x Abu Dhabi, UAESunday 23 July 2017

China faces new challenges, few clear solutions

Mr Wen introduced a new five year plan for China but it is unclear that any leader will be able to prepare the country for what lays ahead

References to Chinese poetry were once so common in Wen Jiabao's speeches that portions of them were untranslatable. The more sombre tone of the Chinese premier's recent remarks has been easier for global audiences to understand. "Without political reform, China may lose what is has already achieved through economic restructuring," Mr Wen said last August. As if to prove the point, this statement was censored by the Chinese state media.

Reality checks, not rhetorical flourishes, also featured prominently in Mr Wen's annual address to Communist Party delegates yesterday. China's economy was strong but growth remained "unstable, unbalanced, uncoordinated, and unsustainable". The party had not "fundamentally solved a number of issues that the masses feel strongly about", Mr Wen said. He hoped to address these with the introduction of a new five-year plan.

It was impossible to divorce recent events in the Middle East from Mr Wen's remarks, though he did not mention them directly. Protesters have gathered in many Chinese cities during recent weeks. What has been most remarkable about the demonstrations has been the security response. The number of police present to break-up the demonstrations has often been far greater than the number of protesters.

Chinese officials are on high alert that what Mr Wen described yesterday as the "great resentment" - fuelled by imbalances in China's economy, disparities in income, and inflation at nearly five per cent - will spiral out of their control. More difficult for China's government, the social programmes and tools that have helped to manage the blow of slower growth in many other markets simply aren't available. While China is a communist state, it lacks a safety net.

Mr Wen introduced a lower target for economic growth yesterday, seven per cent per year, and was wise to stress lower expectations along with it. But economists estimate that the country requires an eight per cent expansion to employ its 20 million new job seekers each year. More pressing may be the concerns of China's 200 million migrant workers, many of whom have grown dependent on the country's breakneck pace of development. And while much has been made of Mr Wen's calls for greater openness, China still lacks many of the means for people to vent their frustration. How much power Mr Wen still has over China's sprawling state is also unclear as he prepares to step down in less than two years.

When asked recently about how he planed to spend the remainder of his career, Mr Wen fell back on his poetic sensibilities: "In spite of the strong wind and harsh rain, I will not yield until the last day of my life." Harsh winds may indeed be on China's horizon but there may be little that Mr Wen, or any Chinese leader, can do to plan for them.