China's exercise to change economic policy with growth in mind

- If America does not change its policy, conflict between the two countries will become inevitable

The Chinese government has called for a change in economic policy in light of factors such as the uncertain international economic environment and slow domestic growth. The continued slow pace of global economic growth, distance from free markets and denial of access to high technology such as semiconductors are significant negative factors for an export and investment driven economy. Structural factors are also at work. For example, an aging and shrinking population, the prospect of slower growth as the economy matures, and a continuing imbalance between investment and consumption, and growing inequality of income and wealth.

As expected, Xi Jinping has been approved for a third five-year term as president. Important policy changes were also implemented to address some of these challenges. For example, through the policy of dual distribution, he tried to prioritize local factors over external factors of development.

There was a shift in form to promote private sector-led growth with state-owned enterprises with the goal of shared prosperity. The regulatory regime was strengthened and excessive growth of capital was limited. This has led to a deep handicap for the country's successful tech companies.

Also, there was a decline in the property sector, which accounts for nearly 30 percent of growth over the years. All these problems have been exacerbated by the zero covid policy. This policy led to lockdowns and disrupted supply chains. Although that policy has now been abandoned, it will take time for the situation to return to normal.

In 2022, China's economy registered a minimum growth of 3 percent. The geopolitical situation is also not in China's favor. Its dispute with America is deepening. The Taiwan issue also poses a deep threat to the relationship between China and the US.

China's strategic partner Russia is embroiled in a war with Ukraine and its relations with Europe have deteriorated. China's ambitious Belt and Road initiative has stalled in many partner countries and concerns are being raised about its debt-trap diplomacy. But China has shown unprecedented diplomatic acumen by brokering peace between old enemies like Saudi Arabia and Iran. This could lead to a redrawing of the geopolitical map in the strategic region of the Gulf and West Asia.

The new Chinese government has taken some important decisions keeping this situation in mind. First, the direct control and supervision of the Chinese Communist Party over the regime has increased. It will be recalled that many ministries and agencies that were under the State Council have now been placed under the Joint Party and State Commission headed by Xi Jinping.

Centralization and direct party power have been further expanded. A new Science and Technology Commission is being formed to increase self-reliance in the field of technology. It is being allocated more funds for research and development.

Xi Jinping has repeatedly said that the future of warfare will be technology driven and that China should strive to take the lead. A new data administration housed in the National Resources and Development Commission will help in this. This data administration will work to access and regulate the vast amount of data produced in the digital economy, thereby promoting innovation.

In view of the growing importance of the financial and banking sector, the State Financial Regulatory Commission is being constituted. It would retain not only the current banking and insurance regulator, but also some of the supervisory functions of the central bank, the People's Bank of China. The National Health Commission will monitor health policies and their implementation. A clear attempt has been made to assure the private sector that it will be provided with a level playing field. Xi Jinping himself reassured the private sector.

However, there is no mention of the stressed asset sector which is having the most adverse impact on the economy. Third, the military budget has also been increased by 7.6 percent this year, which is 0.5 percent more than in 2022. Which indicates an increased threat from the US.

New Foreign Minister Qin Gang warned that if the US does not change its position, disputes and conflicts between the two countries will be inevitable and the consequences will be dire. Taiwan is a matter of great concern and Xi Jinping reiterated what he had said earlier that Taiwan is a border that should not be violated.

China's military upgrading is not in India's interest as we face a constant threat from China on our borders. If the relationship between China and America deteriorates further, China's concern about Indo-US military relations will increase. China often refers to the Quad as an Asian NATO centered on China.