A raft of reform measures is needed if China is to become a "Modern, Harmonious, and Creative High-Income Society", according to a 468-page study report jointly compiled by the World Bank and the Development Research Centre (DRC) of the State Council, China's highest national policy organ. Click here and here For a conference edition of the full report Click here
The report was released on 27 February shortly before the opening of the 2012 sessions of the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC), which set out to review the implementation of China's 12th Five Year Plan (2011-15).
It also fortuitously coincided with a high-profile election on 3 March in Wukan Village of Donghai Township in Lufeng City, south China's Guangdong Province. This came about after Wang Yang, the Provincial Party Secretary and a rising aspirant for the Politburo Standing Committee, saw fit io intervene personally in resolving a prolonged villagers' stand-off against the land grabs of the local village authorities. With the support of the Party Secretary, all of the village protestors' demands were met. A subsequent open and fair election saw the leader of the village protest elected as village chief. The Party Secretary hastened to explain that the democratic election in Wukan was in accordance with the nation's Organic Law of Villagers Committees. "What made the Wukan election special was that the organic law and election rules were fully observed and implemented in detail this time, unlike previous pro forma elections." He is reported to have insinuated that the Wukan model of elections is to be rolled out throughout his Province.
The Wukan affair is only the tip of an iceberg of rising social unrests. Some analysts citing leaked official figures put such incidents at 127,000 in 2008. Click here These unrests in themselves are a manifestation of strains of a system falling behind the times whose socio-economic and political fabrics seems to have outlived their usefulness.
Contrary to The Economist's skepticism click here , the prescrptions in the World Bank/DRC Report may not end up as wishlist of the so-called "reformers" in the Party. The DRC cannot operate as the exclusive preserve of the so-called "reformers" and could only play to the collective wisdom of the State Council. Above all, reform is imperative if China is to escape the so-called "Middle Income Trap" which see many developing countries stagnate at around $8,000 per capita income. Indeed, as premier Wen openly stressed recently, "Not reforming is not an option. It could only lead to death."
In line with the directions of the latest Five Year Plan, the World Bank report focuses on the efficiency, equity, and sustainability of the existing system of allocation of resources. Its prescriptions include -
(a) redefining sources of revenue and scope of responsibilities between the central and local authorities to avoid forcing the latter to resort to land appropriation as their main source of revenue;
(b) unlocking the inefficient capital accumulated by large state-owned enterprises and promoting the competition and innovation of the private sector;
(c) implementing the State Council decision in 2011 of guaranteeing a decent standard of living of the people with access to public services including heathcare, education and housing by 2020;
(d) unblocking the "hukou" (household registration) system which deprives migrant workers of access to local social provisions and acts as a hindrance to greater national social mobility;
(e) using the rising middle class as a catalyst for improved governance, standards of services, and the empowerment of civil society;
(f) liberalizing the financial system to achieve higher total factor productivity;
(g) pushing ahead with the internationalization and eventual capital-account convertibility of the RMB with a view to its use as an international reserve currency;
(h) delivering a comprehensive economic, social and environmental agenda to achieve a green economy and society by 2030 (e.g. by capitalizing on a voluntary "cap-and-trade" scheme and introducing green standards in the massive government procurement program); and
(i) playing a more proactive role as a responsible stakeholder in helping to shape the global order commensurate with the growing size and influence of China's economy.
The Report takes cognizance of a number of eye-catching realities. China has over a million millionaires while some 170 million people still live under the poverty line of $1.25 a day. The body of university graduates is expected to swell by 200 million over the next two decades, bigger than the entire workforce of the United States. By 2030, China will become two-thirds urbanized, compared with 50% at present. Owing to demographics, China is likely to "grow old before it gets rich".
Against all these challenges and contradictions, doing more of the same is no option. If anything, the Report seems to err on the side of over-caution. There is, for example, no mention of establishing a more independent judiciary system to safeguard the rule of law (as distinct from rule by law). For example, instead of being appointed by local authorities, judges of such a judiciary could be appointed for a fixed term by a commission with elected members answerable to the State Council. The Report also shies away from a suggestion to scrap the culprit of China's eschewed demographics - the One Child Policy - which seems to have past its sell-by date.
Judging from the moderate content and tone of the World Bank Report, it is apparent that the DRC has already walked through it to ensure that everyhting is doable. It is also widely known that Li Keqiang, China's next Premier-in-waitng, is the Report's strongest backer. So, contrary to the heavy pinch of salt in some Western quarters, I would not be surprised if this Report will be used as a blueprint for China to build a "Modern, Harmonious, and Creative High-Income Society" by 2030.
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