A new China is rising with President Xi

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CHANGSA, China: I am filing this column from the city of Changsha, the capital of Hunan province, which is the second leg of my journey to China (with a 16-member Filipino delegation comprised of journalists, academics, NGO representatives and some Filipino student-scholars in China). Our journey began Thursday (Nov.20) last week with an early morning flight from Manila to Xiamen.

In all, this journey will take 9 days to complete. It will take us mildly through the immensity of Chinese geography and history, from southeast China (Fujian province) to central China (Hunan province), to Beijing, the capital of the People’s Republic of China, the country’s political, cultural and educational center, and the headquarters of China’s institutions, including the Communist Party, which is the party of government in this nation of 1.37 billion people.

It will be a delight that we will be consigned to a diet of Chinese food, savoring varieties of cuisines in Chinese cities, provinces and villages. Matter-of-factly, in answer to a question by one curious traveler, our guide tells us, Yes, Chinese food uses MSG, otherwise it will not taste good.

I shall give a full report on my journey, after it’s completed on Saturday, November 29, and after giving myself sufficient time to digest and reflect on all the observations, impressions, information, and all the pleasures and discoveries to which we have been royally treated.


For now, I will begin with a quick report that China still reverberates with the memory of Chairman Mao Zedong. The great ones endure in the mind and in the heart. Mao comes to mind in big lumps of memory like the founding of the people’s Republic of china in 1949, the Long March, the Great Leap forward, and the Cultural Revolution.

Here in Hunan, where Mao was born and started his rise to power and fame, he is clearly first in the hearts of his countrymen. Just hours after our arrival in Changsa, we were bundled off for a visit to the Orange Islet, where sits a massive, youthful and handsome bust of the chairman, his eyes full of ardor and optimism, looking like a matinee idol, and gazing at the horizon like he is poised to conquer.

We endured an hour of walking in the islet in 10-degree Celsius weather, and the cold took away any thought we might have that this sojourn is going to be a cakewalk. Instead, by nightfall, after a whole day of hiking, I had a feeling that we were going to go through a mild simulation of Mao’s long march – to brace us for the revelation that what is taking place in China today is a new and wrenching march towards the future.

We will learn as we go along about the new program of rejuvenation of China under the leadership of President Xi Jinping, and how this differs in strategies and goals from China’s earlier push toward rapid modernization. Xi is China’s most powerful leader since Deng Xiaoping, because he has consolidated in his person all three hats of power in china –president, military chief and general secretary of the Chinese Communist Party.

The People’s Daily, mouthpiece of CCP, has described Xi’s place in history in this fashion: “Mao Zedong made Chinese people stand up, Deng Xiaoping made Chinese people rich; Xi Jinping will make Chinese people strong.”

IN our first stop, the province of Fujian and its capital of Fuzhou City, we got a quick glimpse of Xi’s clout; he served in the province for many years. We also got a notion of how China will deal with the distraction that is Taiwan. We visited the Pingtan Comprehensive Pilot Zone, which is located in Fujian’s largest island and is closest in proximity to Taiwan. The zone is the program for cross-strait exchanges between the mainland and Taiwan. Taiwan people and companies will be assisted and even subsidized to live and work in Pingtan. A tunnel will be built to connect Pingtan and Taiwan, and one charming guide in the zone sweetly and confidently said that the tunnel will be completed by 2018.

That does not look likely, because tunneling takes arduous effort and time as bank robbers discovered long ago. President Xi cannot just tunnel his way to Taiwan, and then emerge one day to announce to the Taiwanese people, here I am. And presto, the mainland and Taiwan will be reunited.

Taking back Hong Kong and Macau was relatively easy in comparison. But soon or later, Xi’s vision of reunification will be realized.

Striking and ominous developments
The sense that the future is being built is everywhere evident during our journey in china. It fills the talk of government officials, party secretaries and development managers, who discuss with us what is in the works and what is happening.

It’s both striking and ominous that during our stay in China, two major events have taken place:

First, China decreed a reduction of interest rates on November 21. But it doesn’t imply what we non-Chinese would normally expect.

If all credit in China still came from banks, as it mostly did a decade ago, a reduction in the benchmark rate set by the People’s Bank of China would benefit most borrowers. The adjustment would not be immediate: though most bank loans have floating rates, they are re-evaluated quarterly or even annually. The effect will be widely spread.

Second, last Sunday, Hunan province was rocked by a most unusual disaster: an explosion of excrement that took down an entire residential building, and injured 13 people.

The development model that propelled China’s growth over the past three decades is now “obsolete” and needs to be replaced with a new one. This transition is likely to be painful and considering that China accounts for 15.4% of global GDP, a slowdown in growth is likely to have far reaching consequences for the global economy. But while the era of growth consistently averaging consistently 9-10% may well be over, a new report from Asia Society, authored by Daniel Rosen, argues that the country’s growth potential has not been exhausted.

The report begins by emphasizing that China can no longer rely on the old sources of growth, a point even acknowledged by its leaders. The demographic dividend that transformed China into the world’s manufacturing hub is now tapering off, as a consequence of the one child policy. With the labor force now poised to shrink, China can no longer rely on low cost labor-intensive manufacturing to boost growth. Further, while capital formation powered investment growth in the past, existing investments are showing diminishing returns in sectors such as coal and iron and steel which are plagued with over capacity. Also, gains from the increase in Total Factor Productivity (TFP) are slowly fading as dividends accruing from the last round of reforms from the World Trade Organization (WTO) implementation have dried up.

Rosen argues that greater dependence on rules and institutions that let markets work could translate to efficiency gains boosting growth. This implies steering resources into productive channels rather than letting leaders allocate funds to unproductive projects where returns are diminishing. Growth opportunities, he argues, exist in all sectors. In agriculture, modernization holds tremendous potential for the 100 million that are likely to remain in farming. In manufacturing, opportunities exist to move up the value chain, while in services, industries ranging from advertising to health care to engineering are full of potential.

The report’s base line scenario projects a potential GDP growth of around 6% in 2020. Half of this is on account of continued investment in capital stock, but channeled into different assets than those currently invested in, while the other half is to accrue from greater productivity of human resources and capital. But as exploiting these opportunities are dependent on regulatory reforms, movement on which has been slow, many are skeptical about how the future will unfold. Rosen however argues that contrary to expectations, the pace of these reforms could actually quicken. The crackdown on corruption, especially going after key figures, could be construed as a sign that drastic change is imminent.

However, if reforms stall, then the report points out that productivity gains will be lost and there will be uncertainty about private investment which “could considerably lower growth to around 3% in a hard landing scenario or 1% at best in a crisis.” To put this in perspective, the difference between the size of the economy with or without reforms is roughly $2 trillion, larger than the size of the Indian economy currently.

yenmakabenta@yahoo.com

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3 Comments

  1. It took China 112 years to take back Macau and 99 years to take back Hong Kong. This was done through surrender of sovereignty by colonial powers. I am just wondering how it be done with Taiwan. Every Chinese leader will be content to let the next generation solve the Taiwan issue. Forcing the issue of unification is at best be described as posturing to satisfy political ends but not realistic soon. This accommodates the word “later”.

  2. Ay salamat. Akala ko nawala na sa Manila Times columnists si Mr. Makabenta.
    Your description of your tour makes me remember the China Travel Service tours I took in the early 1970s. I can still hear the sounds of The East Is Red — (I’m only typing out from my brain what I think the sounds were)–“Mao Ze Dong de Shushang, Shir pulu ti tai a-a-a-yang…” wherever we went.

    • Naalala mo ang bayana pinagtaguan ni Ka Eric at ni Ka Chito ng napakaraming taon? Sa totoo lang, yan mga ganyang tour ni Yen ay kaakibat ng propaganda ng estado nila upang pagandahin ang imahe ng bansa sa pananaw ng mga manunulat na Pinoy. Due to their Spratley misadventure, they have been perceived as “aggressors” and on the road to Asian hegemony which is without basis. Surely, by inviting academicians, journalists and NGOs to a “tour” like herded cattle, they hope that the country will be written in a better light and broadcasted as a country on their path to greatness. But Yen et al should rather make a detour on their own and see their barangays far from the eyes of their “tour guides” who may actually be intelligence agents of their PLA. Then, they will know that the real tsaynah is never what those economic statistics reveal. Similar to simyon’s figures of the Philippines being “investment grade”, I do not know how I can relate that to my countrymen still sleeping in tents in Tacloban a year after the place has been devastated by Yolanda.