A. V. OSTROVSKY

Doctor of Economics

Far East Institute of the Russian Academy of Sciences

Keywords: China, 4th session of the National People's Congress, Small Welfare Society, 13th five-year plan

At the 4th session of the National People's Congress (NPC) of the 12th convocation (March 2016), the decision of the 5th plenum of the CPC Central Committee (October 2015) was approved: by 2020, China should double the volume of gross domestic product (GDP)compared to 2010 -up to 80 trillion yuan, and GDP per capita-up to 60 thousand yuan (approximately $9230 at the current exchange rate) (see Table 1).

These indicators are included in the 13th five-year plan (2016-2020). The goal was set-to "build a Xiaokang (small welfare) society in China by 2020", and as the immediate task - to eliminate rural poverty by 2020, to raise the standard of living of 70 million people above the " poverty line"and" snatch " 592 "rural counties" out of poverty.

In 2000, the Xiaokang society was already built in two cities of central subordination - Beijing and Shanghai, and in 2010-in 8 more provinces and autonomous regions of the People's Republic of China (in particular, in the Inner Mongolia Autonomous Region).

If we analyze the calculations of the famous Chinese scientist Hu Angang, we will notice that the Chinese term "xiaokang" largely reflects the main indicators of the UN term "Human Development Index" (HDI), which determines the level of socio-economic development of the country.

Table 1

Key indicators of China's economic development (2000-2020)

Source: Zhongguo tongji zhaiyao-2015 (Statistical Handbook of China-2015). Beijing, 2015, pp. 15, 20; 2015-nian kuomin jingji he shehui fazhan tongji baogao (Statistical Report on the Socio-economic Development of the People's Republic of China in 2015). GSU of the People's Republic of China, February 29, 2016

According to Hu Angang's calculations, the HDI for various Chinese provinces varies markedly from-

Table 2

HDI by Province of the People's Republic of China (1982-2020)

Source: Hu Angang. 2020. Zhongguo quanmian jiancheng xiaokang shehui (2020. China is comprehensively building a "small welfare" society). Beijing, Tsinghua University Press. 2012, p. 115.

Table 3

Average life expectancy by province of the People's Republic of China (1982-2020)

Source: Hu Angang. Decree, op. cit., p. 117.

Table 4

Duration of education of the population by provinces of the People's Republic of China (1982-2020)

* In this case, we are talking about the average duration of education of the population.

Source: Hu Angang. Edict. soch., p. 116.

It's closing. In particular, in 2000, five provinces - Qinghai, Gansu, Yunnan, Guizhou, and Tibet - had HDI levels below 0.5 (low), while Beijing and Shanghai had HDI levels between 0.7 and 0.8 (high), and Shanghai's GDP per capita was already comparable to that of Brazil. By 2010, HDI levels in the provinces of the People's Republic of China have changed markedly, and by 2020 they will reach even higher levels (see Table 2).

Two other indicators - average life expectancy (less than 65 years in Tibet and 75-80 years in Beijing and Shanghai) and average education duration (less than 6 years in Tibet and 10-12 years in most provinces of the PRC) - showed a similar situation in 2000, but by 2010 it had changed significantly (see Tables 3-4).

In 2010, there were noticeable changes in the GDP per capita indicator (in most provinces it has already exceeded $3 thousand per year -about 20 thousand yuan), declared back in 2002 by the President of the People's Republic of China Jiang Zemin (1993-2003) as the lower level of "small prosperity", and in two others indicators. In particular, the duration of education in the vast majority of provinces has already reached 10-12 years, and the average life expectancy is 70-75 years. Moreover, according to the State Health Service of the People's Republic of China, in 2015, the average life expectancy was already 76.3 years1.

DIRECTIVES OF THE 4th NPC SESSION

According to preliminary forecasts, in 2020 China should build a "small welfare" society (where only Tibet's HDI indicator will be 0.5 - 0.7) and in terms of per capita GDP will reach the level of Iran. The vast majority of provinces in terms of HDI will reach the level of 0.7 - 0.8, and three cities of central subordination will exceed the indicator of 0.8: in terms of per capita GDP, Shanghai will reach the level of Great Britain, Beijing-the level of Hong Kong, and Tianjin-New Zealand. In most of the provinces, the education duration will be 10-12 years, and the average life expectancy will be 75-80 years (see Tables 2-4).

As a result of the reforms, China's HDI is expected to grow from 0.456 in 1982 to 0.760 in 2020, with an average life expectancy of 77 years and an average study duration of 11.7 years. At the same time, in all parameters, including the HDI, Beijing will lead-0.895, Shanghai -

Table 5

Key HDI indicators in China (1982-2020)

Source: Hu Angang. Edict, op. cit., pp. 120-123.

0.889 and Tianjin - 0.861, with Tibet -0.628 noticeably behind, Yunnan and Qinghai - 0.701 each, and Guizhou - 0.702, which will move to the average level in terms of HDI indicators (see Table 5).

Apparently, these forecasts are close to reality, as the standard of living of the population of the PRC significantly increased during the 12th five-year plan (2011-2015). If in 2010 the per capita income in cities was 19,109 yuan ($3,000), and in villages-5919 yuan ($970), By 2015, these indicators had grown significantly both in the city and in the countryside. In particular, in 2015, the real income of the urban population was 31195 yuan (an increase of 8.2% compared to the previous year), and the rural population - 11422 yuan (an increase of 8.9%).

In 2015, the total turnover of retail consumer goods amounted to 30.1 trillion yuan (44.3% of GDP), and the volume of deposits on household accounts - 55.2 trillion yuan (more than 80% of GDP).². These indicators indicate a huge "safety cushion"that has been formed among the population over the years of reforms. However, even here, China has significant reserves for expanding the consumer market. In the structure of retail trade, most of the RMB25.9 trillion (86%) is accounted for in the city and only 4.2 trillion (14%) is accounted for in the countryside, while the rural population accounts for 44% ^.3

Further expansion of the purchasing power of the Chinese population is associated with an increase in the purchasing power of rural residents. This can only be achieved by further expanding the social insurance system in rural areas and extending to the rural population the same social benefits as for the urban population in the areas of pensions, education, and healthcare.

At the 18th CPC National Congress (November 2012), President Hu Jintao's report (2003-2013) stated that the policy of full social security coverage of all segments of the population should continue. A course was taken to reform the social insurance system at enterprises and institutions in cities, to improve basic medical care in the city and village.

It also provided for the gradual opening of pension accounts for all workers, the creation of a mechanism of benefits and subsidies and its constant regulation in the social insurance system throughout the country, and the improvement of the system of social assistance in the event of natural disasters. Given the ageing population, special attention is paid to strengthening social assistance funds to provide social services for the elderly and protect the legal rights of persons with disabilities.⁴

The Social and Economic Development Plan of the People's Republic of China until 2015 provided for the development of the social sphere and greater accessibility of public services for rural residents. At the same time, over the years of the 12th five-year plan, the level of social insurance in China has significantly increased. As of 2015, 504.7 million people in cities and villages used the pension system. 665.7 million in cities and towns used the basic health insurance system5.

The results of the 12th five-year plan showed that China not only fulfills, but also exceeds the planned main economic indicators. While GDP grew by 6.9% in 2015, it was 67.7 trillion yuan. At the same time, in 2015, the real growth of investment in fixed assets decreased and amounted to 9.8% compared to the previous 20-year period, when the GDP growth rate at the beginning of the XXI century grew by more than 10% per annum - 6 - 7 trillion yuan per year. However, in China, the volume of investment in fixed assets remains significant -

56.2 trillion yuan, its share in GDP is very high at 83%.

In the years of the 13th five-year plan, it is expected to maintain high rates of investment in the economy to stabilize the growth rate and regulate the structure, and the total investment volumes for the next five years will reach 500 billion rubles. RMB, or up to 100 billion yuan. per year, i.e. almost twice as high as in the years of the 12th ^five-year plan6. Ultimately, the Chinese leadership expects that a steady increase in investment in fixed assets will contribute to faster economic growth and curb inflationary processes due to increased production volumes and the expansion of the product range.

"NEW NORMALITY" - CHANGES IN THE DYNAMICS OF DEVELOPMENT

In 2014-2015, China's economic growth rate began to decline, and instead of the traditional 8-10% growth rate in 2014, this figure was 7.4%, and in 2015 - "only" 6.9%. As a result, China's GDP was 67.7 trillion yuan in 2015 (or over $10 trillion at the current yuan-to-dollar exchange rate)^.7

In other words, over the past two years, China has moved from high to lower rates of economic development, which is due to two reasons: internal - a high volume of GDP, which makes it more difficult to achieve higher GDP indicators, and external - related to a decrease in demand for Chinese export products.

The recent transition to lower GDP growth rates in China is associated with the concept of "new normal" (Xin changtai), which indicates gradual changes in the dynamics of the Chinese economy after the global financial and economic crisis of 2008-2009. At the official level, President Xi Jinping (since 2013) first announced the "new normal" in May 2014 during an inspection tour of Henan Province.

As noted in the report of Premier Li Keqiang of the State Council of the People's Republic of China (March 2016), "the success of the past year was achieved on the basis of high basic indicators of the Chinese economy... Now, one percentage point of Chinese GDP growth is equal to 1.5 percentage points of its growth achieved five years ago, and 2.5 percentage points of its growth achieved 10 years ago." Thus, in the 13th five-year plan (2016-2020), the Chinese economy will no longer be able to develop at the same rapid pace as in the earlier stages of reforms, and the GDP growth rate will no longer exceed 7% per annum.⁸

"New normality" refers to the desire of the Chinese leadership to achieve by 2020 the goal of building a Xiaokang (small prosperity) society in China and to achieve this goal, to ensure sustainable development in the face of declining GDP growth rates.

At the APEC meeting of Heads of Commercial and industrial enterprises in Beijing in November 2014, Xi Jinping highlighted three features of the Chinese "new normal"::

- there is a transition from high growth rates (7.5% or more per year) to medium-high (6-7.5% per year);

- the economic structure of China is constantly being optimized, its level is increasing, consumer demand is gradually coming out on top, the differences between urban and rural areas, as well as interregional differences, are gradually weakening, and the results of development are being enjoyed by a wider circle of the population;

- innovation becomes the main driver of growth instead of factors of production and investment ⁹.

WHAT IS THE EXPERIENCE OF CHINESE REFORMS?

The experience of Chinese reforms is an example of a painless transition from a planned to a market economy, reaching the trajectory of high economic growth, which has been going on for more than 30 years.

In our opinion, the socio-economic development indicators of the PRC during the 11th five-year plan (2006-2010) and the 12th five-year plan (2011-2015) showed us all the pros and cons of the Chinese model of economic reforms - the so - called "Beijing consensus"*, in contrast to the reform model proposed by the IMF (the Washington Consensus**).

Note that a number of countries have followed the Chinese path. In particular, Vietnam has now adopted the Chinese model of economic development (the so-called "Beijing Consensus"), and

* The Beijing Consensus is a Chinese reform model focused on increasing the money supply (M2) in circulation while increasing investment, putting new production capacities into operation, and attracting more and more labor from agriculture to other industries, which helps to contain inflationary processes and rapid GDP growth. author's note).

* * The Washington Consensus is a reform model proposed by the International Monetary Fund (IMF) for developing countries, aimed at containing the money supply (M2) in circulation by raising interest rates for bank loans and limiting money issuance in these countries in order to combat inflation (author's note).

in a dozen years, it is possible that they will already talk about the "Vietnamese miracle".

A distinctive feature of China's development in 2014-2015 was the decline in economic growth rates compared to the previous period. On this basis, many experts in the West and in Russia have started talking about the end of the "Chinese miracle", that China has fallen into the "middle income trap", and in general about the upcoming economic crisis of the Chinese economy in the near future, and about its "hard landing" in the foreseeable future.

However, an objective analysis of the results of the 12th five-year plan, in general, and 2014-2015 in particular, as well as the macroeconomic indicators of the Chinese economy, does not indicate this. Still, despite a certain decline in high GDP growth rates, these indicators were significantly higher than the global average, in the United States, Western Europe and Japan. Only India's macroeconomic indicators were comparable to those of China, although China was far ahead of India in terms of per capita indicators.

At the same time, China understands that the previous growth incentives of the Chinese economy - huge investments in the main production assets of industry, infrastructure, a huge volume of exports and attracting a mass of unskilled and low-skilled labor-have exhausted themselves and it is necessary to look for new drivers of economic growth.

At the 4th session of the National People's Congress, such incentives for economic growth were proposed as the expansion of the domestic market by increasing the purchasing power of the population, a significant increase in the supply of services and the development of environmentally friendly industries.

At the same time, it is recognized that traditional economic indicators, such as coal prices, electricity consumption, and cargo turnover, whose growth leads to further environmental pollution, are gradually losing their importance for economic development.¹⁰

The main goal of China's economic reform was not to liberalize the economy as an end in itself, but to raise the standard of living of the country's ever-growing population on the basis of comprehensive development of production. The state released itself from constant control over the activities of economic agents, but this was done gradually, in stages, over many years.

At the same time, it continued to maintain control over the main sectors of the economy (fuel and energy, transport, banking) through various economic levers, thus providing, at the first stages of the reform, due to fixed prices for the products of these industries, opportunities for creating enterprises of various forms of ownership and market competition between them. Only after a competitive environment was formed in a particular branch of the economy, the state began to exempt prices for fixed assets of production.

One of the main tasks of the reform was the formation of a market infrastructure in a country with a planned economy. To address this issue, the Chinese leadership paid special attention to the three main components of the market infrastructure-investment demand, the domestic market and the pricing system.

China's experience in the transition to the market and price liberalization shows that the main thing is the formation of a pricing mechanism in market conditions, as well as state control over prices in the presence of a buyer's monopoly (state purchases of agricultural products, trade in factors of production).

In general, the transition to a market economy in China managed to keep inflation under control, despite the rapid growth of the share of money supply in circulation in relation to GDP - 205.7% in 2015 (for comparison, in the Russian Federation below 40%).

At the 4th session of the National People's Congress, in order to contain inflation and expand the domestic market, it was proposed to continue using an active financial policy, which assumed, along with increasing investment, expanding the areas of structural tax reduction, moving to a total reduction in cash charges and reviving unused state budget reserves.¹⁰

At the same time, the PRC continued and continues structural reforms related to the simplification of administration and the transfer of powers to lower-level bodies with proper control to optimize the provision of public services. The procedure for registering companies in the Commercial and Industrial Administrative Department has been significantly simplified, where from now on only three documents are required.: 1) a patent for the right to operate an enterprise; 2) a certificate of the organization's code; 3) a certificate of tax registration ¹¹.

Special attention at the 4th session of the National People's Congress was paid to the growing environmental problems in the country. Although it was noted that the specific energy intensity of GDP decreases annually, and decreased by 5.6% in 2015, but there is still a question of protecting the environment.-

environmental protection occupies a special place in the plans of the 13th five-year plan. Just over the past few months, the capital of China, Beijing, has been declared a "yellow" and even "red" danger level several times.

This is largely due to air pollution due to the excessively high share of coal in the country's energy balance - 64% in 2015. One of the main tasks is to reduce the share of coal and increase the share of resources such as oil and natural gas, and renewable energy resources such as nuclear power plants, wind and solar energy. The NPC session in March 2016 decided to reduce the specific energy intensity of GDP to 3.4% in 2016, while reducing emissions of major pollutants.¹²

In China, much attention is paid to the development of the regional economy. In the 13th five-year plan , this is a coordinated development of four major regions of the country - eastern, central, western and north-eastern. At the same time, three priorities in China's regional development were identified-the Silk Road Economic Belt (One Belt, One Road)program¹³, Development of the Beijing-Tianjin-Hebei region and the Yangtze River Economic Belt. In the areas of infrastructure, production facilities, environmental improvement, and environmental protection, measures have been taken to encourage the development of national regions - Xinjiang, Tibet, and areas where Tibetans live compactly in other provinces.

External conditions include the deterioration of the international economic situation in connection with the global financial and economic crisis of 2008-2009. Since the end of the zero years of the XXI century. For China, export opportunities to the United States, the European Union and Japan were limited, which significantly reduced the country's economic potential focused on foreign markets. Therefore, due to the emerging economic problems in the countries-its main trading partners - the United States, Japan, and the EU - China was forced to limit exports to these countries and expand them at the expense of the BRICS, ASEAN, and Africa countries.

FOREIGN TRADE DEPENDENCE OF THE CHINESE ECONOMY

Both exports and imports have grown significantly in recent years. However, over the past year, due to the narrowing of the commodity market of China's main trading partners, the volume of foreign trade has decreased: from $4.303 billion in 2014 to $3.951 billion. - in 2015, due to lower exports. China has already moved from exporting primary processed goods (raw materials) to primarily exporting mechanical engineering products and new and high technologies. Various factors played a significant role in this, starting from the expansion of the rights of enterprises in the sphere of foreign economic activity at the first stage of the reform and ending with China's accession to the WTO.

As a result, after China's accession to the WTO in 2001, the dependence of the Chinese economy on foreign trade significantly increased. If in 2001 the share of foreign trade in GDP was 38.5%, then in 2006 it was already 66.5%, and as a result of the global financial and economic crisis, by 2009 it had fallen to about 44%.

In the future, the foreign trade dependence of the Chinese economy decreased and, as of 2015, the share of foreign trade in GDP was already 36.4%, while the export quota (the share of exports in GDP) fell to 20%. According to various indicators of the share of foreign trade in GDP, China has already returned to the level of 1998-2000.

In early 2010, China indicated its foreign trade orientation to the ASEAN countries, where it announced the creation of the ASEAN + China Free Trade Zone. In our opinion, under certain conditions, China will be able to get rid of the dependence of the Chinese yuan on the US dollar, and after switching to full convertibility of the yuan and expanding exports to Southeast Asian countries, it will eventually be able to turn the yuan into a reserve currency in the Asian part of the world - in the countries of Southeast and East Asia.

This is evidenced by the fact that since December 1, 2015, the IMF has included the Chinese yuan in a special basket of world currency reserves, which means that all banks licensed to operate on the world market must purchase Chinese yuan from the foreign exchange market in order to have reserves in yuan. In fact, the addition of the renminbi (renminbi) to the SDR-¹⁴ currency basket, along with the US dollar, euro, British pound, and Japanese yen, effective October 1, 2016, is the result of more than 30 years of China's reform and opening-up efforts, which have been recognized in the global community.

It is still growing - from $119.7 billion in 2014 to $126.3 billion. - in 2015, the volume of foreign direct investment (FDI) in the Chinese economy, and China's foreign direct investment in non-financial projects already amounted to $118 billion ¹⁵. In China itself, the experience of the Shanghai Free Trade Zone has been actively disseminated to boost foreign economic relations. In 2015 alone, similar zones were created in the coastal provinces of Guangdong and

Fujian and in the city of central subordination of Tianjin. Agreements on free trade zones were also signed with the Republic of Korea and Australia, and a protocol on the modernization of the ASEAN-China free trade zone was signed.

Two major financial institutions were also officially established - the Asian Infrastructure Investment Bank (AIIB)¹⁶ and the Silk Road Fund, with the help of which China intends to actively develop international economic cooperation during the 13th five-year plan.

Today, China's main task is to develop international cooperation in the field of production capacities and promote the latest Chinese technologies and equipment abroad, in particular, in the construction of high-speed railways and nuclear power facilities.

* * *

In general, it can be concluded that in the foreseeable future, at least in the 13th five-year plan (2016-2020), China is not in danger of an economic crisis. Current economic risks do not pose a serious threat to stable economic development, as evidenced by the high GDP growth rates in comparison with other countries of the world.

The country's financial system is stable, and public debt is moderate (less than 60% of GDP, not more than 270% of GDP, according to mckinsey17). The financial resources available in bank accounts of most businesses and households are a kind of" safety cushion " - only 117.4 trillion yuan - deposit balances and 86.8 trillion - loan balances at the end of the year.

Moreover, according to Chinese statistics, the majority of investments in fixed assets are not made up of bank loans, state budget investments, or foreign investments, but rather by enterprises ' own funds - over 70% of investment in fixed assets, while bank loans account for less than 12% ¹⁸.

A certain risk for the Chinese economy is a large share of the growing money supply in circulation relative to GDP, but the Chinese government and the People's Bank of China have long been using financial and monetary measures to stimulate the growth of investment in the economy. In the PRC, they mainly control the share of the money supply (cash in circulation), which has decreased to 12% of GDP and has been maintained for a decade from 12% to 15% of GDP, which significantly restrains inflationary processes.

Serious long-term risks not only for the Chinese economy, but also for the whole of China are three global problems - population, lack of energy resources and environmental pollution, the aggravation of which can plunge China into a serious economic and then political crisis.

Only if these three main problems are consistently addressed can China ensure economic stability and achieve its goals-building a Xiaokang (small prosperity) society by 2020, and a Fuyu (universal prosperity) society by 2030.

¹ 2015-nian kuomin jingji he shehui fazhan tongji baogao (Statistical Report of the Socio-Economic Development of the People's Republic of China in 2015). GSU of the People's Republic of China, February 29, 2016), p. 2.

² Ibid., pp. 11-12.

³ Ibid., p. 7.

⁴ Shibada zai Jing kaimu, Hu Jintao zuo baogao (quanwen) (The 18th CPC National Congress opened in Beijing, report by Hu Jintao) - http://china.caixin.com/2012 - 1-08 / 100458021_all. html#page6, Caixinwang, 08.11.2012.

⁵ 2015-nian kuomin jingji he shehui.., p. 12.

^{Li Keqiang.} 6 Report on the work of the Government at the 4th session of the NPC of the 12th convocation, p. 27 - http://russian.news.cn/2016 - 03/17/c_135198801.htm

⁷ Zhongguo tongji zhaiyao-2015 (Chinese Statistical Yearbook-2015). Beijing, 2015, p. 21.

^{Li Keqiang.} 8 Decree. soch., p. 3.

⁹ http://news.xinhuanet.com/world/2014 - 11/09/c_1113175964.htm

^{Li Keqiang.} 10 Decree. soch., p. 3.

¹¹ 2015-nian kuomin jingji he shehui.., p. 3.

¹² Ibid., p. 14.

¹³ For more information, see: Ostrovsky A.V. Chinese project "Economic belt of the Silk Road" / / Asia and Africa Today. 2016, N 2. (Ostrovskiy A.V. 2016. Kitaiskiy proekt "Ekonomichesky poyas Shelkovogo puti" // Aziya i Afrika segodnya. N 2); Sazonov S. L., Petrunko K. A., Wu Zi (China). Multivariance of the transport strategy of the PRC / / Asia and Africa today. 2016, N 5. (Sazonov S.L., Petrunko K.A., U Tszy (China). 2016 ... transportnaya strategiya KNR // Aziya i Afrika segodnya. N 5) (both in Russian)

¹⁴ SDR - Special Drawing Rights (or SDR-eng. Special Drawing Rights (SDR) are an international reserve asset created by the IMF in 1969, and they supplement the official reserves of its member States.

¹⁵ 2015-nian kuomin jingji he shehui.., p. 9.

¹⁶ For more information, see: Klishin V. V., Pavlov V. V. Asiatic Bank of Infrastructural Investments / / Asia and Africa Today. 2016, N 6. (Klishin V.V., Pavlov V.V. 2016. Aziatskiy bank... // Aziya i Afrika segodnya. N 6) (in Russian)

¹⁷ McKinsey included, in addition to government debt, other corporate debts and debts of enterprises of various forms of ownership, including unpaid loans and local budget deficits.

¹⁸ See Zhongguo tongji zhaiyao, p. 77.

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