Page 34 - 2017 White Paper
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7 White Paper on the Business Environment in China
college-education, first-family-vacation, middle class already showing a sharp deceleration, likely to sink to 6.8
consumer boom of the 1950s; and even aspects of the percent in 2015 and 6.5 percent in 2016, according to a
social upheaval similar to the 1960s” (Moore 2012). recent forecast outlined in Newsweek magazine by Wang
Tao, the chief China economist at UBS (Powell 2014).
At the Sixteenth National Congress of the CCP in
2002, when Hu Jintao and Wen Jiabao came to power, After years of double-digit annual growth, this type
the direction of SOE reform was further readjusted. The of slowdown – “growth that falls too far below 7 percent”
government continued to make efforts to restructure could be “dangerous” for China’s ruling Communist Party,
the state-owned economy and reform the state assets states the same Newsweek report, visualizing that “the
management system. In the first half of 2003, the State- prospect of young college graduates not being able to
owned Assets Supervision and Administration Council find jobs, or of poor farmers migrating to new urban areas
(SASAC) of the State Council was established“to guide the only to be unable to find work, or of large firms going
reform and restructuring”of state assets (Zheng and Chen bankrupt, triggering layoffs, worries China’s leadership”
2007). However, most pundits observe that China during (Powell 2014).
the decade of rule under Hu Jintao and Wen Jiabao, while
marked by breakneck economic growth and seeming to Mindful of this, China’s leadership had earlier already
remain stable despite an overseas financial crisis in 2007- begun an active discussion on the process of promoting
2008, was generally characterised by a lack of action on and implementing economic reform but the discussion
reform. was not accompanied by any actual meaningful
implementation. As observed by the US-China Business
Much of the credit for that economic boom must Council Economic Report Scorecard, the discussion
go to Mr. Hu’s predecessor Jiang Zemin and his Premier process really “advanced in late 2011, more than a year
Zhu Rongji, who had spearheaded far-reaching reforms before China’s 2012-2013 leadership transition”, just
that laid the foundations of the decade’s growth. Under a year before the ascension of Xi Jinping as China’s
Mr. Hu’s administration, some of those gains have been president and head of the Chinese Communist Party
reversed, as the government again lent support to its (CCP) and Li Keqiang as premier and head of the powerful
state champions. According to the Wall Street Journal, State Council. The US-China Business Council noted that
the number of state-owned enterprises as a share of the “Mr. Xi came to power as a strong proponent of economic
total continued to fall, dropping to 5% in 2011. But with reform, fueling speculation about its scope, scale, and
SOEs still dominant, their share of total output remained speed” (US-China Business Council 2014).
relatively high at 26% (Orlik 2012).
In 2013, the US-China Business Council continued to
A lending splurge in 2009-10 as China responded observe, China’s government agencies began issuing
to the global financial crisis also hurt its future growth “official regulations, statements, and editorials supporting
prospects. The ratio of outstanding credit to GDP reform goals and hinting at the evolving internal
increased from around 116% in 2002 to 172% in 2011, discussions about reform implementation. These releases
according to China Real Time [Wall Street Journal] covered an array of reform issues, including financial
estimates (Orlik 2012). liberalization, the role of state-owned enterprises (SOEs)
in the economy, administrative licensing, and tax reform”
Critics of [Mr. Hu and Mr. Wen] argue that reforms (US-China Business Council 2014).
have stalled on their watch, as they focused, “above all,
on keeping China stable”. “Hu Jintao and Wen Jiabao’s Also in 2013, two major developments of significance
generation could have achieved a lot, but they did occurred – widely perceived as the response of President
not”, said Yao Bo, a former China Daily columnist. “They Xi Jinping and his new generation of advisers and leaders
inherited good foundations, but they did not make a to mitigate the risks of a major economic slowdown:
difference”, he added (Moore 2012).
- In September 2013, the Shanghai government
On November 2012, President Xi Jinping assumed announced the launch of the China (Shanghai) Pilot Free
leadership of China as a strong advocate for a new wave Trade Zone (SFTZ), a pilot area for broader economic
of economic reforms.
He inherited an economy that was reforms in areas such as investment approvals, trade
34
college-education, first-family-vacation, middle class already showing a sharp deceleration, likely to sink to 6.8
consumer boom of the 1950s; and even aspects of the percent in 2015 and 6.5 percent in 2016, according to a
social upheaval similar to the 1960s” (Moore 2012). recent forecast outlined in Newsweek magazine by Wang
Tao, the chief China economist at UBS (Powell 2014).
At the Sixteenth National Congress of the CCP in
2002, when Hu Jintao and Wen Jiabao came to power, After years of double-digit annual growth, this type
the direction of SOE reform was further readjusted. The of slowdown – “growth that falls too far below 7 percent”
government continued to make efforts to restructure could be “dangerous” for China’s ruling Communist Party,
the state-owned economy and reform the state assets states the same Newsweek report, visualizing that “the
management system. In the first half of 2003, the State- prospect of young college graduates not being able to
owned Assets Supervision and Administration Council find jobs, or of poor farmers migrating to new urban areas
(SASAC) of the State Council was established“to guide the only to be unable to find work, or of large firms going
reform and restructuring”of state assets (Zheng and Chen bankrupt, triggering layoffs, worries China’s leadership”
2007). However, most pundits observe that China during (Powell 2014).
the decade of rule under Hu Jintao and Wen Jiabao, while
marked by breakneck economic growth and seeming to Mindful of this, China’s leadership had earlier already
remain stable despite an overseas financial crisis in 2007- begun an active discussion on the process of promoting
2008, was generally characterised by a lack of action on and implementing economic reform but the discussion
reform. was not accompanied by any actual meaningful
implementation. As observed by the US-China Business
Much of the credit for that economic boom must Council Economic Report Scorecard, the discussion
go to Mr. Hu’s predecessor Jiang Zemin and his Premier process really “advanced in late 2011, more than a year
Zhu Rongji, who had spearheaded far-reaching reforms before China’s 2012-2013 leadership transition”, just
that laid the foundations of the decade’s growth. Under a year before the ascension of Xi Jinping as China’s
Mr. Hu’s administration, some of those gains have been president and head of the Chinese Communist Party
reversed, as the government again lent support to its (CCP) and Li Keqiang as premier and head of the powerful
state champions. According to the Wall Street Journal, State Council. The US-China Business Council noted that
the number of state-owned enterprises as a share of the “Mr. Xi came to power as a strong proponent of economic
total continued to fall, dropping to 5% in 2011. But with reform, fueling speculation about its scope, scale, and
SOEs still dominant, their share of total output remained speed” (US-China Business Council 2014).
relatively high at 26% (Orlik 2012).
In 2013, the US-China Business Council continued to
A lending splurge in 2009-10 as China responded observe, China’s government agencies began issuing
to the global financial crisis also hurt its future growth “official regulations, statements, and editorials supporting
prospects. The ratio of outstanding credit to GDP reform goals and hinting at the evolving internal
increased from around 116% in 2002 to 172% in 2011, discussions about reform implementation. These releases
according to China Real Time [Wall Street Journal] covered an array of reform issues, including financial
estimates (Orlik 2012). liberalization, the role of state-owned enterprises (SOEs)
in the economy, administrative licensing, and tax reform”
Critics of [Mr. Hu and Mr. Wen] argue that reforms (US-China Business Council 2014).
have stalled on their watch, as they focused, “above all,
on keeping China stable”. “Hu Jintao and Wen Jiabao’s Also in 2013, two major developments of significance
generation could have achieved a lot, but they did occurred – widely perceived as the response of President
not”, said Yao Bo, a former China Daily columnist. “They Xi Jinping and his new generation of advisers and leaders
inherited good foundations, but they did not make a to mitigate the risks of a major economic slowdown:
difference”, he added (Moore 2012).
- In September 2013, the Shanghai government
On November 2012, President Xi Jinping assumed announced the launch of the China (Shanghai) Pilot Free
leadership of China as a strong advocate for a new wave Trade Zone (SFTZ), a pilot area for broader economic
of economic reforms.
He inherited an economy that was reforms in areas such as investment approvals, trade
34
