VIDEOS | MAY 2019
Susan Dietz-Henderson: When Xi Jinping first came into power in 2012, his first five years were all about what I call the great reset, because he was going to embark on the great rebalance. He needed the whole of China on the same page to follow the reform agenda that he had in mind, which is not necessarily going to be in five-year chunks as people seem to think. It has a much longer time frame in mind.
When I talk about the great reset, one of his first priorities was to launch the anti-corruption campaign. As he had been waiting in the wings to step into power, he had been watching the phenomenon of the serious level of anti-corruption that had compromised the way the reform agenda of the last decade before him had been progressing. It was quite an ambitious and aggressive campaign. He’s made it clear that this campaign is going to go on well after people think, the next five years. Enabling everybody to get on to the same page has meant that they’re all obedient in following the reform agenda.
What I call the great rebalance is about restructuring the economy to be more consumption-driven. Less reliant on the old economy, heavy industry, reliance on exports but being able to tap into the great consumer story of China. We have this growing middle class, willing to consume, eager to adopt new technologies and new applications for e-commerce, just willing to take advantage of the great prosperity that is evident in China now.
Xi Jinping has for the next five years, which he’s just embarked on, a ratcheting up of the agenda, whether it’s poverty alleviation, whether it’s the reduction of the income disparities between geographical regions, the poorer inland and the richer east, or whether it’s those who have and those who have not. In his mind and his new mantra, rather than the China dream, is to create the happy life that the people aspire to. This means that we’re going to see stronger efforts in increasing qualitative growth, qualitative development, as opposed to quantitative growth. The fact that GDP may slow over the next five years is not really the priority for them.
What the priority is, is in building up the quality of the environment and the quality of the economy. That lends to the restructuring priority that they have. Environmental pollution is going to be tackled quite aggressively. You’ll see it in terms of how it’s being utilized and strictly implemented in a way to strengthen the supply side reform priorities that they have at the moment, which is aimed at reducing excess capacity in the pollutive industries, in the industries that are no longer appropriate for a more service-oriented economy. Whether it’s coal-fired power stations, whether it’s polluted cement industries, or whether it’s the aluminum sector, there’s going to be a lot of consolidation in those sectors as they get rid of the excess capacity and the inefficient producers.
Using environmental measures and strictly enforcing environmental standards has that two-fold effect of giving impetus to the supply side reform, the reduction of excess capacity, but also cleaning up the environment. A lot of environmental remediation measures are in place. Standards on emissions out of factories. All of these things are being implemented quite strictly, and it is painful for those producers, but it’s part of the overall agenda Xi Jinping is quite serious about.
Susan Dietz-Henderson is the china affairs director at Capital Group. She has 31 years of diplomatic experience and has been with Capital Group for 11 years. Prior to joining Capital, Susan was the Australian Consul-General in Shanghai, an assistant secretary for the Australian Department of Foreign Affairs and Trade in Canberra, and had other diplomatic postings in China, the United States, Australia, and Papua New Guinea. She holds a diploma in applied economics from the University of Canberra, a bachelor’s degree in arts and Asian studies from Australian National University, and a diploma in applied linguistics and translation from Wycliffe College. Susan is based in Beijing.