The Communist Party of China has added President Xi Jinping’s initiatives to its guiding principles, along with greater environmental protection and other quality-of-life issues.
Such additions to the constitution adopted Tuesday, alongside “Xi Jinping Thought on socialism with Chinese characteristics for a new era,” signal a shift toward more balanced development for the world’s second-largest economy. It comes after decades of focus on hitting growth targets delivered breakneck expansions accompanied by fouled air and water.
"Xi Thought increases the chances that China’s leaders will focus more on quality over quantity of growth next year," said Rob Subbaraman, chief economist for Asia ex-Japan at Nomura Holdings Inc in Singapore. He said he now has a "high conviction" leaders will lower the official economic growth target to 6 percent to 6.5 percent next year.
This year’s, set in March, calls for "GDP growth of around 6.5 percent, or higher if possible in practice." Economists surveyed by Bloomberg project 6.7 percent expansion this year will be followed by 6.4 percent in 2018.
Here are eight points from the plan that may shape how the economy evolves:
"The principal contradiction facing Chinese society has evolved and is now that between the people’s ever-growing needs for a better life and unbalanced and inadequate development; it reflects the realities of the development of Chinese society."
This is an epochal change. Historically this contradiction was about balancing meeting people’s needs with upgrading production. The change acknowledges rising inequality and citizens’ demands for economic gains along with cultural, societal and environmental benefits. Economists say this suggests policy makers have more leeway to let near-term growth slip a bit as they focus more on environment and social equality.
"Innovative, coordinated, green, and open development that is for everyone."
This emphasis is another sign leaders want the economy to move up the value chain and also provide for a cleaner environment.
"Achieve better quality and more efficient, equitable, and sustainable development"
This expands on the implications of the "principal contradiction" shift, further confirming that leaders wants to steer away from a growth-at-all-costs approach.
"Give play to the decisive role of market forces in resource allocation and ensure the government plays its role better."
This call for allowing greater influence for market forces hasn’t lived up to expectations since it was first enunciated at a high-level meeting in 2013. Still, its new place in the constitution shows cadres still want the so-called invisible hand to work alongside their very visible hand of state enterprises and regulating markets if needed.
"Advance supply-side structural reform."
This often-repeated call forms the core of Xi’s recent emphasis on cutting overcapacity and reducing leverage while also boosting domestic demand. This year’s deleveraging campaign doesn’t let leaders claim victory just yet, but they’ve made progress in crucial areas. Inclusion in the constitution might indicate greater emphasis to come.
"Lucid waters and lush mountains are invaluable assets."
This is one of Xi’s pet phrases on environment protection. Chinese welcome the clean-up push, though it may prove to be a short-term drag on economic growth.
Belt and Road
"Pursue the Belt and Road Initiative."
Xi has called his plan to rebuild ancient trade routes the "project of the century." Adding it to the constitution helps "strengthen the willingness of other stakeholders such as private sector firms and financial institutions to taking long-term investment stakes," said Rajiv Biswas, Asia-Pacific chief economist at IHS Markit in Singapore.
"Develop an open economy of higher standards."
This offers assurance to foreign companies that have long complained Beijing puts up market barriers. Wei Jianguo, former vice commerce minister and now an executive deputy director of the China Center for International Economic Exchanges said last week he expects more measures to attract foreign investment after the party congress.