Link: https://asiatimes.com/2024/03/china-has-a-plan-and-its-working2/
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China has a plan, and it’s working
Beijing focuses on high-tech industry
by David P. Goldman and Uwe Parpart15.03.2024
The Communist Party of China has a deep political interest in rectifying the enormous disparities of wealth and income that arose from the great wave of urbanization begun by Deng Xiaoping with the 1979 reforms. Xi Jinping’s byword for this priority is “common prosperity.” Image: Asia Times files / Facebook / Getty
The “two sessions” in early March – the National People’s Congress and the Chinese People’s Political Consultative Conference – took no macroeconomic action of significance, to the consternation of pundits who
expected dramatic action from Beijing in the form of monetary ease, or consumption stimulus, or a property bailout.
China’s leadership focused single-mindedly on the transformation of Chinese industry through new technologies. It asks for and will give no quarter to America’s technology blockade, relying on an “all-country effort” to achieve self-sufficiency in semiconductors and other key technologies.
Among other measures, it added another US$27 billion for a semiconductor industry fund to its already massive commitment and announced a 10% increase in the national science budget.
The divergence of views about China’s economy at home and abroad couldn’t be more pronounced.
The Center for Strategic and International Studies, the epicenter of conventional wisdom, wrote on February 29 that “China’s economy is showing multiple signs of weakness. Actual growth seems below the official figures; there is substantial deflation; the housing market has yet to stabilize; and the domestic stock markets have fallen significantly.”
Beijing, by contrast, has little interest in the obsession of Western macroeconomists with demand management and focuses on industrial policy.
A few important data reports since the “two sessions” ended favor Beijing’s benign view of China’s economic circumstances. Contrary to the deflation meme, China’s core consumer price index showed a 1.2% year-on-year rise in February following a 0.4% rise in January. Core CPI excludes volatile food prices, which dragged the headline CPI number into negative territory. Headline CPI also rose in January.
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Producer prices continue to fall, but that is not necessarily a bad thing: Lower producer prices and higher consumer prices suggest higher
corporate profits. That has been the historic pattern.
Most importantly, exports in RMB terms rose 10.35 year-on-year in January and February. That provides critical support for China’s high-tech industry, especially solar panels, EVs, telecommunications equipment and electronics.
China already installs more industrial robots than the rest of the world combined, or 52% of the total, and the combination of automation and economies of scale enables it to produce solar panels, electronic vehicles, and other key products far more cheaply than any competitor.
But industrial automation, including the application of advanced 5G (what Huawei labels 5.5G) and artificial intelligence, is only the beginning. China is pushing for breakthroughs in frontier technologies including nuclear fusion.
The 10% increase in the science budget is the biggest increase in any major budget category. To highlight only two major initiatives: The accelerated development of thermonuclear fusion as a major energy source of the future and the construction of the world’s largest particle collider, which will bring thousands of top international scientists to China.
At the end of December, a consortium led by China National Nuclear Corp was formed to combine the capabilities of scientists and industrial giants to
advance research in nuclear fusion technology to build energy producing reactors by 2030.
The group comprises 25 central government-owned enterprises and research institutes, including some of the country’s largest energy and steel firms, such as State Grid Corp, China Three Gorges Corp and China BaowuSteel Group Corp Ltd.
A second major initiative is in the field of advanced particle physics. Construction of the Circular Electron Positron Collider, known as a Higgs factory, will take a decade to complete and become the next global centre of particle physics … at a cost of 36 billion yuan ($5 billion).
Focus on second- and third-tier cities
The Communist Party of China has a deep political interest in rectifying the enormous disparities of wealth and income that arose from the great wave of urbanization begun by Deng Xiaoping with the 1979 reforms. Xi Jinping’s byword for this priority is “common prosperity.”
The minority of Chinese who live in Shanghai, Shenzhen, Guangzhou, Beijing, and other Tier 1 cities already have a living standard close to that of the industrial countries, while much of the country has lagged behind “Observer” columnist Chen Feng wrote on March 6 that Beijing’s goal “is to make the pie bigger by narrowing the gap between urban and rural areas and narrowing regional differences.” China’s infrastructure spending, Chen explained, will focus on raising the level of smaller cities through the expansion of the high-speed rail network and other infrastructure.
Frans Vandenbosch 方腾波
Flanders, Europe
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