China's new grand strategy
- By Dan Steinbock
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E-mail chinausfocus.com, November 15, 2013
In the 1980s, Deng Xiaoping’s economic reforms and opening-up policies enabled China to industrialize through investment and export-led growth.
After Beijing’s Third Plenum, the new grand strategy by President Xi Jinping and Premier Le Keqiang allows China to move toward post-industrial society and consumption-led growth, along with increasing regional integration.
How Washington responds to these reforms has far-reaching implications in Asia, as well as across the globe.
Series of economic and strategic reforms
In the past few months, China’s new leadership has provided glimpses of economic reforms, which have now been officially enacted. Based on the “3-8-3 Plan,” they comprise tripartite reforms, focus on eight sectors and involve three reform packages.
The tripartite reforms cover the market, government and companies. In each case, the goal is to reduce the government’s role in the economy. The eight core sectors comprise finance, taxation, state assets, social welfare, land, foreign investment, innovation and good governance. In turn, the reform packages seek to relax control over market access, launch social security and allow sales of collectively-owned rural land. The household registration system (hukou), which continues to discourage migration, will be phased out by easier access to urban hukou for third-tier cities.
These proposals have been shaped by Chinese think-tanks, but the broad outlines have been authored by Li Wei, the ex-secretary of the former premier and tough reformer Zhu Rongji, and Liu He, a reformer who serves as the economic adviser to President Xi Jinping. The new growth model draws from policy blueprints shaped by "China 2030" project, which Liu He’s team has developed in cooperation with the Chinese State Council and the World Bank.
Since early fall, these reforms have been fueled by Shanghai’s free-trade zone (FTZ). The reforms come with increasing financial deregulation. Meanwhile, China is opening doors to foreign investors and financial institutions. The reformers seek to make the renminbi fully convertible and into a major international and a reserve currency within a decade.
Most new reforms, which will be spearheaded by a central leading team, are likely to be phased into policy over the next 5-10 years. While the team may be led by Premier Li Keqiang, it could be headed by Vice-Premier Wang Yang, known for his reforms in Guangdong, and be assisted by Han Zheng, Shanghai’s party secretary.
Beijing will also institute a national security agency to coordinate efforts of various government departments covering intelligence, the military and foreign affairs. The initiative has been considered since 1997, when then-president Jiang Zemin visited the U.S. National Security Council (NSC). Inspired by the visit, the new agency represents an effort to ensure the sharing of vital security information across agencies. It can also be seen as a response to the U.S. National Security Agency’s (NSA) extensive cyber spying globally, as disclosed by the ongoing Snowden debacle.
Rebalancing from Southeast Asia to the BCIM Economic Corridor
As the momentum of economic growth is shifting from the transatlantic axis to Asia, Washington and Beijing are rebalancing their foreign policies in the region. While the buildup of U.S. forces in Asia has intensified since 2011, America’s combat ships in Asia will double by 2020.
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