Properly Understand the Major Theoretical and Practical Issues in China's Development (Xi Jinping)

Properly Understand the Major Theoretical and Practical Issues in China's Development
Author	Xi Jinping
First published	2021-12-08
Type	Speech
Source	Ginger River Review

By Xi Jinping, general secretary of the Communist Party of China (CPC) Central Committee, Chinese president and chairman of the Central Military Commission

As China enters a new stage of development, its internal and external environment has undergone profound changes. The country is faced with major new questions that need to be properly comprehended. I address a few issues here.

The first issue: We must properly understand the strategic goal of realizing common prosperity and the pathways to this end. "The wealth of a country is measured by the abundance of its people." The creation and distribution of wealth is a major issue that all countries face. While social wealth keeps growing, extreme wealth gaps and polarization trouble some Western countries all along. Moreover, income in some Latin American countries is not high, but the distribution disparity remains large. Under the guidance of the Chinese socialist system, we must unleash and develop productive forces, and continuously create and accumulate the wealth of society. At the same time, polarization must be prevented. Besides, we will strive for more visible and substantive progress in the well-rounded development of individuals and the common prosperity of the entire population. In the past, we performed egalitarianism at a low-income level. After the reform and opening up, some regions and some people got rich first. In the meantime, the income gap has widened gradually and some improperly gathered wealth has brought risks and challenges to the healthy operation of the economy and society.

Common prosperity is an essential requirement of socialism with Chinese characteristics. So how should the path of common prosperity be taken? We are exploring it. To achieve this goal, the first step is to "make a bigger and better cake" through the joint efforts of the people, and then divide and distribute the cake properly through rational institutional arrangements. This is a long-term historical process, so we shall create conditions and improve the system to steadily move toward this goal.

In promoting high-quality development, employment must be prioritized. Employment is the foundation of people's well-being. We should better leverage the role of economic growth in boosting employment, and constantly promote the amount and the quality of employment. We should support the development of micro and small businesses and give full play to their role as the main channel of employment. And we must learn the 西方国家经济"脱实向虚"的教训 lesson of some Western countries "leaving the real economy for the nonreal economy", and continue to grow the real economy and create more high-quality jobs. Furthermore, we need to increase investment in human capital, advance the quality of education, strengthen vocational education and skills training, improve the quality of the workforce to better adapt to the needs of high-quality development, and effectively prevent the risk of mass unemployment.

We must ensure the full function and effect of [wealth] distribution. Efficiency and equality must be balanced, and fundamental institutional arrangements must be done in terms of the coordination between primary distribution, redistribution and the third distribution. We will adhere to the system whereby distribution according to work remains the predominant mode, raise the share of work remuneration in primary distribution, and improve the distribution system according to factors of production. We will increase the adjustment effect of taxation, social security and transfer payments, and improve their precision. We also need to make full use of the third distribution, guide and support enterprises and social groups who have both the ability and willingness to take an active part in public charity. But "逼捐" "coercive donation" (force others to donate) in the form of moral kidnapping is not allowed.

We must improve the system and institutions of public service policies and promote common prosperity, rather than falling into the trap of "welfarism". Back then, populism prevailed in some Latin American countries, and high welfare systems supported a bunch of "lazy people" and those who reap without sowing. The result is that these countries' finances are overburdened, falling into the "middle-income trap", and they could not get out of it for a long time. Raising welfare is easy while cutting it is another story. Moreover, "welfarism" beyond a country's capability is not sustainable, which would inevitably cause severe economic and political problems! Therefore, we should insist on doing our best while doing things within our power, and put focus on facilitating the level of public services, providing precise and basic public services in areas of greatest concern to people, such as education, medical care, pensions and housing. We will protect those in need's bottom line of living and not make empty promise.

The second issue: We must properly understand the nature of capital and its laws of behavior. Marx and Engels had not envisaged that a market economy was possible under a socialist system, and certainly could not foresee how a socialist state would deal with capital. Although Lenin and Stalin led the socialist construction of the Soviet Union, the Soviet Union practiced a highly-centralized planned economy at that time, and basically, no large-scale capital problems were encountered. The socialist market economy is a great invention of the CPC. Given that it is a socialist market economy, capital of various forms would certainly emerge. Though capital in a capitalist society and that in a socialist society certainly have many differences, capital is chasing profits everywhere. "The one thing that unites all the people in the world is wealth, the one way to manage all the wealth is law." We will explore how capital can take an active role in the socialist market economy, while curbing its negative effects. Over the recent years, due to lack of understanding and insufficient regulations, some fields in China have witnessed the unregulated expansion of capital, blatant manipulation, and profiteering. This is why behaviors of capital must be regulated to avoid harm. We shall make capital fulfill its mission as a factor of production while preventing it from going unchecked. And this is a major political and economic issue that we cannot turn away from.

In practice, the following points must be kept in mind. We should set up a "traffic lights" mechanism for capital. "Traffic lights" apply to all vehicles on the road, and that should be the case for capital as well, no capital should go on a rampage. And we will prevent capital from growing out of control. We should fight against monopoly, profiteering, exorbitant prices, malicious speculation, and unfair competition by strengthening the effective supervision of capital in accordance with the law. The socialist market economy is ruled by law, so capital activities must abide by the law. To retain capital's arbitrary expansion is not to get rid of capital, but to make capital grow orderly. We will improve relevant laws and regulations that are defective, and strictly implement existing laws and regulations to support and guide the healthy and orderly development of capital. We must adhere to and improve the socialist market economy, unswervingly consolidate and develop the public sector, unwaveringly encourage, support and guide the development of the non-public sector, and stimulate its healthy development as well as the growth of participants in the private sector.

The third issue: We must properly understand the supply security of primary goods. Securing the supply of primary goods is a critical strategic issue for a major country like China. We must reinforce strategic planning and make early adjustments to ensure the security of supply.

We must prioritize the spirit of thriftiness. "Taking in a temperate manner leads to abundance while taking in an extravagant manner leads to scarcity." We will implement a comprehensive resource conservation strategy, pushing forward conservation actions in all areas. In the field of production, we will advance the overall conservation, integration and recycling of resources, reduce energy consumption per unit of product consumption, and accelerate the transformation of technology in manufacturing, so that input and output efficiency will be improved. In the field of consumption, we will enhance national awareness of conservation, advocate a simple and moderate, green and low-carbon lifestyle, oppose extravagant waste and excessive consumption, and promote food conservation activities like 光盘 "Clean Plate" campaign (the habit of mindful eating). We will extensively build green offices, green families, green communities, green travels, and other relevant activities too.

We must enhance the capability of securing domestic resources production. We should step up the exploration of minerals, and a new round of strategic action to find a breakthrough in mining will be implemented. We will also raise the development and protection levels of marine resources and mineral resources. We must hold onto the bottom line of self-sufficiency of crucial energy resources. State-owned enterprises will serve as the backbone in accelerating the development and application of advanced technology related to petroleum and natural gas resources. We will strengthen the construction of the national strategic goods reserve system. So that, in critical moments, they could play a regulating role which would keep the bottom line of security. Waste sorting and recycling will be carried out. Moreover, we must expand the use of domestic solid waste, as well as move ahead with the establishment of a recycling system for waste and used materials.

We must optimize the security of overseas resources. We should make full use of international and domestic markets and resources, in a way that brings us mutual benefits and win-win outcomes. Under the premise of effectively preventing outbound investment risks, we should strengthen cooperation in energy resources with relevant countries, and buttress rights and interests in high-quality overseas resources.

Here, I would put special emphasis on the security of agricultural product supply. From the results of the latest national land survey, arable lands are still decreasing. And in some places, areas of basic farmland are not for grains. Instead, fruit trees or other high-value-added crops are planted. I have repeatedly said that the food supply of Chinese people should be firmly held in our own hands at any time, and the sources of food should mainly come from China. We should prioritize raising overall agricultural production capacity, Continuously promote the construction of high standard farmland, back an initiative for the revitalization of the seed industry, and upgrade agricultural machinery and equipment to ensure that farmers who grow food receive reasonable income. We must ensure absolute grain security, fundamental self-sufficiency in grains, and enhance the production capacity and self-sufficiency rates of oil plants and soybeans.

The fourth issue: We must properly understand the importance of guarding against and defusing major risks. Since the 1990s, China has effectively handled the Asian financial crisis, the international financial crisis, the COVID-19 epidemic and other major tests. Now, China's economy and financial sector possess many risks, but the overall situation is under control. We must think about worst-case scenarios just as the old saying goes "Nip the disaster in the bud." We have to leverage the strengths of CPC's leadership and the advantages of our socialist system, spot the problem early on, and try our best to avoid major risks or crises.

In the previous stage, we effectively disposed of the shadow banking risks and Internet financial risks. At the same time, we must see that new risks are still brewing, "black swan" and "gray rhinoceros" events keep coming. In analyzing these phenomena, I found several important points. One reason behind these phenomena is the result of long-term accumulation. The "三期叠加" "three phases superposition" impact (Ginger River's notes: a period that China's economic growth rate shifts, a period that the pain of structural adjustment is felt, plus a period that the economy needs to digest the previous stimulus. All three periods add up together) has not yet ended, and there are still risks from earlier stages to be digested. The second is the deficiencies of regulatory capacity and system. There is a lack of supervision for financial institutes’ corporate governance and a mismatch between financial regulatory capacity and the regulatory level. Some local governments borrowed in a covert and illegal manner, causing the liability burdens to continuously grow. The third reason is the savage behaviors of debtors. Some big enterprises were blind and impulsive. They pulled off diversified expansion irrationally, so they relied heavily on financial leverage, resulting in too much industrial capital ending up in the financial sector. Some shareholders and actual controllers operated and managed financial enterprises illegally. Problems like insider control, manipulation by major shareholders, financial fraud and massive embezzlement kept showing up. Fourth, there existed collusion between government and business and corrupt practices. Some officials in charge of financial institutions and government officials were spotted with negligence, malpractice and corruption. They also enriched themselves in their pockets at the expense of the state, causing significant losses. Fifth, the economic cycle has changed. When the economy went into a downturn, those originally hidden risks surfaced, so the probability of local risk triggering systemic risk would increase, featuring the risk of companies going bankrupt.

Next, we must continue the work to handle the risk in accordance with the policy of ensuring the stability of the big picture, strengthening coordination, implementing policy in a differentiated manner, and dissolving risks in a targeted manner. We should enhance the law in the financial sector, and explore and establish a system of regular law modification. We should push the local governments to fulfill their responsibilities, ensure the stability of places under their jurisdiction and defuse risks. We have to make sure that financial regulators, the departments in charge of an industry and supervision departments mitigate risks as required by their responsibilities. We will urge enterprises to treat self-rescue as their main responsibility and to develop feasible risk resolution programs. We need to strengthen our capability, improve the level of regulatory technology to make up for regulatory shortcomings, and reinforce the construction of financial regulatory cadres. Sufficient resources should be available and a fund for ensuring financial stability will be established. Moreover, the deposit insurance system and industry guarantee funds will be brought fully into play. We must study and set up support policies for financial institutions in terms of mergers, acquisitions and the diffusion of non-performing assets. Local governments should take the initiative to put idle assets to use, and dissolve the risks. Corporate shareholders should first shoulder the risk and the loss until the equity is cleared. All parties should cooperate extensively, and the financial industry should establish an integrated risk disposal mechanism with full authorization and coordination to improve the abilities of cross-market and cross-industry coordination and response.

We should pay extra attention to some enterprises in the real-estate sector. Local governments should take responsibility, enhance regulation, and maintain a vigilant guard against systemic risks. So that the real-estate market could develop in a stable and healthy way.

The fifth issue: We must properly understand the idea of achieving carbon peak and carbon neutrality. Promoting carbon peak and carbon neutrality is a major strategic decision made by the CPC Central Committee after careful consideration, which is our solemn commitment to the international community and an inherent requirement for boosting high-quality development. Recently, there have been some problems with the actual operation. For example, we found phenomena such as "碳冲锋""carbon rush" "一刀切" "one-size-fits-all", 运动式"减碳" campaign-style "carbon reduction", even "拉闸限电" "pulling the plug to limit electricity", which are not in line with the requirements of the CPC at all. Green development is a comprehensive and complex transformation of the economy and society. Restructuring energy and industry can not be achieved overnight, and they must be done based on reality. If the gradual withdrawal of traditional energy is not under the premise that there is a safe and reliable alternative, it will have an adverse impact on economic development and social stability. Pollution reduction and carbon reduction are an integral part of economic restructuring. So we need to build the new before weeding out the old, and always have the big picture in mind.

At the ninth meeting of the Central Committee for Financial and Economic Affairs, I made a comprehensive arrangement for "double carbon" (to peak carbon dioxide emissions by 2030 and achieve carbon neutrality by 2060), emphasizing the principles such as national coordination, a priority of conservation, relying on forces of both government and market, linking up domestic work and that of other countries and risk prevention. The CPC Central Committee has already issued opinions on achieving carbon neutrality and approved an action plan for peaking carbon emissions by 2030. We should be determined to achieve the goal of carbon neutrality and carbon peak emissions, but it is not possible to finish the job in one leap, and we must base ourselves on China's national context, where coal is a major energy source. While advancing the clean and efficient use of coal, we should accelerate the transformations of coal power units to make them more flexible, develop renewable energy, promote the optimal combination of coal and new energy and increase the absorptive capacity of new energy. We must work hard to get breakthroughs in low-carbon technology, speeding up the promotion and application of advanced technologies. We should conduct scientific evaluations, improve the “双控” "dual control system”, and create conditions for the transformations towards controlling both the amount and the intensity of carbon emission. We should also expedite the establishment of a reward and control mechanism. All localities and government departments should take coordinated moves for "double carbon" and "dual control" work. And setting an overall quota and simply dividing it all the way done must be avoided. We must ensure the supply of energy, making a well-balanced energy supply system that has various goals. And we need to increase energy supply from multiple channels. Major enterprises, especially state-owned enterprises, should take the lead in securing the supply and stabilizing the price. Moreover, large-scale power cuts are strictly prohibited. We will promote the energy revolution, boost the reform of energy consumption, supply, technology, and relevant institutions, strengthen international cooperation, and step up in building national strength in energy