Chinese Premier Wen Jiabao spoke at the opening of the Fifth Session of the 11th National People's Congress (NPC) regarding his administration's annual work report for 2012. The report maintained the previous year's tone with respect to the need to rebalance the economy and placed stable economic development and boosting consumer demand at the top of the administration's list of nine priorities. Detailed measures to substantially increase consumption include the creation of 9 million new jobs, increasing coverage and payouts for social benefits, the continued construction of affordable housing and assistance for rural dwellers. Most significantly, Wen spelled out government aims for economic growth of 7.5 percent, down from the 8 percent target for the preceding eight years.
The reduction has more to do with shaping perceptions than an actual effort to dampen growth, however. Particularly amid a weakening external economy, Beijing will remain supportive of growth greater than 8 percent to ease China's leadership transition and to keep from fueling social unrest.
While growth targets are largely symbolic — China always surpasses them by as much as 1-3 percent — the lowered target will still shape perceptions. It represents Beijing's acknowledgement of an inevitable slowing in growth and shows Beijing working to face the slowdown, particularly under the upcoming generation of leadership, with a greater emphasis on balanced and sustainable socio-economic development.
Beijing has relied on China's growth boom of the past decades to support its immense population and to accumulate large amounts of capital. Such extraordinary economic growth has helped legitimize Party rule, but Beijing's growth plan has seen wealth centralized, benefiting a small group of elites. Negative consequences, including class frustrations originating from the wealth disparity and other social imbalances, increasingly have begun tarnishing China's economic miracle.
After 2008, the weakening global economy damaged China's export-oriented model. Beijing already knew the importance of shifting away from its gross domestic product (GDP) growth-oriented economy, but events since 2008 have reinforced the urgency of such a shift. Beijing accordingly has had to speed up its efforts to restructure toward a more domestic consumption-based economy and toward greater social equity, something it had mulled for years but had not had an impetus to act on. In 2011, numerous senior economic planners called for a greater emphasis on wealth redistribution and on the need to rebalance the economy. In its 12th Five-Year Plan, Beijing set a target of 7 percent for average annual growth over the next five years, a strong indication of Beijing's acceptance of a gradual yet inevitable economic slowdown.
A greater willingness to regulate local government behavior has accompanied Beijing's willingness to accept a modest slowdown. Even before the 2011 annual session of the NPC and the Chinese People's Political Consultative Conference, the National Development and Reform Commission — Beijing's top economic planner — had warned local governments to reduce their individual GDP targets and pointed out problems with the pursuit of GDP growth. Local government officials have long had an incentive to pursue higher GDP numbers to promote their political careers. Attaining higher office frequently has depended upon the ability to point to strong GDP growth, but such behavior now threatens to undermine Beijing's new emphasis on balanced, albeit smaller, growth.
Ultimately, however, Beijing understands that China cannot afford to slow growth substantially, because a slowdown in growth would create even greater social, political or economic hardship.
