China slowdown puts Xi in political bind

China slowdown puts Xi in political bind

When Xi Jinping became Chinese president in 2013, he inherited a decades-long goal to ensure the country had achieved widespread prosperity on the eve of the Communist party’s 100th anniversary next year.

Known as xiaokang shehui, a term often translated as “moderately prosperous society” and comparable to the western concept of middle class, the plan called for doubling gross domestic product from 2010 to 2020 and the eradication of extreme poverty.

But economists said the outbreak of coronavirus and the collapse of economic growth for the first time in decades had dashed the Communist party’s hopes of declaring victory by the end of this year. And for Mr Xi, the country’s most powerful leader since Mao Zedong, it could prove a politically embarrassing and damaging miss.

“Achieving xiaokang shehui is the goal for the first centenary. This is the first real test for President Xi,” said Guo Yingjie, a professor of Chinese studies at the University of Sydney, who focuses on nationalism and class in China. “Xi’s and the CCP’s credibility is on the line. The party and its general secretary can’t fail.”

The concept of xiaokang shehui has been ubiquitous in Chinese society for the past 30 years. Originally a Confucian term, state media carefully defines it as “less affluent than well off” but free from poverty. 

Xiaokang shehui was first used in reference to China’s economic goals by Deng Xiaoping, the reformist leader credited with opening up the country to the outside world, in the mid-1980s.

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The target has been updated by economic planners to mean doubling GDP by the end of the decade and many economists have based their forecasts on it in recent years.

To officially double GDP over the past decade, China would have to achieve at least 5.6 per cent growth this year. Until the outbreak of Covid-19, few believed the target would be missed.

But after a national lockdown caused GDP to contract by 6.8 per cent in the first quarter of this year, the xiaokang plan now seems unreachable. The IMF expects GDP growth in 2020 to fall as low as 1.3 per cent.

“I don’t think it’s possible, and the Chinese government didn’t stress any growth target in its latest politburo meeting,” said Serena Zhou, an economist at Mizuho Securities Asia.

For many ordinary Chinese, missing the target is a symbol of government promises that have not been fulfilled. The crisis has prompted an outpouring of derision about the party’s expected failure on social media.

“It’s already 2020 — the road in our village still hasn’t been repaired and it will turn into a river in the rain. #xiaokang society# Can the government fix the road for us first?” asked a person on Weibo, the Twitter-like social media platform.

Another Weibo user called Chenyuerong asked: “In this year’s situation, can the great goal of comprehensive xiaokang society still be achieved?”

Even the government has changed tack, downplaying the target since the onset of the outbreak. The head of the National Bureau of Statistics did not respond directly to a question about the aim of doubling GDP growth this year, but instead emphasised other aspects of the xiaokang plan.

Julian Evans-Pritchard, senior China economist at Capital Economics, said: “The Chinese leadership will be less concerned about reaching the doubling of GDP target slightly later than planned and more concerned about the risks to political and financial stability caused by the Covid-19 shock and sharp rise in unemployment.”

The Communist party also has some wriggle room. Although the goal is widely understood to mean doubling growth by the end of 2020, a speech by former leader Hu Jintao set the deadline as anytime before the 100th anniversary of the party in July, says Bert Hofman, director of the East Asian Institute at the National University of Singapore.

Failing even that, the Chinese leadership could simply ignore the original hard target. “Rather than staging another massive stimulus to achieve the goal, they can use an old Maoist tradition and declare the Xiaokang society as ‘basically achieved’,” said Mr Hofman.

Additional reporting by Sherry Fei Ju in Beijing

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