China Outlines Slower Growth and Talks Tough on Independence

 | Mar 07, 2017 | 10:00 AM EST
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Attempts to cool overheated property markets in China's biggest cities, as well as a push to reform the country's bloated state-owned enterprises, will push the mainland's growth down a notch this year. That's one of the main conclusions so far of the dual political gatherings now going on in Beijing, which are taking place ahead of a momentous twice-a-decade congress later this year.

China's economy will grow at a target rate of around 6.5% this year, Premier Li Keqiang said this weekend in a report to the country's equivalent of a parliament. That's down a notch from the 6.5% to 7% that he "guided" -- read ordered -- in March 2016, with the actual full-year figure coming in right in the middle of that range, at 6.7%. This year, China faces "more complicated and graver situations" both at home and abroad, he explained. 

China also plans to tackle pollution and corruption, the nation's two biggest bugbears, Li said, while paying tribute to President Xi Jinping. Those issues will prove substantially harder to address than the statistics.

Things have a way of going the government's way when it comes to stats such as the gross domestic product, as I've explained before. Whether massaged or, as in the case of the rust-belt province Liaoning, a complete fabrication, the data support the narrative that China's growth is strong, second only to India among major economies, even if it is flagging slightly.

It's the direction rather than the raw number that's important as the annual National People's Congress convenes. The body is the equivalent of parliament in China, although it is almost inevitably described as little more than a "rubber-stamp" entity. The Chinese People's Political Consultative Conference, a political advisory body, is meeting at the same time, both sessions lasting around two weeks.

The event has brought 3,000 delegates to the Chinese capital, the bulk of them Communist cadres and advisers, with a dose of celebrities, entrepreneurs and sports stars thrown in. They are expected to propose initiatives and ideas, and representatives such as gold-medal sprint hurdler Liu Xiang have been derided for skipping sessions in the past. But inevitably the commercial and personal concerns of those attending outweigh any real push for change. The thousands of demonstrators who converge on the Chinese capital at the same time are kept well away.

This year's March meetings are overshadowed by the 19th National Congress of the Communist Party of China, which will take place this fall. That meeting will decide much of the future of the country's direction over the next five years, and will also establish a succession plan for China's top leadership. The seven-person Politburo Standing Committee that is China's cabinet and the 25-person Politburo will both see a major overhaul of personnel.

The shakeup will be a sign of exactly how much President Xi has cemented his status as the most-powerful Chinese leader since Mao Zedong. He may push for Wang Qishan, who has led the sweeping push against corruption, to remain in the cabinet. Wang, 68, is brushing up against an unofficial retirement rule at that age. If he is allowed to stay on, Xi, now 63, could attempt to remain in power when his two terms end in 2023.

Another noteworthy conclusion out of these March meetings, in their early days, is that China is still not ready to introduce a national property tax. The idea has been mooted for years, since it would discourage speculation, encourage investors to make use of properties rather than leaving them empty, and diversify local-government income that currently relies overwhelmingly on land sales to developers.

Property is always a touchstone issue in China, where it's the ultimate investment for most people - and virtually a requirement for any suitor looking to woo a woman.

There's a shift under way, and the results of recent land auctions in China have been mixed as a consequence. Four of seven plots for sale in Hefei, the capital of Anhui Province, fetched premiums of more than 200%. Property in other regional hubs such as Nanjing, Foshan and Ningbo also drew plenty of attention, often going at highs for the district.

It's those "second-tier" cities that are now showing the strongest growth in property prices. Overall, prices rose 12.4% last year across China, the fastest rate of growth since 2011.

Jobs and property security are two major concerns of the Communist Party, since they're the two issues most likely to lead to social unrest. That's something the Communist Party -- whose job at times seems to revolve purely around managing the economy and making sure it stays in charge -- wants to avoid at all cost.

Faced with rapidly rising home prices, 20 cities have now introduced cooling measures to curb their property markets. As a result, major "first-tier" markets such as Shanghai and Shenzhen, which had been posting annual property price gains of more than 30% last year, have stalled.

In Beijing, there may be other signals of China's direction this year, with another 10 days or so of the gatherings to go.

Premier Li's tough language has also stressed improving China's military and the country's commitment to preventing any push at all toward Taiwanese independence. That hints at a tougher diplomatic stance, certainly with one President Donald J. Trump in mind.

The chairman of the National People's Congress is also looking in my direction. Zhang Dejiang has said the Hong Kong election of the Chief Executive on March 26 should not be used to challenge China's sovereignty over my home city.

Rubber stamp the congress may be. But China plans to stamp hard.

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