East Asian Policy

The guideline for the 13th Five-Year Programme (FYP) is an important document, which sets as its top agenda promoting innovative development to sustain China’s long-term prosperity. The government also identified key task areas such as reforming state-owned enterprises (SOEs), overhauling China’s fiscal arrangement and promoting further economic opening. However, the government’s commitment to reform China’s zombie SOEs remains doubtful. Moreover, the implementation faces challenges, including ambiguity in guiding principles and bureaucratic inertia.

China’s 13th Five-Year Plan (FYP) maps out China’s economic and social development in the next five years under the guidelines of “innovative development”, “coordinated development”, “green development”, “open development” and “shared development”. It features a pro-active approach to programmes that are “social investment” in nature and a conservative approach to programmes seen as “social consumptions”. As the economy slows down, the 13th FYP period is likely to see social expenditures proceeding at a slower pace.

The 13th Guideline has created a friendly policy atmosphere for a moderately prosperous and stable housing development to attain a 6.5% gross domestic product growth rate and ensure a harmonious society. However, the overall impact remains unclear as details have yet to be rolled out. As the role of housing development in overall development changes, the contribution of housing development to future economic growth is expected to be lower.

Chinese President Xi Jinping has demonstrated a distinctive leadership style and established his personal dominance by setting up a number of small leading groups, reducing the decision-making authority of his politburo colleagues. He has also made himself a populist leader by using the whole party-state propaganda machine to promote his personality. The power concentration and a distinct personal leadership may help Xi push long-delayed reforms, while making decision-making more vulnerable to mistakes and power abuse.

Many have problem reconciling China’s corruption-infested system with meritocracy. The survey study reported here indicates that Chinese cadres are eager to impress their superior, but what impresses the superior is increasingly along the line of competence and achievement. Even corrupt officials have to deliver and be competent, the bottom line that sets limits to patronage. The system may not always favour the most competent but it is geared towards performance.

In a new wave of reform, China’s Central Military Commission remains a party-state organ of the highest military control. Politically, the reorganisation enhances intra-People’s Liberation Army (PLA) supervision and inter-section checks, and paves the way for the personnel reshuffle before the 19th Party Congress scheduled in 2017. Strategically, the military reshuffle is to advance the PLA’s joint operational capability, facilitate modernisation of weapon systems, accelerate China’s transition towards maritime power and improve the PLA’s systemic commanding efficiency.

Is China falling into the “middle-income trap” (MIT) with its current economic slowdown? Extrapolating from its 2015 per capita income of US$8,300 and benchmarking a developed economy at US$16,000, China would become a developed economy within 10 years with a reasonably strong growth of around 6%. China’s impressive R&D efforts and industrial upgrading towards “intensive manufacturing” could help it cross the MIT; however, it may run into a new kind of trap, the “low-income developed-economy trap”.

China’s development of its New Energy Vehicles industry since 2009 has been strengthened through the “Made in China 2025” plan in 2015. The Chinese authorities have provided numerous supporting policies, but the high financial burden, inconvenience of use, technical uncertainty on the demand side, high battery cost and imperfect competitive domestic market on the supply side have impeded the development of the industry.

This paper identifies three phases of China’s South China Sea policy since 2009: reactive assertiveness from 2009 to 2011, forceful response from 2012 to 2013, and proactive adjustment from 2014 to the present. These three distinct phases suggest that China does not have a grand strategy for the South China Sea. The paper also assesses the consequences of China’s island building in the South China Sea and the costs of its deliberate ambiguity on the international legal front.

Japanese direct investment in China fell sharply in 2013 and 2014. Both political and economic factors contributed to the fall. Political tensions between the two countries greatly exacerbated China risks as perceived by Japanese companies and dampened their confidence of investing in China. Additionally, China has lost its competitiveness of attracting export-oriented Japanese FDI because of the cumulative appreciation of the Yuan and rapid wage growth.