China likely to have next Silicon Valley


  • Business
  • Saturday, 01 Apr 2017

Big meeting: A file picture showing the fifth session of the 12th National People’s Congress at the Great Hall of the People in Beijing. – AFP

MANY readers ask: What’s the “Two Sessions” in China (for 11 days until March 15) all about? How significant are they for China?

The term refers to the annual plenary sessions of the National People’s Congress (NPC) – China’s parliament; and of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC) – China’s top political advisory body. NPC supervises government and judicial system and determines major state policies. It appoints the president, chief justice and chief prosecutor and assesses their performance.

Each year, its main job is to review the government’s annual report, including the official GDP forecast, plans for social and economic development, and central and local budgets. This year, it also deliberated the draft provisions of the new, unified Chinese Civil Code. NPC comprises some 3,000 deputies elected from across the country at national, provisional and prefecture levels.

They submit motions which, once adopted, become legally binding. Deputies are accountable to voters in their electoral districts.

These deputies are immune to prosecution for their speeches and votes to protect them from undue interference. CPPCC was established in 1949 (five years before NPC) and comprises about 2,200 selected top leaders, renowned economists, entrepreneurs, artists, sportspersons and representatives from a cross section of society. It facilities China’s multi-party co-operation and the political consultation mechanism led by the Chinese Communist Party.

CPPCC discusses important political, economic, social, and cultural matters and make non-binding proposals for NPC’s consideration. Together, NPC and CPPCC form the highest organ of State power and legislature. This people’s congress system integrates basic principles of the people as master of the nation, upholding party leadership and rule of law.

Anti-poverty

For China, these sessions are crucial as it moves closer to achieving its dream of great national renewal, through the implementation of major reforms by 2020. They also precede the nation’s quinquennial political meeting – National Congress of the Communist Party of China, in the second half of 2017.

Implementation of the massive reforms include on-going building of a moderately prosperous society; development of the Belt and Road Initiative to link Asia, Europe and Africa; and implementation of the 13th five-year plan (2016-20). The public well-being figures prominently during the two sessions, especially on poverty relief.

Although China had almost 40 years of breakneck economic growth, today more than 40 million people remain poor, each earning less than US$335 a year. Improving their lives remains key. Since 2013, 55.65 million people have been lifted out of poverty. For 2017, it intends to lift yet another 10 million rural villagers above the poverty line. Poverty is multidimensional.

China is at the “last mile” of poverty reduction. In addition to income and basic material necessities, other factors like access to education, healthcare and inclusiveness in society have to be taken care of. There is also the need to provide jobs – helping them stay out of poverty. In other words, an integrated approach helps to address the many inter-linked SDGs (sustainable development goals) to really eradicate poverty. China still has a long way to go to tackle the poverty dynamics.

Goals

According to the Prime Minister, in the struggle to transform the economy from “chrysalis to butterfly”, China needs to revitalise the national modernisation drive with three principal goals in mind:

> Eliminate corruption – ensure that cadres “dare not, cannot and do not want” to be corrupt. Since late 2012, the anti-corruption drive has punished more than one million officials, netting both “flies” and “tigers”.

> Maintain and uphold stability – aim at a slower 6.5% growth this year (6.7% in 2016), signalling restraint in the face of being wary of overheating and a further build-up of already excessive levels of debt. The budget deficit will be kept at 3% of GDP, while holding steady the growth in money supply. Also preoccupied with cleaning up the debt-tangled financial system.

> Become more competitive – push innovation; adopt a co-ordinated green, open and shared development; use markets to allocate resources; and reform supply-side structures.

They reflect the tenets underlying China’s well-established Four Comprehensives strategic blueprint: comprehensively building a moderately prosperous society; comprehensively deepening reform; comprehensively advancing the rule of law; and comprehensively governing the party with discipline.

Innovation

Innovation lies at the forefront to drive the economy. Investment in research and development (R&D) is vital to its Made-in-China 2025 Initiative, aimed at raising productivity in key areas including advanced information technology, robotics and advanced machine tools, modern railway technology, aerospace and maritime equipment, and hi-tech shipping. China’s R&D spending is set to reach 2.5% of GDP by 2020 (five times that in 1995), and higher than Europe’s 2%.

The goal is for scientific and technological advances to contribute up to 60% of economic growth by 2020. And, initiatives such as the Shanghai Free Trade Zone (FTZ) – launched in 2013, it now has 40,000 businesses in new sectors such as e-commerce and health services, will lead to boost innovation efforts, especially in artificial intelligence (AI), including facial recognition technology. Seven more FTZs will be set-up this year, raising the total to 11.

KPMG’s latest survey report “The Changing Landscape of Disruptive Technologies” concluded that China is the most likely alternative location to Silicon Valley to become the technology centre of the world. Nearly 65% of respondents said China will replace the California hub within four years.

And, the Guangdong-Hongkong-Shenzhen/Macao Bay Area could well become the new global technology hub. Shenzhen was once dubbed the world’s factory.

It has since nurtured an entrepreneurial ecosystem, including making available “maker-space” (an incubator or start-up accelerator) networks. This hub would be facilitated with the completion of world’s latest and longest sea-crossing Hongkong-Zhuhai-Macao Bridge.

The Bay Area is already one of China’s most affluent regions (accounting for 20% of China’s GDP). It has become the hotbed for technology start-ups, especially for Europe. According to KPMG, China is only second (23% of respondents) to US (29%) as the country most likely to produce disruptive technologies with global impact, against India (9%), Japan (8%), Israel (6%) and Germany (5%).

China is fast catching up. Indeed, it is already close to what is cutting-edge in a couple of areas. It’s estimated that China will need 3½-4 million scientists working in R&D to meet its 2020 targets.

I see innovation as very much a numbers game. For every one good idea (say) per 1,000 persons, a country with 1.4 billion population is bound to have an advantage. China recorded a 17% annual rise in patents since 2005, with applications reaching 2 million in 2014, 3 times that in US.

Outcome

Lawmakers considered 514 motions at the two sessions and approved all crucial major documents, including the government’s 2016 Work Report, the 2017 economic and social plan, and the current budgets, paving the way for the nation’s development in the current year.

What then are we to do?

Over the past four years, the Xi Jinping administration has made advances in building socialism with Chinese characteristics – i.e. at promoting co-ordinated political, economic, cultural, social and ecological progress with a new vigour.

Despite a global environment that is troubled by sluggish growth, flagging international trade, backsliding on globalisation, and weak growth momentum in Europe and Japan, China’s economic growth has been held steady (though slowing somewhat) continuing (together with India) to power global growth.

By 2020, China is targeted to quadruple its 2000 GDP; last year, GDP was already 4 times higher. So it’s ahead of schedule. By 2020, China would be home to 440 million middle-class households.

The quality of life has also markedly improved – with per capita real income for urban and rural folks rising by 7.7% and 9.6% respectively between 2011 and 2015. Meanwhile, life expectancy reached 76.3 years, against 74.8 in 2010. China has since decoupled its growth from the heavy consumption of resources, often the cause of pollution.

Industrial as well as agricultural water consumption is today much lower than the peak reached in 2013. The only way China can keep this momentum is to innovate, and raise productivity to remain competitive and grow. This ensures the chrysalis not only stays healthy, but have a fighting chance to evolve into a beautiful butterfly. China needs to do more to implement the multi-faceted strategy of innovation-driven development. Continuing to spend on R&D remains vital. Indeed, it’s the only way.

Former banker, Harvard educated economist and British Chartered Scientist, Tan Sri Dr Lin See-Yan is the author of “The Global Economy in Turbulent Times” (Wiley, 2015). Feedback is most welcome; email: starbizweek@thestar.my.

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