China holding off on regulatory crackdowns and common prosperity?

The annual year-end Central Economic Work Conference (CEWC) of the Communist Party of China (CPC) closed on 10 December, the earliest session in 12 years. Bringing forward the session calls attention to the gloomy, difficult internal and external economic situation as well as the fact that the top leaders are on high alert. And the reappearance of the phrase "take economic development as the central task" (以经济建设为中心) - seldom heard in years - brings much thought and recollection.

The mission of the work conference is to summarise the economic work of the past year, get a pulse on the economic trends, and set the tone for the following year.

Since 2011, the basic line of the meeting has not changed at all: "prioritising stability while pursuing progress" (稳中求进). As for "high-quality development" and "advancing supply-side structural reform", those phrases have been bandied about for about five or six years, with little difference between each year's theme.

However, the sense of urgency surrounding this year's conference is obvious. In a rare move, the session put the words "stability first" (稳字当头) before "prioritising stability while pursuing progress", conveying that economic stability trumps all other instructions from the top.

As to the current situation, the meeting soberly assessed that the Chinese economy is facing pressure from demand contraction, supply shocks and weakening expectations, and called for action to keep major economic indicators within an appropriate range, safeguard jobs, livelihoods, and market entities, and maintain social stability to prepare for the CPC's 20th Party Congress next year.

Clearly, "stability" means preventing economic growth from going out of control or slipping. China's economic growth fell to 4.9% in the third quarter of this year, and if the authorities do not respond promptly, the situation could be worse.

Han Wenxiu, deputy director of the Central Committee for Financial and Economic Affairs, said on 11 December: "Stability is the most prominent keyword of the [conference] this time." He added that the authorities should be wary of introducing policies with a contractionary effect; not make long-term goals into short-term ones and break up systemic objectives; not turn a sustained campaign into a guerilla attack; and not add layers to its mission such that the grassroots cannot sustain it.

These moves towards "stability" feel like an emergency brake, signalling that the authorities' containment policies this year - such as the high-pressure measures to curb the "disorderly expansion of capital" and to rein in internet giants, tutoring classes, and the entertainment industry - will be slowed down, even if not reversed.

Also, among the five points of "proper understanding" as set out at length in the news release following the conference, the first point stressed proper understanding of the strategic goal and pathways of realising "common prosperity". The statement said to realise common prosperity, China should first "make a bigger and better cake", and then divide and distribute the cake properly through rational institutional arrangements, adding that this is a "long historical process".

The second point is to correctly understand the characteristics and behavioural laws of capital and recognise that there are inevitably various forms of capital in the socialist market economy.

The meeting also mentioned that taking economic development as the central task is the basic party line, and all members have to wholeheartedly implement it.

What does it mean to "take economic development as the central task"? This phrase is closely related to the history of reform and opening up.

At the third plenary session of the 11th Central Committee of the CPC held in 1978, two years after the Cultural Revolution ended, the policy of taking class struggle as the key link was abandoned, and the party's focus shifted to economic development, marking the starting point of reform and opening up.

At the 13th National Congress of the CPC held in the 1980s, the party formulated the basic guidelines for the primary stage of socialism: "One Central Task, Two Basic Points" - to take economic development as the central task, uphold the Four Cardinal Principles, and uphold the policy of reform and opening up.

By the time Deng Xiaoping went on his southern tour in 1992, he further reiterated these basic guidelines, saying that the party should "adhere to the basic line for a hundred years, with no vacillation".

Indeed, over the past 40 years, taking economic development as the central task has always been the CPC's basic line. At the 40th anniversary of reform and opening up in 2018, CPC General Secretary Xi Jinping said that the CPC has been committed to economic development as the central task for 40 years, and has been liberating and developing social productive forces.

However, the "central task" has not always been prominently highlighted, and people occasionally wonder if this has changed, because disputes between China's left and right wings have never ceased. The disagreements involve disputes over the path to take as represented by different groups, as well as the conceptual issue of how to adhere to the original aspiration of the Chinese Communist Revolution.

The points of contention also involve the issue of maintaining growth while avoiding the risk of collusion between the rich and the powerful, which may result in the formation of special interest groups that would undermine the CPC's rule. This has always been a real dilemma facing the CPC since reform and opening up. It has always tried to resolve problems coming from all around, striving to eliminate various problems that keep emerging.

This year, the CPC won the battle against the pandemic, eradicated absolute poverty, and celebrated the 100th anniversary of the founding of the party. At one point, it had the confidence to weather a relatively lower economic growth and thus began cracking down on capital in a bid to reverse negative social trends, and reduce its dependence on real estate. It even began exploring common prosperity. In the end, the risk of a major economic slowdown is appearing right before its eyes.

Come 2022, as more and more countries move towards the new normal in the post-pandemic era, China will face greater pressure to open its borders. In light of a challenging situation for economic development, coupled with the fact that the 20th Party Congress is fast approaching, a stable economy is even more crucial now than any other year to support a stable political environment and achieve a smooth transition. Thus there is a political impetus for economic stability.

These realities imply that many of the major moves taken over the past year have to be put on hold to restore "economic development as the central task". This also highlights the fact that in reality, it is difficult for China to deviate significantly from its original path for long. On the other hand, there is no urgent need to advance common prosperity. After all, according to the 19th National Congress report, 2035 is the year where China will move towards this goal.

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