03/05/2016, 11.19
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From National People’s Congress, a China uncertain between reforms and control

by Bernardo Cervellera

The Premier Li Keqiang anticipates a growth of between 6.5 and 7%. Public debt (compared to GDP) will grow by 3%. Once again a reform of heavily indebted state enterprises promised, and a transition to a market economy. The obstacle of families of Party members and the Party itself, which does not want to lose its hegemony. Boost to army's budget (7.6%) and public security (5.3%).


Rome (AsiaNews) – The National People's Congress (NPC), which opened this morning in the Great Hall in Tiananmen Square, reveals a China full of uncertainties, torn between a desire for reform, especially economic, and the imperative not to lose social control.

For the first time in 20 years the annual Prime Minister’s report, on the first day of the NPC did not submit accurate and absolute figures, but a "field" in which to move.

The Premier Li Keqiang announced that the country's expected growth will be between 6.5 and 7%, even without giving figures and forecasts on the growth of trade.

The uncertainty stems primarily from the creeping global economic situation, but also from the negative signs that the country has offered in the past year: the GDP growth forecast (GDP) of 7% has been reduced to 6.9 (the lowest value in 25 years); the import-export values ​​fell by 7% (while a growth of 6% was expected); public debt has reached 250% of GDP.

Added to these signals are others: the large indebted state-owned industrial complexes; overexposed banks with easy credit; local governments with false financial statements and immersed in debts; the housing market in over-production and on the verge of a speculative bubble. In addition last summer’s ups and downs of the Shanghai and Shenzhen stock exchanges which have lost 4 trillion dollars.

From the social point of view, there is an increase in the elderly population (due to the one child law); a staggering gulf between rich and poor; healthcare and pensions, that are not guaranteed.

Under President Xi Jinping there has already been an attempt to respond to these situations: The abolition of the one child law; fighting corruption; greater freedom in establishing the currency value.

The Xi-Li duo had promised economic reform that would transform China from a country based on exports (and cheap labor) to one based on domestic consumption and a greater market economy. But this happened only minimally.

In his report, Li Keqiang has said once again that state enterprises will be tackled, with an aim to closing unproductive and inefficient institutions, restructuring others, while ensuring 100 billion yuan (about 15 billion US dollars) for all the layoffs that will accrue .

Another decision is the increase of 3% in the public debt (relative to GDP). Last year it was expected to increase by 2.3, although economists estimate that in 2015 the increase was in fact 3.5. There is also the promise to liberalize interest rates, reform the banks and stock exchanges, still under strict government control, ensuring within five years a doubling of the income-per-capita compared to 2010 and jobs for over 10 million people.

The cry of reform has rung throughout the Great Hall of the People for years, but now many reformists friends of Xi Jinping listen to it with skepticism. What is holding back any firm action is above all the interests of the various factions in the Party and supported by powerful families, heads of state companies, who do not want to lose their benefits (including the coverage of costs by the government) and who as a result struggle against any restructuring. But the government seems undecided, and continues to appoint heads of companies not based on their curriculum and experience, but based on loyalty to the Party.

And indeed, the other big obstacle to reform is the Party itself, which does not want to lose its hegemony and control. Proof of this is the way it intervened in the stock market crisis, while preaching the transition to a market economy.

So while hundreds of millions of people are calling for more justice, an end to air and water pollution, a more balanced distribution of wealth, the Party's response remains the same as always: arrests of lawyers who defend the poor; arrests of activists and bloggers; silence and control over the media.

In recent days the "liberal" criticism of a Party member, Ren Zhiqiang, has caused quite a stir.  He criticized Xi Jinping for his demand the media maintain "absolute loyalty" to the Party. This immediately unleashed a media campaign against him and his account on the Chinese microblog was closed. No one dares say a word on the issue at the NPC and the Chinese People's Political Consultative Conference (held in parallel).

Therefore the desire for control is still strong. In fact, the army's budget this year will grow by 7.6% (last year it was 10.1); the budget for public safety, to maintain "social stability" will be increased by 5.3% (last year it was 4.3).

Some economists say that with the reforms, China could overtake the United States and become the world's largest economy in a very short period of time. But to do that, the Party must first reform itself. And the clock is ticking.

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