Must-read. I've hit some of the highlights below, but it's all important because China is important — the gorilla about to break out of the cage, or not.
Can China escape the middle income trap? The answer will have huge consequences for both the global economy and the potential emergence of a new world order centering on Eurasia, in which the US is peripheral. Is Xi Jinping the next Deng Xiaoping, or will his administration be a flash in the pan? The world awaits, and the US won't be helping.
Beijing Renmin University professor Zhao Xijun breaks it all down: "The timing of the 13th five-year plan is crucial, because by 2020, the nation is supposed to have met its first centenary goal, marking the 100th anniversary of the party's founding [in 1921], to complete the building of a moderately prosperous society."
Yet how’s that superhuman task to be accomplished? Essentially, by Beijing shifting the focus from labor intensive manufacturing leading to exports, the basis of the model so far, towards a service/consumption economy, with a key role also for modernized agriculture.Meet Liu He.
Everyone in Asia knows how Chinese manufacturers have been steadily losing that famous “competitive edge,” as labor and land costs rise, especially in the developed Eastern seaboard. So Xi’s “new normal” implies a complex process of transferring jobs from manufacturing to the service sector. That also implies increased Chinese innovation in technology, industry, design and business management.…
…the man with the plan: Liu He, one of Xi’s top economic advisers, an industrial economics graduate of Renmin University with a Masters in public administration at Harvard.
Liu He also happens to be the vice-director of the National Development and Reform Commission, the all powerful agency that creates policies for China’s economic and social development.
And he is the cherry in the cake, a zombie killer.
“Zombie killer”, in a Chinese pop context, means someone who wants to close down for good dodgy businesses known as zombie enterprises.
So naturally Liu He is a man they love to hate, as many of the zombies are powerfully-connected state-owned companies (SOEs). Local governments refuse to close them down because they fear bad loans spiking up; rising unemployment; and a huge drop in their local fiscal take.
On the record, Liu He is totally pragmatic; he insists China needs “market-oriented reforms, more management focus on supply, intensified efforts in shutting down zombie firms and an end to overcapacity.” But this structural adjustment must be gradual; the CCP is terrified of unemployment and social instability.
As if his zombie business was not enough, Liu is also head of the General Office of the Leading Group for Financial and Economic Affairs, China’s number one economic policymaking body chaired by, who else, Xi.
Liu He was instrumental in approving China’s 4 trillion yuan stimulus package in 2009, which was Beijing’s counterpunch against the 2008 Wall Street provoked global financial crisis.
So he will be the go-to man for all economic policies, and how fast they should advance. But top Chinese economists stress that everything related to hardcore politics and governance of SOEs will be handled by CCP bigwigs, if not Xi himself.…RT
China’s 2020 vision
Pepe Escobar
