Central Economic Work Conference unveils China's key priorities in 2021
China's governing system, if compared to its counterparts in the West that have historically focused on short-term goals due to the lack of visibility beyond the next election, has always been widely admired for its long-term views and for the ability to develop well-crafted plans that rely on clear milestones and on a constant monitoring of the direction the nation is taking.
The annual Central Economic Work Conference, recently concluded in Beijing and traditionally held during the second or third week of December, represents one of the major gatherings in the country's governance since Chinese leaders convene to discuss key macroeconomic, financial and banking topics and prepare plans for the development of the national economy in the coming year.
This year's Central Economic Work Conference is of particular importance because it marks the end of the 13th Five-Year Plan (2016-2020), a period of time that has registered important achievements in terms of economic and social development, while it unveils the key priorities that the country in going to face during the 14th Five-Year Plan (2021-2025) as well as the long-range objectives through the year 2035.
In 2020, China, taking into account the emergency provoked by the unfortunate outbreak of the COVID-19 pandemic that has forced the country to quickly adjust its agenda in order to achieve goals previously set, has been able to overcome the difficulties caused by an unpredictable event and to accomplish goals announced in the 13th Five-Year Plan, while in some cases going beyond expectations.
The most significant examples of how China has been able to win key battles in its path to become a moderately prosperous society include the impressive achievements in the field of science and technology that have placed China and its national champions at the forefront of global innovation, overcoming Silicon Valley tech giants; the rollout of unprecedented reforms for the opening-up of the financial sector to foreign investors and capital with positive outcomes for domestic bond market and internationalization of the yuan; and the improvement of people's livelihoods in winning the battle against poverty in rural areas.
The unquestionable success in containing the pandemic through a well-defined set of top-down rules, the full cooperation of the entire population and by leveraging the widespread presence of top-notch technologies, has allowed China to emerge as the only country to register positive growth this year and to be considered as a reference point providing valuable lessons to the rest of the world.
In this sense, it is interesting to notice that the Centre for Economics and Business Research (CEBR), a UK-based consultancy group, has recently predicted that the Chinese economy as a result of its fast recovery from the pandemic is now set to become the world's largest, overtaking the United States by 2028, half a decade sooner than previously forecast.
In 2021 China is expected to gain momentum through a fast growth trajectory that is going to offset the "lost" first half of 2020 and, once the distribution of vaccine will be completed, to pave the way for a more sustainable and healthy growth through ad-hoc policies that serve to tackle some major difficulties that constrain the national development.
In this regard, the Chinese leadership is expected to build the foundation of a "new development paradigm" based on the dual circulation model in which domestic and foreign markets support and reinforce each other and where the domestic market is set to become a more and more central component of the country's economic policy.
The trade war with the United States and the outbreak of COVID-19 have enlightened the fragmentation of global markets and the necessity for China to rethink and readjust its supply chain and logistics in order to become more independent and less vulnerable to the possibility of unilateral retaliations as well as to be better prepared for future pandemics.
An entirely controlled supply chain empowered by homegrown innovation would allow China to be almost self-reliant, to be protected from increasing external risks, to increase the internal demand and to strengthen its overall economic power as well as its positioning on the global political chess board.
The rapid growth of major Chinese cities has created major issues in terms of affordable housing for students and low-income citizens due to the high level of speculation in cities like Shenzhen where the cost of an apartment is equal to 43.5 times a resident's average annual salary, leading the People's Bank of China to vow to carry out consistent financial policies to curb these practices and to declare that "houses are for living in, not speculation."
Attempts made by online platforms such as Danke Apartment to offer budget-friendly housing to fresh graduates by dividing flats normally designed for families with several bedrooms into small units for co-housing have turned out to be unsuccessful and potentially a systemic risk and the government is now determined to intervene with valid solutions.
Technology plays a vital role in China's future development due to the concrete advantages that the implementation of innovation bring to the entire society in terms of higher level of efficiency, security and safety, and the government has underlined the necessity to give priority in the next five-year plan to technologies that are considered strategic for the nation's success such as semiconductors, AI and 5G.
With the fast development of innovation, although important, tech giant should strengthen risk management and control, maintain business continuity and normal business operations, and ensure quality financial services for the public. China's financial regulators have identified major problems in some of the tech giants and have urged the relevant company to make plans and set a timetable as soon as possible to fix the problems in accordance with supervision requirements.
The promotion of reform and opening-up is going to elevate even further China's status on the global stage as a result of a more integration of its domestic market with global markets through financial liberalization and deregulation as well as a higher participation in multilateral agreements that promote economic cooperation and connectivity.
The recent formation of the Regional Comprehensive Economic Partnership (RCEP) has marked a major diplomatic and economic achievement for China paving the way to "favorably consider" the possibility that the country join in the near future the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) as President Xi Jinping affirmed in an APEC summit in late November.
The outbreak of the COVID-19 pandemic has globally posed questions on the negative effects that the economic activity has on the environment and it is thus important that China has promptly demonstrated a sense of responsibility and purpose trying to proactively solve problems that affect the whole planet.
The recent announcement to target a steeper cut in rates of carbon dioxide emissions by 2030 is thus welcome by the entire global community and represents a further commitment through a boost in the installation of wind and solar power and an increase of the share of non-fossil fuels in order to achieve carbon neutrality by 2060.
The strength of China over the last four decades of unstoppable growth and prosperity has to be reconducted to a type of governance that guarantees stability and responsiveness to changes in the external environment, giving the country the opportunity to navigate successfully even through the harshest storms.
At a time when Western economies are still suffering the consequences of the pandemic and are in desperate need of true leadership, China, through the Central Economic Work Conference, shows the whole world that good planning will get you halfway to success.
Matteo Giovannini is a finance professional at the Industrial and Commercial Bank of China in Beijing and a member of the China Task Force at the Italian Ministry of Economic Development.
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