On December 13, the Central Economic Work Conference (CEWC) wrapped up in Beijing. The annual meeting, which sets economic goals and priorities for the next calendar year, lasted four days — the longest such meeting in history, according to CCTV. The meeting was attended by the seven members of China’s Politburo Standing Committee (PBSC), whose members include Chinese President Xi Jinping and Premier Li Keqiang as well as Zhang Dejiang, Yu Zhengsheng, Liu Yunshan, Wang Qishan, and Zhang Gaoli.
The official meeting report, published by Xinhua, set six major tasks for economic work in 2014. The tasks were, in order:
1. Safeguard national food securityEnjoying this article? Click here to subscribe for full access. Just $5 a month.
2. Make structural adjustments to the industrial sector to eliminate over-capacity
3. Get local debt under control
4. Push for coordinated regional development
5. Safeguard and improve the lives of the people, with a specific emphasis on factors such as education, employment, income gap, medicine and housing
6. Open further to the outside world
CCTV also noted that there was a special emphasis on urbanization, which was the subject of its own, separate high-level meeting on the sidelines of the main conference. The list of priorities lays out China’s vision for economic reforms in 2014.
There were few concrete policy recommendations on how China intends to achieve these priorities. Some hints have already been revealed, though. For example, the recent announcement that the Communist Party will change its evaluation criteria for local officials to place greater emphasis on controlling local government debt. An editorial reflecting on the CEWC in People’s Daily (redistributed by Xinhua) suggested that the new evaluation criteria might set “hard quotas” for local debt. It was less clear how the government plans to deal with the problems of over-capacity and food security.
As for the specifics of economic policy, Xinhua’s English-language website reported that China will stick with “proactive fiscal policy and prudent monetary policies in 2014.” The specific financial reforms announced at the meeting included further liberalizing interest rates in China and reforming the exchange rate for China’s currency. The country should “make efforts to free up demand, give full play to the fundamental role of consumption, the pivotal role of investment and the supporting role of exports,” the Xinhua article said.
Despite the laundry list of planned reforms, there was also a cautionary note to the media coverage. The editorial from People’s Daily pointed out the key requirements for China: maintaining stability and focusing on reform. The editorial made it clear that, of the two, stability is the priority. “If the economy has large ups and downs,” the article wrote, “it will not only influence the quality and efficacy of development, it will also influence the reform process, and more reform more difficult.”
In addition to the “ups and downs” of the economy, China’s leaders are also concerned with stability in a more general sense. The CEWC report noted several causes for concern, including unemployment, poor environmental conditions, and safety issues in food and medicine. At the end of the list, the report concluded that the security situation within Chinese society was not good. If the Chinese government truly believes this, leaders are likely to be extra cautious when implementing economic reforms. For instance, the appearance of “food security” at the top of the list of economic priorities highlights that China’s leaders are concerned that the economic rebalance could disrupt the government’s ability to meet people’s most basic needs, like being fed.
While People’s Daily praised China’s leadership for “fully developing the role of the marketplace”, it also reflected favorably on the leadership holding to a “bottom line.” This comment also appeared in the official meeting report on Xinhua. There is much speculation that China’s leaders have in mind a “bottom line” for yearly GDP growth. The line for minimum annual growth has been variously placed at 7.2 percent by Li Keqiang and 7 percent by state media reports. Hypothetically, should economic reforms threaten to bring GDP growth below this “bottom line,” China’s leaders might scale back or even halt reforms to allow the economic situation to stabilize.
Yet Chinese leaders are also well aware that without reforms, China cannot hope to have stable, long-term economic growth. The People’s Daily editorial noted that there are systemic barriers that restrict China’s economic growth, and these can only be removed by changing the system itself. Perhaps this is why the report of the meeting warned not to judge growth solely by the increase in GDP. An editorial in Xinhua expanded on this idea, advising the country to turn its focus from GDP growth to structural adjustments. The goal, according to the CEWC, is to keep a “reasonable” increase in GDP while also implementing structural reforms. This seems like a preliminary effort to adjust expectations both at home and abroad, so that people will tolerate a lower rate of annual GDP growth. As the CEWC report noted, stability is crucial for reforms, but the opposite is also true. The trick is balancing the two.
Ultimately, the pace of reform is likely to be cautious, and perhaps more slow than outside observers would like. The People’s Daily editorial recommended that in 2014 the Party should only carry out reforms that have “a clear direction and will see fast results.” When it comes to economic reforms, China can only follow Deng Xiaoping’s famous recommendation to “cross the river by feeling the stones.”