China Power
Economic issues were on the table, but personnel issues loom.
Last month saw the holding of the Fourth Plenary Session of the Central Committee (CC) of the 20th National Congress of the Chinese Communist Party (CCP), also known as the Fourth Plenum. As a rule, the Fourth Plenum is a forum to discuss the economy. This occasion also saw the presentation of the 15th Five-Year Plan for Economic and Social Development (Draft). At present, the Chinese economy is facing several challenges, but what was discussed at this Fourth Plenum differed little from previous sessions. In line with the Xi Jinping administration’s grand strategy of a “national security” system, the plan included promoting “self-reliance and strength” that raises the standard of science and technology without relying on foreign countries, achieving high-quality development, and improving quality of life for the Chinese people. The plan calls for GDP per capita to ultimately be increased to the level of middle-income countries, meaning about $20,000, by 2035. Although this draft is to be finalized in March next year after deliberation by the State Council, this is the direction that will more or less steer the Chinese economy for the next five years. Moreover, considering the long term, it will likely be necessary to maintain economic growth at around 5 percent for the time being in order to achieve that $20,000 target.
Of course, there are fundamental issues with this Five-Year Plan. To begin with, if the goal is to improve quality of life, what needs to be done and how? Although the plan lists issues, it does not suggest how to solve them. How can social security issues be dealt with? This plan does not offer a useful answer that question. Moreover, where are the financial resources to improve science and technology for “self-reliance and strength” and to realize a higher quality of life for ordinary Chinese? Of course, the financial resources of the Chinese central government are relatively healthy. Still, despite this plan painting a grand picture, the necessary funding is not made clear.
Then there is the question of whether this plan as a whole can even be realized while emphasizing technological management and other aspects of economic security. It is true that economic security is important, and China is actively engaged in rare earth management. However, rare earth production areas tend to be poor, so any decline in export volume as a result of export control means a decrease in the wealth returned to those poor areas. Imposing export controls on rare earths would not seem to be compatible with poverty eradication and peripheral development. It is not easy to achieve a higher quality of life and 5 percent annual growth while wrestling with contradictions between security and the economy.
Trends in real estate prices and other areas remain difficult. It is difficult for the CCP to fully control the “market.” It is also impossible to fully control investor sentiment. The Chinese government is currently at the mercy of the market, an area not entirely within its control.
Meanwhile, the 2027 problem made a noticeable appearance at the Fourth Plenum. The 2027 problem is that the Xi Jinping administration needs to renew its foreign affairs and defense leaders as it enters its fourth term, but the top officials Wang Yi and Zhang Youxia have occupied their positions for so long that it is proving difficult to pick their successors. More than half of the People’s Liberation Army (PLA) officials eligible for the Fourth Plenum did not participate, and nine ended up being sanctioned. Many of those sanctioned belong to the Fujian faction, which used to be thought of as a group of Xi Jinping loyalists-in-training. Some have also argued that Xi has conversely become wary of the Fujian faction as it has become too powerful. At present, the race to succeed Zhang Youxia is a clean slate. If Xi selects someone in the future, there is a risk that some iniquity may be exposed once again. In terms of foreign affairs, the successive falls from grace of Qin Gang and Liu Jianchao have made the question of who will succeed Wang Yi increasingly uncertain. What is now the 2027 problem will also become the 2032 problem in five years’ time. If a person or a group has occupied an important position for a long period of time, picking a successor grows more difficult the longer that period has lasted. The most daunting challenge faced by the Xi Jinping administration at this time likely is this personnel problem.
