Since last year, I have argued that economic growth in China would take a less and less important role in China’s political agenda. My view is that Chinese policymakers are well aware that growth cannot be sustained for the foreseeable future and are therefore looking for new objectives and for a new narrative that can maintain social stability. It is a bit like an ex-post rationalization of a problem: “Given that GDP growth cannot be sustained, let’s play down the importance of the economy and focus on other goals so that we can continue to meet those – new – objective”. The output from the Two Session seems to go in this direction.
Premier Li on the CPPCC published the Government Work Report, setting the key growth target for 2017. GDP growth target is expected to be 6.5%, government deficit target to be 3%, CPI to be 3%., and the unemployment rate to be 4.5%.
Last year, the GDP growth rate was 6.7%, with total GDP reached 74.4 trillion yuan. CPI increased by 2%. Industrial profitability turned positive from -2.3% in 2015 to 8.4% in 2016.
On Saturday, I attended a job fair held at Shanghai Stadium. I stopped and talked to many of the companies trying to recruit new workforce – a typical scene post New Year – and many told that they cannot find anyone. The average manufacturing industry salary in China has increased by 300%, to 3.6US$ per hour in last ten years. The current salary has exceeded Brazil, Mexico, and it is catching up with Greece and Portugal. Although manufacturing industry is one of the leading industries, thus employing large number of people, the average salary nationwide has also growth from 1.5 dollars per hour to 3.3 dollars per hour over the last 10 years.
China’s first central document of 2017 promises to maintain the drive to resolve rural issues on the road to a moderately prosperous society by 2020. The first policy statement of year is widely referred to as the “No 1 Central Document.” For the past 14 years, it has been devoted to agriculture, farmers and rural areas. The Chinese government is facing the classic dilemma of: on one hand trying to increase the living standard of the rural population and at the same time narrowing the Urban-Rural income gap.