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Martin Khor

Last week saw the completion of China’s leadership transition, with Xi Jinping as the new President and Li Keqiang the new Premier.

President Xi set the world speculating when he spoke of “striving to achieve the Chinese dream of great rejuvenation of the Chinese nation.”

One Western newspaper commented it was a collective national dream, contrasting it, unfavourably, to the “American dream” of giving individuals equal opportunities.

But to the Chinese, the promised renaissance of the nation is a reminder of the collective humiliation during the colonial era and the “dream” to win back its previous place as a world leader in science, technology, economy and culture.

High growth in recent decades has boosted China’s economy and confidence.

Nevertheless China’s new leaders face many serious challenges ahead which need to be tackled if the “Chinese dream” is to be realized.

First is the need to fight widespread corruption.  Making this his main priority, President Xi warned that corruption could lead to “the collapse of the Party and the downfall of the state.”

New leaders usually vow to get rid of corruption, but few have succeeded.  If President Xi wins this battle, it would be a great achievement.

Second are administrative procedures and abuse of official power that cause both inefficiency and injustices right down to the local level.

At his first press conference, premier Li promised to shake up the system, acknowledging the difficulties of “stirring vested interests.”   He promised that a third of the 1,700 items that require the approval of government departments would be cut.

Frugality is to be the new hallmark. Spending will be reduced in government offices, buildings, travel and hospitality (no more official large banquets!) and the savings will be redirected to social development.

Third are the complexities of running China’s large and complicated economy.  China aims to grow continuously by 7-8 per cent a year.  The rest of the global economy is however in a bad shape.

The country has thus to shift from export-led to domestic-demand led growth, and from investment-led to consumption-led domestic growth.  Implementation of this new growth strategy, which the government has accepted, is not easy.

There are also the challenges of managing the currency, the huge foreign reserves and the regulation of capital flows, with the aim of having finance serve the real economy while not becoming a source of new instability.

In foreign trade, China has been very successful in building up a powerful export machine.  But growth of exports to the West is slowing due to the near-recession, and new forms of protection (such as tariff hikes using anti-dumping and anti-subsidy measures) are increasingly used on Chinese imports.

At the same time, other developing countries are becoming wary of their increasing imports of cheap Chinese goods.  How can China be sensitive to their concerns and strive for more balance and mutuality of benefits?

Fourth are China’s social problems.  Poverty is still significant in many areas. Social disparities have worsened, with wide gaps in rich-poor and urban-rural incomes that are politically destabilizing.

Redistributing income towards the lower income groups can meet two goals: reducing social inequalities and providing the demand base for consumption-led growth.  The policies can include wage increases, government provision of social services and income transfers to the poor.

Fifth is the need to tackle China’s environmental crises, which include emerging water scarcity, increased flooding, climate change and urban air pollution.  Recent studies show the health dangers of the worsening air pollution, including links to the 2.6 million who die from cancers annually.

Many of the protests in China in recent years have been over environmental problems, including polluting industries located near communities. How can China integrate ecological concerns into its development strategy?

Sixth is China’s foreign relations. President Xi last week reaffirmed China’s principle of “peaceful development” and that the country would never seek hegemony.

There is need to settle the different claims by China and other East Asian countries on the South China Sea in a proper and peaceful way and build confidence of its neighbours on this principle.

China, which is still very much a developing country in terms of per capita income and other characteristics, also need to stand with the rest of the developing world in international negotiations and relations.

At the same time, it is expected to provide preferences and special assistance to poorer countries and its investors abroad are expected to be socially and environmentally responsible.

Most difficult for China is the ability to manage foreign relations with developed countries, especially the United States. China is a rising or risen power, and is viewed with some envy as a rival by those who fear losing their previous dominance.

Maintaining political stability with these powers is important; but of course this does not depend on China alone.

The above are only some of the hurdles facing China on its road to realize its dream of rejuvenation.  As with any dream, it is not impossible to achieve but the road is long and difficult.

This piece first appeared on the Third World Network.

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