China Sends Mixed Message on Economic Growth

An analysis by Michael Lelyveld
2013-12-23
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A migrant worker labors at the construction site of the Qingdao North Railway Station in Qingdao city, east China's Shandong province, Oct. 25, 2013.
A migrant worker labors at the construction site of the Qingdao North Railway Station in Qingdao city, east China's Shandong province, Oct. 25, 2013.
Imaginechina

The ruling Chinese Communist Party is sending mixed signals to local officials as Beijing seeks a balance between environmental protection and economic growth.

On Dec. 9, the party's Organization Department issued instructions to local governments on the pursuit of growth in gross domestic product (GDP) a key benchmark of economic expansion at the expense of the environment.

Officials were told to "abandon the development mode of 'high investment and heavy pollution for fast growth rate,'" the official Xinhua news agency reported.

Local authorities are expected to put more emphasis on "resources, the environment, scientific innovation, employment, income, health and social insurance," the party circular said.

The political guideline has been hailed as a shift toward more sustainable growth after years of concern that promotions of local officials have been based primarily on their reports of high GDP.

The order could curb energy-wasting construction projects at the local level, which have been a major source of pollution and excessive GDP growth.

"It's a historical turning point that shows solid steps to deepen reform," said Wang Yukai, professor at the Chinese Academy of Governance, according to another Xinhua report.

Economic growth figures "will no longer be the main determinants of local administrators' success or failure," the report said.

Conflicting guidelines

But an explanatory statement from the Organization Department seemed to undercut that conclusion.

"Not judging by GDP alone does not mean we no longer want GDP or economic growth, nor does it mean we will not assess development based on GDP criteria. We emphasize assessment based on scientific and comprehensive development," the statement said.

The qualification may leave local cadres uncertain about whether their best interests will be served by pursuing high GDP or not.

"They'll probably stick to GDP," said Lowell Dittmer, a political science professor at the Berkeley campus of the University of California.

"If one message is ambiguous and the other is not, you take the one that seems most clear," Dittmer said.

The party's directive is the latest interpretation of new economic policies under the leadership of President Xi Jinping and Premier Li Keqiang.

GDP gets priority

Since March, the new government has gradually tilted the balance of economic and environmental interests with a series of statements on how local officials will be judged.

But none of the new guidelines has suggested putting anti-pollution efforts above GDP.

In November, the Third Plenary Session of the party's Central Committee called for forming "a comprehensive assessment system for officials' performance to rectify the one that overemphasizes GDP growth."

At another point, the plenum urged an end to "the GDP assessment of key poverty-alleviation areas with fragile ecosystems."

That exemption could apply to about half of China's 2,000 county-level regions, said Yang Weimin, deputy head of the Office of the Central Leading Group on Finance and Economic Affairs, according to the official English-language China Daily.

But as with other items on the government's reform agenda, it is unclear when it will be implemented.

Local growth surge

In the meantime, some provincial and municipal governments have been pumping up their economic expansion as before, even as the national GDP growth rate for the year is expected to slow to around 7.6 percent.

Tianjin municipality and Guizhou province both reported GDP growth of 12.6 percent for the first three quarters of 2013, while Chongqing municipality recorded 12.4 percent, China Daily said.

The results suggest that the forces of old-fashioned development and new-style sustainable development are pulling in opposite directions, not only at provincial and local levels but also within the party and the central government itself.

The party circular also conveys conflict because it groups environmental assessment together with employment, which is usually associated with economic growth.

Although the government has pledged to rebalance the economy, it is unclear whether it will crack down on the provinces that are still outpacing the national average by wide margins.

"People are wondering about how much rebalancing they're going to be doing because they're anxious about the slowing down," Dittmer said.

Commitment to reform?

At the national level, economic growth policies appear split. While the plenum declared a "decisive" role for the market, it did not back away from supporting state-owned enterprises (SOEs).

"They're in a transitional phase with the new leadership, and Xi wants to make big reforms, but his own commitment to reform is also ambiguous," Dittmer said.

Local officials may have trouble in interpreting the new national policies for advancing their careers after decades of relying on high-growth imperatives.

One problem is that economic growth may be easier to measure than environmental protection, even though the accuracy of local economic data has been frequently challenged by the National Bureau of Statistics (NBS).

"GDP is nice and quantitative. You can put a number on it," said Dittmer. "It's hard to put a number on smog."

Although China's cities have started issuing regular reports on smog-forming particulates known as PM 2.5, the pollution may drift over regional borders, making local responsibility for the problems unclear.

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