Central Economic Work Conference.

Many deputies who attended this year’s National People’s Congress recommended that any policy shifts need to be based on local conditions. Calls were also made to try to bring market speculation under control.

The Communist Party of China Shanghai chief Han Zheng, a deputy of the National People’s Congress, has said that addressing the issue in his city requires a dual-track approach. As Han Zheng explained, “Because Shanghai has a population of more than 24 million, we need to deal with two different issues if we want to make adjustments: These areas include the market and the law. The local housing market in Shanghai needs to be convinced so as to focus on allowing people to find affordable homes.”

As for the legal side of China’s property market machinations, Han says, “When it comes to the law, we should be taking steps to try to ensure that low-income families are given every opportunity to access housing. Anyone found shutting people out of affordable housing in an illegal way should be punished. This is what will guarantee a healthy and stable property market.”

Traditionally, housing in China has been considered a safe investment, compared to the stock market or other high risk investments. While the market has been sporadic, housing prices appeared to have bottomed out in the second-half of last year after declining for well over a year.

However, home prices in the southern Chinese city of Shenzhen surged nearly 52 percent in the first month of this year. Meanwhile, prices in Shanghai increased close to 18 percent.

14

CHINA

PLUS

But while property prices appear to be rebounding in the major centres, statistics suggest that the property market in second, third and fourth tier cities in China have not kept pace. The uneven recovery has prompted suggestions that the government needs to take a more targeted approach to its stimulus.

Speaking earlier this year during the National People’s Congress, NPC deputy Lu Wei spoke to China Plus about the concerns that many have at present with regard to the future outlook of China’s property market in the bigger cities. “Right now, inventory reduction should be focused on the third and fourth-tier cities. In big cities like Beijing, Shanghai and Guangzhou, efforts should be focused instead on ensuring the properties that are available are affordable.

Steps need to be taken to try to prevent people from taking advantage of broad-based government stimulus packages.”

Lu Wei is of the firm belief that supervision over this issue is incredibly important, because, “If we open up too many options, people are going to take advantage. This is going to lead to another round of overheating in the property market.”

Another concern raised during this year’s NPC was the availability of financing. Huang Qifan, Mayor of Chongqing, suggested that there needs to be regulations on non-bank lending when it comes to down payments. As he pointed out, “Property developers or their agents have been too active in providing loans to home buyers to cover their down payments. This could lead to a large-scale investment bubble. We don’t want another situation like we saw in the United States with the subprime mortgage crisis. Inventory reduction and structural reforms are what’s needed.”

Ultimately, authorities are working on legislation to eliminate non-bank lending for down payments in China. The subprime mortgage crisis in the United States saw companies engage in predatory lending, convincing would-be home-buyers with little equity to purchase homes on contracts which would require a massive balloon payment after a certain period of time. Credit defaults from this practice were the stimulus for the global financial crisis in 2009. China will attempt to avoid such a situation at all costs.

Anyone found shutting people out of affordable housing in an illegal way should be punished.

15

E-COMMERCE

E-commerce Improves China’s Rural Living Standards

T

he task of building a more digitised society was emphasised by central authorities during this year’s Two Sessions, and the efforts will not only be confined to big cities. That is because this year’s government work report encouraged the introduction of e-commerce into rural areas.

Such encouragement led to heated debate among political advisors, who attended this years annual session of the Chinese People’s Political Consultative Conference (CPPCC) back in March, as to how introducing e-commerce into rural areas would guarantee farmers a better life.

Mr. Zhang is a farmer living in Pinggu District in the northeast of Beijing. Talking of his experiences as a farmer, Zhang explains to China Plus, “Farming in the past was mostly weather-dependent. After harvest, the only thing I could do was just wait for buyers. Sometimes I grew too much, and the vegetables would rot in the field.

It always worried me.”

Limited choices, low efficiency and information asymmetry, have long been the main shortfalls of traditional Chinese agriculture. But Zhang says things changed when he began using an online platform to sell products.

As Zhang enthuses, “Now I can sell my products directly to residents in the city. What’s more, we can grow the vegetables according to their personal preferences.” A lot of work has gone into optimising the agricultural industrial chain and encouraging people to start new businesses in rural areas.

Earlier this year, e-commerce giant Alibaba reached a deal with the National Development and Reform Commission (NDRC) to work together in more than 300 rural areas to help develop e-commerce. While rural dwellers in China are willing to spend online, many of them are still relatively poor, which limits purchasing power and ultimately means they have few resources to invest in building a businesses.

16 16

National political adviser Liang Weihua is one of the strongest promoters of introducing e-commerce into the countryside, noting that, ”During our field trips to remote rural areas, we discovered that many of them were rich in terms of agricultural resources and natural and organic products. But they were limited by inaccessibility and transport hurdles, and the lack of an information communication platform.

E-commerce will largely shorten the distance between companies, costumers, and farmers.”

Liang also pointed out that the success of e-commerce will help China realise its goal of lifting 70 million people in rural areas out of poverty by 2020. In this year’s annual government work report, Premier Li Keqiang announced a fiber-optic networks plan, which includes a program, involving 50-thousand administrative villages, which will enable rural residents to enjoy a more digital way of life.

During this year’s CPPCC sessions, political advisers including Liu Hanyuan lobbied for the building of a big data platform for the agricultural sector. As Liu explains, “Building a big data analysis platform is necessary for balancing supply and demand, and as a forecasting mechanism. The sharing of information will lower the risk of price fluctuations, as well as costs during circulation, and at the same time improve efficiency.”

For a number of entrepreneurs, long-distance transportation, logistics costs and storage conditions for fresh products represent big concerns. That is why, during the CPPCC session, political advisers including Liang Weihua suggested the need for a better logistics network. Liang also pointed out that the government should play a better role in supervision.

As Liang told China Plus, “The development of e-commerce also requires more regulations. We are living in an information age, so a supervision mechanism is needed in case a false or misleading message gets widely spread.” Though the scale of online shopping in rural areas is still lower than in the cities, political advisers and industry insiders believe there is huge space for growth.

Limited choices, low efficiency and information asymmetry, have long been the main shortfalls of traditional Chinese agriculture.

CHINA

PLUS

17 17

OPINION

Confidence in New Economy On the 16th of March 2016, the 12 day secession of China’s legislature ended and Premier Li Keqiang met the press. The importance of this press conference lies in the fact that in the12 days prior to this, China’s new five year plan was being fine tuned by its legislature and this five year plan comes at a time when the world’s second largest economy is sailing through choppy waters in the wake of an economic transition and a flagging global economy.

Li had admitted in his inaugural address to the legislature that it is going to be “a difficult battle” but in his press conference the Premier seemed much more upbeat, primarily because of the successful finalization of the five year plan.

18

OPINION

There is a famous saying regarding the relationship between the US and the world economy, and it goes like this: “If the US economy sneezes the world catches a cold.” Similarly, when we see the world’s second largest economy transitioning and undergoing rigorous reforms towards a market and consumer demand oriented economy, the economy itself is bound to slow down and a few hiccups are to be expected, as was the case with a few mild but short lived scares in China’s stock market in 2015.

Speaking to the reporters at the press conference, the Premier highlighted growth targets, unemployment risks, corporate debt, new technology and innovation, Sino-U.S. relations, and relations with Russia and Japan. Most importantly, in the days following, he emphasized that the economy, despite facing challenges, is in no danger of a hard landing.

At the press conference a number of questions were asked by various national and international media outlets, including Reuters, Xinhua News Agency, NBC, China News Service, Bloomberg News, People’s Daily, China Radio International, Spanish News Agency EFE, Phoenix TV, Russia Today, China Daily, CTI Television Incorporation, China National Radio, Nikkei Business Daily, and CCTV.

CHINA

Just like the US economy, the world’s second largest economy is also intertwined with the rest of the planet. It is safe to postulate that, “If the Chinese economy gets an itch, the world economy will get the pox;” especially when China is responsible for 35 percent of the world economy. There is bound

PLUS

to be a lot interest in China’s economy and its transition and more specifically this new five year plan. The Q&A secession covered a wide range of questions concerning the Chinese economy.

Ranging from financial stability, meeting growth targets, the China-US relationship driving the global economy, pension funds, reforms and layoffs, reforms and market access, issues in the Asia-Pacific region, the issue of preserving cultural relics, Hong Kong’s future, the new economy, China-Russia trade relations, medical insurance, government openness, social security packages and grain prices including agricultural subsidies.

Li Keqiang answered all the questions in detail and painted a clear path of how China is set to 19

AUTO

OPINION achieve its annual economic growth targets while at the same time the government is going to strengthen its supply-side reform. The Premier showed a lot a confidence in the government’s capacity to anchor the economy “if it slides below the appropriate range”. Aside from pivoting policies to counter economic issues, the Belt and Road initiative will provide a lot of support and investment to advance the economy.

Regarding Sino-U.S. relations, Premier Li said that China-U.S. cooperation is the key to benefitting Asia-Pacific stability. Without cooperation and peaceful dialogue, negotiations cannot take place for a peaceful resolution and Premier Li said that “China-U.S. relations will move forward regardless of the U.S. election result.”

When Sino-Russian relations were touched upon, the Premier explained that relations with Russia have stood the test of time and will be unscathed despite changing international situations. In reference to relations with Japan the Premier hoped that “relations do not retrogress as bilateral ties have shown signs of improvement.”

A lot of focus has been given in the government report to the “new economy.” Li explained the concept of the new economy and said, “We will foster new growth engines to help promote economic restructuring.” Even though a lot of the world media is skeptical of the economic conditions in China, one should not get fazed by this negative skepticism which is usually based on misinformation and half truths. With China’s economic reforms gaining ground a lot of positives have been observed.

Indeed the economy has slowed down but most certainly there will be no hard landing because one has to keep in mind that China is still a developing country with a government with pockets that run very deep. Hence, the word “developing” should be enough for people to understand that there is still tremendous room for growth and investment; almost the entire western side of China is underdeveloped and plans have been set in motion to overcome this.

A lot of economists and experts talk about the hurdles and challenges which most economies faced in the wake of transition from being manufacturing driven to services driven and these economists argue that those economies went through prolonged periods of busts before revitalizing. China’s case is quite different because China’s economy is massive and large scale economies with strong foundations do not hit rock bottom abruptly; it takes time. One can take the example of the US economy.

20 20

The word “developing” should be enough for people to understand that there is still tremendous room for growth and investment.

The US economy is the world’s largest economy and despite facing many challenges in the recent past, due to the financial meltdown in 2008, it still hasn’t had a hard landing.

Similarly China’s economy is integrated into the world economy and with the global economy slowing down it has compelled China to switch off its after burners in order to sail at a normal pace.

This slowdown is not a hard landing, but rather a shift in gears designed to implement reforms. The major challenges of transition include unemployment, bankruptcies, bad debts and capital reappropriation. The Chinese government certainly has some answers to these challenges because comapred with China’s previous transition, its economy has grown tenfold this time round.

The government’s pockets are much deeper, thus holding the promise of a much wider social security safety net.

Furthermore, Premier Li pledged that a government fund of 15.4 billion US dollars could be bolstered if required, which would lessen the impact of transitional hiccuops on the ordinary Chinese citizens.

The Author: Shafei Moiz Hali has a master’s degree from George Mason University, Virginia, USA in the field of International Commerce and Public Policy. Mr. Hali has been working as an Assistant Professor at the National Defence University (NDU), Islamabad, Pakistan with the department of Government and Public Policy Since 2009. Currently he is pursuing his PhD from the College of Public Administration at the Huazhong University of Science and Technology (HUST), China.

THE THE EV CHARGING CONUNDRUM THEEV EVCHARGING CHARGINGCONUNDRUM CONUNDRUM

A

t this year’s annual legislative session in Beijing, political advisers called for unified efforts in the new energy vehicle industry in the hope of making a breakthrough in the technology.

After failing in Beijing’s license plate lottery system for some three years, Beijing resident Qin Xiaofei finally made the decision in January to buy a battery-driven car to chauffeur his pregnant wife around the city.

According to Qin, one of the biggest concerns he has with his new car is finding enough charging stations. As Qin told China Plus, “Up until now, I find charging to be the most troublesome aspect of owning this kind of car. All the parking spaces in my community have been leased out.

Without a parking space, we can’t install our own charging post and have to go to other places to charge the car. And there aren’t many charging stations in Beijing right now.”

Qin’s concern is shared by many drivers of new energy vehicles in China. These concerns have prompted local government authorities to expand their existing charging networks. In Beijing, for example, municipal authorities have vowed to add another 5,000 public charging posts throughout the city this year.

But, according to political adviser Ma Li, concerns for the lack of charging posts and battery life have stunted market growth. Ma believes that drivers will only be content when pure electric cars have a range of 1,000 kilometres on each charge.

Commenting on the current situation, Ma pointed out that, “Regardless of the type of new energy vehicle, cars should serve a practical function first and foremost. One of the problems with electric cars is their range, which at present only

reaches around 400 kilometres (per charge). People will only be able to forget their concerns once the vehicles can cover 1,000 kilometres on a single charge.”

Xing Lei, chief editor of top publication China Auto Review, echoes that view, and notes that car makers are working on batteries to further commercialise electric vehicles, noting that, “Batteries account for pretty much 50 percent of the cost of a new energy vehicle. So it’s the biggest bottleneck.

A higher battery density gives you a better range. So now companies are working to reduce the cost of batteries, to drive down the prices of the new energy vehicles themselves, so that they could be more affordable in the future.”

Leading market players within China, like BYD, are seeking to mass produce the key component and are making leaps and strides in doing so. Sherry Li, BYD’s general manager of public relations told China Plus, that BYD are making all types of battery products that can be commercialised. “Our new factory producing LiFePO4 batteries was put into production last year. This is the largest type of lithium battery in the world.” However, a breakthrough in the field may still be far off despite the work of BYD. For this reason, Ma Li spoke out during the annual two sessions and called for a more unified approach to research at a national level.

As Ma says, “We have been asking for years that research on fundamental and common technologies must be led by the central government. They should establish a research institution specialised on batteries. When the research produces concrete results, the government can sell this to companies.

It will also facilitate the setting up of unified standards for products later on down the line.”

Despite his continued calls for a unified approach backed by the central government, Ma believes the outlook is bright evidenced by the fact that the Ministry of Industry and Information Technology, together with nine private companies, are working to build a research centre or common platform for batteries backed by 500 million yuan of investment.

The views expressed above are the opinion of the author and do not neccessarily reflect the views of China Plus or China Radio International.

CHINA

PLUS

21

I

OPINION

t would be impossible for me to side with a view that we’re not able to meet our major economic development target this year,” said Premier Li Keqiang at the two-hour long press conference at the end of the yearly conference of the National People’s Congress, the country’s top legislature. The growth target aforementioned for 2016 is a range from 6.5 to 7 per cent, the first time of a non-specific figure goal in decades of Chinese economic history.

Chinese government’s stewardship of economic transition, which is considered a key to for China to move beyond the so-called middle income trap. China needs to keep its economic growing at 6.5% on average for the next five years, i.e. the 13th Five-Year Plan, in order to materialize its long-term goal of doubling per capita GDP between 2010 and 2020.

What’s at controversial is if the Chinese economy will continue to record a robust expansion at a time of great international uncertainty and strong domestic headwinds. Some economists tend to believe that, a slow-down in Chinese economy is necessary or even unavoidable in the process of structure reform - bankrupting unprofitable enterprises, closing down factories burdened with overcapacity, laying off surplus workers, cutting back government debt levels, etc.

The Chinese economy, said one renowned economist whom I talked to, is certainly facing challenges like overcapacity and deep debts held by local governments. But it is also true that the economy is nowhere near the bad shape as suggested by world media headlines. The fundamentals speak for themselves. For example, consumption accounted for some two-thirds of China’s GDP growth in 2015. How strong is the Chinese spending power? Here’s a good example carried in local Australian news:

They are right in the sense that the Chinese economy is at a key stage of reform, which is in fact more about rebalance. China is transforming its economic model from relying on export and heavy investment to one focusing on service industry and domestic consumption. The understanding is the latter model offers stable and long-term growth, while the export business is current in trouble when the rest of the world is still struggling in the post-2008 financial crisis doldrums.

A balancing act is also required in regions with different economic performances. For example, on one hand, the northeast of China, the so-called rust belt, is bleeding from a dwindling population as well as struggling heavy industries. On the other, you have regions like the city of Chongqing, which recorded an impressive 11% economic growth last year, compared to a national average of 6.9%.

22

CHINA

OPINION

Speaking to global media, Premier Li Keqiang expressed his confidence that “reform and development are not in conflict … we’ll press ahead with cutting overcapacity while ensuring there’re no massive job losses.”

Speaking at the Australian Financial Review Business Summit Tuesday in Melbourne, Richard Henfrey, CEO of the vitamin company Blackmores, said that sales of a Blackmores Vitamin E cream were running at about 3000 tubes a month. But that changed dramatically after movie star Fan Bingbing was photographed with a tube in her handbag - by the way, it’s not a paid advertisement. Within weeks sales of the cream soared to 100,000 tubes a month. Today sales are running at about 500,000 tubes a month and still growing.

When commented on the investment of other Australian companies in China, Henfrey was surprised that others had not followed in the footsteps of Blackmores. With an exceptionally high saving rate and the world’s largest foreign reserve, China has rooms and tools to deal with economic risks. Compare China’s fiscal and monetary resources to that of Europe or the United States, whose interests rates are nearly zero, China is at a much better position to keep rapid economic expansion while continue to deepen structural reforms.

A closer look at various industries also present a mixed picture of Chinese economy. As pointed out by Premier Li Keqiang, some industries such as the Internet and online shopping are thriving as usual, while others like the steel and coal industries are filled with zombie companies - undead but still operating. How to take on the zombies while at the same time further boost the booming sectors of the economy necessitates carefully-designed balancing policies.

The International Monetary Fund projected that Chinese economy would grow at 6.3% in 2016. If that’s the case, there’s little reason that China can’t reach it’s target growth range of 6.5 to 7%.

The doubt about Chinese economic growth also originates from the stock market crashes late last year and the stability of the value of the national currency RMB. The concerns finally dwells on the

The subtlety may lie in which region or sector the growth comes from and where the reforms are applied to. Therefore, a grand test in rebalancing.

PLUS

Furthermore, theoretically speaking, the idea that a short-term slowdown is unavoidable to trade for a long-term growth doesn’t really hold water. Looking back at Chinese economic miracle one the past decades, the growth has always been scored hand in hand with reform and opening up.

23

China Plus, a member of China Radio International, is a comprehensive provider of news and information, covering a number of different platforms including print, radio and digital media.

China Plus strives for quality and clarity as part of its in-depth reporting of Chinarelated news, as such news relates to Chinese people and to the wider world.

Editor-in-chief Stuart Wiggin Design & Layout Stuart Wiggin Executive editor Wang Lei