Column : China’s stability gambit
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The first principle that I learned when I started focusing on China in the late 1990s is that nothing is more important to the Chinese than stability—whether economic, social, or political.
Given centuries of turmoil in China, today's leaders will do everything in their power to preserve stability. Whenever I have doubts about a potential Chinese policy shift, I examine the options through the stability lens. It has worked like a charm.
Stability was on everyone's mind at the annual China Development Forum (CDF) held March 17-20 in Beijing. Hosted by Premier Wen Jiabao, with many ministers of the State Council in attendance, the CDF is China's most important international conference. Yet, literally two days before this year's CDF began, the controversial Bo Xilai was removed as Party Secretary of Chongqing. As a strong candidate to join the Standing Committee of the Politburo, China's inner circle of leadership, Bo's sudden demise was stunning. There was a palpable buzz in the air as we convened in the Diaoyutai State Guesthouse.
The formal sessions played out predictably, placing great emphasis on the coming structural transformation of China's growth model—a colossal shift from the all-powerful export- and investment-led growth of the past 32 years to a more consumer-led dynamic. There is now broad consensus among China's senior leadership in favour of such a rebalancing. As one participant put it, "The debate has shifted from what to do to how and when to do it."
Many of the other themes flowed from this general conclusion. A shift to services-led growth and an innovations-based development strategy were highlighted. At the same time, there was considerable concern about the recent resurgence of state-owned enterprises, which has tilted the distribution of national income from labour to capital—a major impediment to China's pro-consumption rebalancing. The World Bank and the China Development Research Centre (the CDF's host) had just released a comprehensive report that addressed many aspects of this critical issue.