China: The Next 30 Years

The agenda Xi Jinping laid out at the 19th Party Congress promises radical change. Jin-Yong Cai of TPG Capital discussed the particulars at a recent Chazen Institute event.

Print this page

Throughout China’s vast width and breadth, schoolchildren are preparing to study “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era.” Universities are scrambling to establish entire new departments to interpret the message that the General Secretary of the Communist Party delivered when the 19th National Congress of the Communist Party convened a few weeks ago.

“Xi set a timetable to lead China,” said Jin-Yong Cai, partner at TPG investment group and former CEO of the International Finance Corp., speaking at the Sir Gordon Wu Distinguished Speaker Forum, organized by the Chazen Institute and moderated by Chazen Senior Scholar Shang-Jin Wei. The “overnight goal,” which started five years ago and will continue for the next two to three years, calls for China to reach “moderate prosperity,” a key phrase used by Xi and his predecessors indicating the end of poverty and establishment of a massive middle class. “The next phase,” which will take place between 2020 and 2035, “is to become home to the No. 1 per capita GDP in the world,” Cai said.

It is that outward-looking ambition which has left some Western observers uneasy, fearing that China’s quest for influence outside its borders could create international tensions. They point to China’s outreach through its One Belt One Road infrastructure plan that spans some 60 countries, increased foreign aid and its territorial disputes in the South China Sea, all examples of how China is fast spreading its authority overseas. Xi declared that China’s version of socialism could provide an alternative model for other developing countries.

“The last era was about China achieving economic prosperity,” a goal that the country has largely attained, according to Cai. “The current era is about achieving additional strength by 2050,” he said.

Cai boiled the 14 points of Xi’s thought into several main aspirations:

China Will Get Rich

Before it can move forward, China must eliminate the last remnants of poverty. When Xi came to power in 2012, 80 million citizens remained below the poverty line. According to Cai, that number has been slashed to 20 million.

Xi’s administration allotted $20 billion to change the poverty trajectory for the remaining number of Chinese living below subsistence levels. Specifically, the government is addressing four root causes of poverty:

  • People are underemployed, working at jobs that don’t pay a living wage. Xi said the government has to provide work for people who are willing. Expect state-owned enterprises to remain a major source of employment for years to come.
  • The unemployed live in underdeveloped areas. If no jobs are available in a particular pocket of the country, people must move to where the jobs are.
  • Illness pushes citizens into poverty. The government agreed to a one-time payment to forgive medical debts and lift those struggling to pay medical expenses from poverty.
  • Handicaps. If physical or mental drawbacks prohibit working, the government must provide education to ready them for jobs that they can do.

China will be democratic

Of course, this concept is not what the West embraces as democracy, but it does give a greater voice to the provinces. “China believes in central planning,” explained Cai. But after Beijing sets the goals and provides direction, solutions increasing will occur on the local level. “Competition between local entities will be next driver.”

To provide working capital, Xi’s government instituted a value-added tax and plans to roll out a property tax. Some of the money will go directly to provinces and localities which have had to rely on land sales to raise capital in the past.

China will be environmentally clean

Make that environmentally cleaner Cai sees this goal as the most difficult to achieve, largely because environmental reforms often conflict with GDP growth. Most of China’s manufacturing is still fired by coal. “Pure solar and wind power won’t solve the problem,” he said. Instead, China currently has the world’s largest nuclear power fleet under construction and is looking to boost its liquefied natural gas imports. Energy-saving measures will gradually reduce demand. Still, said Cai, “It will take 10 years or longer for China to get to normal emissions.”

Cai is largely convinced that China will achieve its goals, mainly because its leadership has adhered so unswervingly to stated policies in the past. “I don’t think China knows more about economics than anybody else,” he said. “But what’s been amazing is the relentless execution of policies one generation after another, with no interruptions.”

The focus of its leadership, said Cai, “is the secret sauce of China.”

articles by Topic