No. 76 | 08.01.2023

Dear reader,

Dongsheng will be going on a month-long hiatus, taking advantage of the double new year period to revamp our Chinese Voices publication. Stay tuned for a new and exciting format in the Year of the Rabbit as we continue to bring Chinese perspectives and understandings of a rapidly-changing society and its global impact.

— Dongsheng Editorial Collective

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No. 75 | 01.01.2023

Dear reader,

In celebration of the New Year, 2023, Chinese Voices will be taking a break. Our next issue will be published on January 8, 2023.

—Dongsheng Editorial Collective

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No. 74 | 26.12.2022
A worker refuels a hydrogen-powered bus in Ordos, Inner Mongolia autonomous region, in October. [WANG ZHENG/FOR CHINA DAILY]
Boosting Domestic Consumption is the Basis for Stabilizing Economic Growth in 2023
Lú Fēng (卢峰)
Lu Feng is a professor at Peking University’s National School of Development. He has, for many years, studied open-economy macroeconomics and the agricultural economy in China. He is the founding editor-in-chief of the China Economic Journal. He has served as an advisor to the People’s Republic of China’s Ministry of Finance and the Ministry of Human Resources and Social Security and has worked as a consultant to China’s Central Bank.

Context:

On December 6, the Political Bureau of the Communist Party of China’s (CPC) Central Committee published policies that will better coordinate pandemic prevention and control and economic and social development, comprehensively deepen reform and opening up, and vigorously boost market confidence, prioritizing the national economy’s recovery. These policies will bring new changes to the employment market, the fight against inflation, the growth of domestic consumption, and the development of the service sectors as China transitions to a new stage of pandemic control.

Key points:

2023 Potential GDP growth is expected to be higher than 5%

  • The implementation of these CPC policies support a goal of more than 5% GDP potential growth to effectively promote the economic recovery in 2023. China still needs to prudently consider the uncertainties of this transition stage to new pandemic control policies and use the advantages of its institutions and governance system to deal with external challenges.
  • The rebound of the 2023 GDP will be demonstrated through the return of migrant workers to the urban and industrial areas, the surveyed urban unemployment rate decrease, and the net increase in urban employment, thus highlighting the improvement of the economic operation and people's livelihood.

The consumer market is expected to improve in 2023

  • The 5% GDP potential growth rate in 2023 will drive many economic activities, especially consumer demand. Though economic fluctuations may occur in the first quarter of 2023, the effectiveness of the new policies will be gradually realized, and once fully implemented, will result in the rebooting of the consumer market.
  • With the changes in the pandemic control policies, investment and export will grow faster than consumption in China. It’s hard to maintain surplus-driven growth when the response to inflation by the U.S. and the West is austere monetary policies, thus causing a global economic slowdown. The decision to boost consumption and stabilize the macroeconomy through a basket of policies, including new pandemic prevention and control measures, was inevitable.
  • The new energy and electric vehicle industries have become the highlights of China's economic vitality and resilience in the post-pandemic era. The previous prevention and control measures however, must be changed in a timely and orderly way. For industries such as steel, which have undergone rounds of cyclical fluctuations and structural adjustments, special industrial policies, beyond market rules, should be implemented more prudently.

New measures will be taken to respond to inflation

  • To address the pressure of short-term adjustments and weak expectations for future economic growth in the private sector, it is necessary to balance the development of this sector and the implementation of policy measures, strengthen industry regulation, emphasize the rule of law and procedural transparency, deepen reforms to address the real problems, and improve institutional mechanisms.
  • In the face of global downward economic pressure, China will continue its positive macro policies to gradually revitalize consumer demand and keep inflation at a low rate. Improved counter-cyclical regulation and necessary supervision will also stabilize market expectations and help different social sectors go through this new transition stage.
How will China Solve Its Fiscal Challenges in 2023?
Zhāng Míng (张明)
Zhang Ming is the deputy director of the Institute of Finance and Banking (IFB) at the Chinese Academy of Social Sciences (CASS) and the deputy director of the National Institution for Finance and Development.

Context:

On December 6, 2022, the Political Bureau of the CPC Central Committee met and proposed the following 2023 goals: stabilize economic growth, employment, and prices, and achieve effective improvement of economic quality and reasonable economic growth. Since the beginning of 2022, China's economic situation has been greatly impacted by the pandemic. In contrast to a sharp decline in fiscal revenue distribution from the central to local governments, fiscal expenditures have increased dramatically in the context of the nationwide resistance to Covid-19. How will China solve the fiscal challenges to guarantee stable economic growth? Zhang Ming expressed his point of view in a recent interview with Guancha.

Key points:

The main reason for China’s fiscal revenue decline in 2022 is an overall economic downturn, especially in the real estate sector.

  • Revenues from the general public budget and the governmental fund budget are the two major revenue sources for the Chinese government. These two are regarded as the government's comprehensive financial resources.
  • In 2022, the government's overall financial resources declined significantly, with a cumulative year-over-year (YoY) decrease of 13.4% from January to October. The revenue for the local governmental fund budget fell 24.3% YoY to 4,853.7 billion yuan. The reason for this was the dramatic revenue decrease that was generated from the transfer – by local governments to privately owned companies – of the right (through paying long-term rent) to use state-owned land, which had accounted for nearly 90% of the total local fund budget revenue, now down 25.9% compared to the same period in 2021.
  • At the same time, downward economic growth and continued years of tax cuts have driven down tax revenue growth.

With the reduction in fiscal revenue, it is a reasonable choice for the government to further expand the scale of the national debt in order to achieve the goal of stable economic growth in the future

  • The widespread perception at home and abroad that China's macro leverage ratio is too high is untrue. The leverage ratio of the Chinese central government, that is the ratio of central government debt to the Gross Domestic Product (GDP), is only 20%, and the ratio of national government debt to GDP was 47% (in 2021); both are far below the level of most developed countries.
  • Increasing the national deficit through issuing more national debt will inevitably lead to an increase in the Chinese government's leverage ratio. However, as long as the government can keep interest rates relatively low and inflation under control, the most important thing is to reinvigorate economic growth.

Optimizing the financing structure is a major issue in the implementation of expansionary macroeconomic policies

  • The core of expansionary macroeconomic policies is that local governments facilitate the development and organization of companies, mainly state-owned enterprises (SOE), to invest in infrastructure to drive economic growth. However, the central government doesn’t want to increase its debt ratio. This has led to unhealthy financing mechanisms for infrastructure development: nearly 80% of infrastructure funding is self-financed by local governments and the enterprises engaged in the construction work. The central government's direct support for infrastructure is minimal. Only 2% of the central government’s total budget was invested in infrastructure in 2020.
  • Lacking financial support from the central government forced local governments to rely on market-based, high-cost financing methods, such as special bonds, enterprise bonds, and bank loans. The consequence is these more expensive funding methods are more frequently used in infrastructure investment.
  • Although this kind of financing structure reduces the fiscal risk of the central government, demonstrated by the ratio of national debt to GDP, it increases the local governments’ fiscal risk. This financing structure needs to be optimized.
  • Increasing the expenditures of the general public budget will lead to an increase in China's fiscal deficit as a share of GDP, thus making the deterioration of China's fiscal condition visible. However, given the continued decline in economic growth and the increasing unemployment rate, especially among the youth, it is a choice of the lesser of the two evils, exchanging a more visible decline in the fiscal condition for the stability of economic growth.

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No. 73 | 18.12.2022
During the pandemic, the Shenyang Federation of Supply and Marketing Cooperatives have stabilized food prices to ensure people’s livelihood. [All China Federation of Supply and Marketing Cooperatives]
The Main Benefits of the Return of Supply and Marketing Cooperatives
Hú Huáchéng (胡华成)
Hu Huacheng is a well-known business and financial writer, and the founder and chairman of Zhihe Island Consulting Group (智和岛咨询集团). He was the founder of the Talent Employment Network, the largest chain recruitment platform in China, the Dean of the HR Business School, and the CEO of Pioneer HR Group (先锋人力资源集团)

Context:

Hubei, Ningxia, Chongqing and other provinces have restored supply and marketing cooperatives. In Hubei province, grassroot cooperative members have reached 452,000 and the number of peasant members has risen from 51,500 in 2016 to 333,000 in 2021. What benefits can the supply and marketing cooperatives bring?

Key points:

  • Supply and marketing cooperatives can increase farmers' employment, stabilize their household income, and improve their pension coverage, which supports rural revitalization and common prosperity.
  • These cooperatives can also ensure food security and increase farmers' motivation to continue farming. Today, township grassroots supply and marketing cooperatives not only provide household goods, but also below-market priced agricultural tools, allowing farmers to acquire less expensive agricultural products and restraining seed, fertilizer, and pesticide dealers from raising prices.
  • As a ballast of market prices, supply and marketing cooperatives may stabilize the prices of basic necessities and curb the excessive rise in the Consumer Price Index (CPI). Cooperatives exist not only in rural areas, but also in the cities, including big ones like Beijing and Shanghai, mainly providing basic goods, such as vegetables, pork, grain, and oil, which are directly linked to the CPI.
  • Only under emergency scenarios, should supply and marketing cooperatives stabilize food prices. However, in order to achieve economic sustainability, the cooperatives still need to fully develop their scale and supply chain advantages to reduce costs. The top-level designers of the cooperatives must continually improve the efficiency of the business model.
Gradually Easing Covid-19 Restrictions: How is Baoding, Hebei Province Now?
The Paper (澎湃新闻)
The Paper, founded in 2014 and affiliated with the Shanghai United Media Group, is a digital media outlet focusing on current affairs.

Editor’s note:

Since November 2022, the Chinese government has continuously adjusted its policy on the prevention and control of Covid-19 in the overall direction of gradually easing restrictions and returning to more normalcy in production and everyday life. This is in line with the current situation of a milder mutation of the Covid virus and the lower rate of severe cases and mortality. It reflects the pragmatic, positive, and flexible attitude of the Chinese government in the process of fighting Covid-19. Nevertheless, the rapidly increasing number of infections that surfaced with the implementation of less stringent control measures is causing some concerns in China’s society. Baoding City in Hebei Province, where the less rigorous control measures were implemented earlier, attracted the attention of the online community. The current situation in Baoding has been relatively stable and can be used as an example for the whole country in responding to the current Covid situation.

Context:

With 45,000 comments and 290 million reads, "Baoding epidemic situation" became the Weibo trending topic (Weibo is one of the top social media platforms in China) in early December. In interviews with a number of Baoding citizens, the journalist from The Paper found that lockdowns and PCR tests have been eliminated from the daily lives of the people of Baoding, industry is returning to its normal processes, and the people are enjoying a more relaxed life.

Key points:

Why did the topic of the "Baoding epidemic situation" attract so much national attention? Because social media, as a huge "megaphone", has amplified and distorted the reality of the situation.

  • Baoding is a city of 10 million people; however, the people who really influence the netizens are those who most effectively use social media. For example, if there are 1,000 people who want to buy medicine, and of these 1,000 people only a small portion are unable to do so, they would post negative comments on social media, which then are easily amplified exponentially. But in fact, these voices do not represent the overall situation in Baoding.
  • There are also some who utilize self-media who, taking advantage of the misinformation, spread some untrue but sensational information just to catch people’s attention and attract new followers.

What are the current epidemic prevention policies in Baoding? As a benchmark, let’s examine the "New Ten Articles", issued on December 7 by the Joint Prevention and Control Mechanism of the State Council.

  • Except for nursing homes, welfare institutions, medical facilities, childcare providers, primary and secondary schools, and some other special places, there is no longer a need to check PCR negative test result certificates, green health codes, or scan venue QR codes when entering public places and taking public transportation.
  • Asymptomatic patients and those with mild cases who are eligible for home quarantine can do so; however, they can also voluntarily choose to go to centralized quarantine and treatment centers.
  • It is no longer required for administrative areas to carry out mass PCR testing.

What is the biggest concern of the people: the shortage of medical resources, especially access to doctors and medicines.

  • In order to facilitate people’s purchase of required medicines, the Baoding Municipal Market Supervision Administration made public the phone numbers of 1,296 pharmacies in the three main urban areas of Gaoxin District, Jingxiu District, and Lianchi District, so that people can more easily contact them to buy medication.
  • In response to the mass demand for cold and fever medicine, they also have been actively working with Meituan and other online medicine purchasing platforms and coordinating the supply of medicines from other provinces, in order to supplement the online supply of medicine.
  • On December 6, Baoding Daily printed the emergency and fever clinics of many hospitals in Baoding that are open almost 24 hours a day to facilitate the public’s ability to seek medical treatment in a timely manner.

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No. 72 | 11.12.2022
At the 19th CPC National Congress, Xi Jinping set the goal of turning Chinese enterprises into “world-class, globally competitive firms” by further reforming state-owned enterprises and developing mixed ownership of economic entities. [CGTN]
An Interpretation of Capital Management Under the Socialist Market Economy
Mèng Jié (孟捷)
Meng Jie is a columnist at Guancha and a distinguished professor at Fudan University’s School of Economics. His research interests are the principles of political economy, modern capitalist economy, and socialist political economy with Chinese characteristics.

Context:

After eradicating absolute poverty in 2021, China is marching toward the goal of achieving common prosperity. How can the government regulate and guide capital? Should state-owned capital compress the space in which private capital exists? Is the land-finance model dysfunctional? What does common prosperity mean in the new stage? These questions have sparked discussions and concerns. Guancha invited Meng Jie, a distinguished professor at the School of Economics at Fudan University, to give his in-depth interpretation on regulating income distribution and wealth accumulation, clarifying several misunderstandings regarding managing capital under the socialist market economy.

Key points:

The meaning of regulating income distribution and wealth accumulation

  • At the primary stage of socialism, to achieve common prosperity the real economy should be promoted by using the surplus created, and ensuring sound regulations to guide capital. This is not only an economic issue, but also a political issue. After the 16th National Congress, the socialist market economy with Chinese characteristics entered a new phase. Both private capital and state-owned capital needed regulation and guidance for further development. As an instrument of national economic governance, state-owned capital is more accountable to social capital and social surplus than private capital.
  • Primary distribution is the most crucial step to achieving common prosperity. China’s national economic governance should increase productive investment through reforms and mechanism arrangements such as those that result from the policy of “houses are for living, not for speculation”. Prior to individual income distribution, the government should first manage both public investment and public consumption funds on a societal level. Primary distribution will be improved by curbing economic bubbles, i.e., speculation, and channeling profits or savings into productive investments, which will lay a solid foundation for common prosperity. In this way, enterprises can assume the responsibility for more of society’s capital accumulation, thus expanding the resources for achieving common prosperity. It is a policy goal and a standard pursued by the Party-led state economic governance to use capital as a factor of production that creates profit for the socialist state and people.

Land finance drives China's economic development, but it will gradually decrease in economic importance

  • Land finance also demonstrates the relationship between the market and the state. Local governments transform savings into investment, using land as a factor of production and as a financial asset to plan economic development. Local governments have strategically used land rents for infrastructure investment and investment subsidies for enterprises, which explains why China's fixed capital grows faster than in both developed and other developing countries.
  • Selling land for residential real estate development is an important source of government fiscal income. But this model is ultimately unsustainable. Real estate speculation could affect the real economy and cause potential financial crisis. High housing costs also lead to social problems such as declining marriage and fertility rates, thereby causing a long-term negative impact on supply-side economic development. “Houses are for living, not for speculation”, for example, is a national policy that deals with the relationship between finance and the real economy, and it is of vital importance to common prosperity.

How to put the regulations and guidance into practice

  • Implementation essentially means regulating the behavior of local governments in the context of China’s situation. Beyond its impact on private capital, it focuses on state-owned capital by transforming state-owned enterprises into state-owned capital investment companies and reforming these enterprises by the modern operation of financial capital. One of the most significant sectors in this regard is the regulation of the platform economy. China must solve the problems of its monopoly and carry out an in-depth study of how to implement the basic socialist economic system within the platform economy. It is incorrect to claim that “the state sector advances and the private sector retreats” without a case-by-case analysis.
  • The functions of the state and, particularly the government, should be adjusted to reflect the changes in the economic sectors and forms to achieve symbiotic development in creating a level playing field for both state-owned enterprises and private enterprises. Under the multi-policy objectives, regulation and guidance should avoid sharp pivots.
A New Income Redistribution Solution: Balancing Efficiency and Equity in the Era of Common Prosperity
Zhái Dōngshēng (翟东升)
Zhai Dongsheng is currently the Vice Dean of the School of International Relations, a researcher at the International Monetary Institute, and the Deputy Director and Secretary General of the Research Center for China’s Foreign Strategies at China’s Renmin University. His main research interests are the international political economy of money and finance, China’s foreign economic relations, and US political economy.

Context:

China's economy is currently facing multiple challenges due to the continued presence of the COVID-19 virus, the demographic structure of an aging population and falling fertility rates, and so forth. These challenges have a big impact on economic growth and social equity. Professor Zhai Dongsheng's team proposes the “Future Basic Income” (FBI) plan, a theoretical solution that could improve the redistribution system in China, thus ensuring more equitable opportunities and strengthening social security to effectively contribute to the realization of common prosperity.

Key Points

Five reasons to support FBI:

  • Since 2021, the growth of China's consumer market has slowed. It is an urgent necessity to provide Chinese residents with more disposable income to boost domestic demand.
  • There is an inverse ratio between the increase in China’s aging population and the decrease in fertility rates among its young people. This leads to a large decrease in lower-skilled workers’ availability for the labor market, while the small number of entrants are mainly college students. The lag in upgrading the industrial structure and the rapid change in the labor supply composition form a huge mismatch, causing difficulties in both recruiting factory workers and providing college students with employment and posing potential political and economic risks.
  • The Chinese government’s social spending, as a proportion of total spending, is much lower than in other large industrial countries.
  • The fully digitalized and knowledge-based economy implies an increase in the bargaining position of capital in relation to labor, and of elites in relation to the general population, which will possibly lead to large-scale unemployment. Those individuals who potentially lose their jobs are likely to be the key forces holding back technological innovation. They need to be compensated so that the road to new technologies can be paved unobstructed.
  • China's current public debt to GDP ratio is lower in comparison to major developed countries, which leaves ample space for income redistribution system reform.

The FBI redistribution solution: its theoretical foundations are people-oriented political economy

  • Provide children, aged 0 to 18 years, a monthly, relatively fixed income. The amount will only increase, not fall in the future.
  • For young people aged 18 to 35 years, distribute an income supplement that will be dynamically adjusted according to the employment rate, inflation, the international balance of payments, and fertility rates. This can effectively expand domestic consumption, drive investment, and increase tax revenue. When young people have more disposable income, they are more likely to consume.
  • Adults, over the age of 35, should receive a one-time government grant for education or skills training, which can help them cope with the midlife crisis brought on by technological advances.
  • Monies should be disbursed by the central government in digital currency or other electronic forms such as WeChat and Alipay to enhance usage efficiency and reduce supervision costs.
  • The money’s source will come primarily from expanding the national debt priced in RMB, with tax increases only as needed.

Two important results from FBI: maintaining financial sustainability and the equity of social distribution

  • FBI provides young people with a basic income, compensating for the inequalities in developmental opportunities in people's early life, thus helping different members in society to achieve a fair chance as they begin their adult life.
  • The unconditionally provided basic income for young people between 0 to 35 years ensures that some of their basic needs are met.
  • With this basic income, ordinary workers will have enhanced bargaining power in the private sector, and more attractive alternatives, such as self-employment, upgrading skills for better-paid jobs, etc. This could help to effectively decrease or even eliminate the exploitation caused by market competition, free people from the alienated labor that they have to perform to meet their basic needs, and transform their work into autonomous labor to fully develop their abilities and realize more freedom.

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No. 71 | 04.12.2022
Farmers promote and sell green tea via livestreaming in Songtao county, Guizhou province. [Photo by Long Yuanbin / chinadaily.com.cn]
Supporting Rural Revitalization: Integrating Corporate Development, Talent, and the Collective Economy
tongren.gov.cn (铜仁网)
Tongren.gov.cn is provided by the Tongren Committee of the Communist Party of China (CPC), which adheres to the Party’s concept of “authority, strength, and the public”. It is the largest online media organization and information-based interactive platform in Tongren.

Context:

Songtao is a Miao autonomous county located in Tongren City, Guizhou Province, Southwest China. The county is actively exploring the development mode of integrating collective corporations, talent resources, and the village collective economy. Through forming the collective corporations at county, town, and village levels that strengthen communities and enrich the people, Songtao is building a long-term effective mechanism that involves counties, towns, villages, and all households. At the same time, Songtao is working with the Chunhui Service Center (CSC), a public service organization created by the Guizhou Provincial Committee of the Communist Youth League, which organizes university students to go to the countryside to support rural construction. The county effectively integrates CSC’s talent resources to provide intellectually strong support to guarantee the county's high-quality rural revitalization.

Key points:

Strengthen team building to promote the development of the village collective economy

  • A leadership team must be built through organizing the secretaries of the party branch organizations in each village (community). This team will become shareholders in the 27 village-level collective corporations, which should employ them as the company leadership. They will manage the development of the village collective economy, which helps the people to increase their income and wealth.
  • Team building must include the management of the talent resources through adhering to the principle of prioritizing party members and selecting and recruiting people that have shown proficiency in business management. The county-level parent collective corporation and the town-level government must choose the talent who will become the chairman and legal counsel of the village-level collective corporations, while establishing a meritocratic ladder-type mechanism for choosing future leaders who will fill management positions.
  • The technical team must be built by integrating the young CSC talent resources and employing them as the technical instructors on the developmental issues of agricultural production, village revitalization, and peasant living conditions in the village-level collective corporations. Songtao is fully committed to the role of scientific and technical talent.

Strengthen talent cultivation to lay a solid foundation for the development of the village collective economy

  • Songtao searches for native talent in each village and provides skills development and technical training to accurately match the needs of different industries and projects. This can also drive the stable employment of this talent and achieve the goal of enhancing both its quality and quantity.
  • The county-level parent collective corporation has developed strategic cooperation with Songtao University’s CSC, taking full advantage of their young talent and guiding them to conduct e-commerce business through Tik Tok, Taobao, and other such platforms. Since the beginning of this collaboration, more than 15,000 kilos of Songtao agricultural products have been sold, accounting for sales of 2.7 million yuan.
  • The county makes full use of all the government levels’ skills training resources to strengthen the education of the secretaries in each village party organization, the legal personnel of village-level collective corporations, and other talent. The county carries out professional skills appraisals and issues corresponding certificates to the qualified people.

Strengthen the policy guarantee to accelerate the development of the village collective economy

  • The party organization secretaries, village cadres, and management personnel who have made an outstanding contribution to promoting the development of the village collective economy, will receive an award of 20 percent of the village collective’s annual operating income, to further stimulate and inspire them.
  • The county makes it clear that all the village-level collective corporations should operate independently and be responsible for their own profit and loss. According to the operating yield, project return rate, resource conversion rate, and other management measurements, these corporations are divided into three categories: excellent, good, and poor, and will be managed differently to achieve market-oriented development. Excellent corporations will be provided with more resources and their dividend, based on the shareholding ratio, will be increased by 10 percent. Good corporations will receive their standard dividend. Poor corporations’ share of the dividends will be reduced by 10 percent, and there will be a reorganization of their corporate board if they have had poor performance for three consecutive years.
  • The county-level parent collective corporation coordinates and integrates the talent resources of each town and street. When necessary, it transfers suitable local people to these village-level corporations, which are lacking human resources, so as to promote the sharing of rural local talent, help industrial development, and realize an increase in the people’s income.
Supervising Village Cadres Who Have “Triple Positions on One Shoulder” (三职一肩挑)
Zhōu Chángjūn (周长军)
Zhou Changjun is the Dean of the School of Law, the Director of the Criminal Law Center, and the Deputy Secretary of the Party Committee at Shandong University.

Context:

There are three models for appointing the Village Party Branch Secretary, the Chairman of the Village Committee, and the Director of the Collective Economic Organization. The first is one position per cadre, “separation of positions” (全分设); the second is two positions per cadre “double positions on one shoulder” (一肩双挑); and the third is three positions per cadre “triple positions on one shoulder” (三职一肩挑). Since October 2020, 491,000 Village Party Branch Committees and Village Committees nationwide have elected new cadre to fill leadership positions to better solve the problems faced by rural collective economic organizations.

Key Points:

Understanding the three appointment models of village cadres

  • The "separation of positions” model (全分设) means that different cadres serve as the Village Party Branch Secretary, the Chairman of the Village Committee, and the Director of the Collective Economic Organization. This model can enhance mutual control and supervision among different grassroot organizations, safeguard the self-governance of villagers, and improve the efficiency of different grassroot works. The model of “double positions on one shoulder” (一肩双挑) means that one cadre serves as the Village Party Branch Secretary and the Chairman of the Village Committee simultaneously, while a second cadre serves as the Director of the Collective Economic Organization. It follows the policy of "separating politics and economics". However, disagreements and finger pointing occur under both models when multiple interests are at stake; thus, they fail to see the whole picture and to form a synergy between these interests.
  • “Triple positions on one shoulder” (三职一肩挑) is an innovative model of village governance in the new era, in which one cadre is elected to all three positions. The Village Party Branch, who is the core of policy implementation, can effectively integrate village resources, improve decision-making, and promote the effectiveness of rural governance. However, proper measures still need to be implemented to protect villagers’ self-governance, avoid excessive concentration of power in one person, and conduct effective supervision.

Challenges of supervising cadres who are responsible for the “triple positions”

  • With one person being responsible for all three positions, it can be a breeding ground for corruption that is hard to supervise and restrict. Inside the collective economic organization, village representatives may have a tendency to be weak in exercising their rights of disciplinary supervision and could remain inactive in general member and villager meetings.
  • The Supervisory Committee of Village Affairs, in general, supervises the use of funds, assets, and resources in the rural collective economy. Independent supervision is hard to ensure when most directors of the collective economic organization are members of the village Party branches. Part of the supervisory boards of collective economic organizations’ responsibilities may become a mere formality when the management and use of village committee funds are not separate from collective funds.

How to strengthen the supervision of village cadres

  • The Central Commission for Discipline Inspection and the National Supervisory Commission should play the main role in directing the Party's development on its working style and anti-corruption policies and integrating the departments of civil and rural affairs, finance, and agriculture to enhance the guidance, supervision, and support for rural work.
  • Supervision and management committees of rural collective assets, at all levels, should reinforce the review of major project investments, the use of funds, asset alterations, profit distributions, financial audits, and important personnel changes in rural collective economic organizations.
  • The agricultural economic management station should comprehensively carry out the daily supervision and management of collective assets of towns and villages. The governance institutions of rural collective economic organizations should act in accordance with the law. Economic cooperatives are the mainstay of managing rural collective assets. The meeting mechanism of representative members, the board of directors, and the board of supervisors should also be established and perform their duties in accordance with the law.

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No. 70 | 27.11.2022
Aerosun provides cryogenic liquid transport vehicles to support the successful launch of China’s Long March-5B Y3 rocket. [Aerosun]
Pioneering Industrialization in China: The Story of the Jinling Machinery Manufacturing Bureau
Shēn Péng (申鹏)
Shen Peng has published over 1,000 articles on popular science and provides political commentary through accounts on WeChat and the Q&A website Zhihu. With over one million followers and as one of the top-ten influencers on Zhihu, he plays an active role in spreading the core values of socialism and creating patriotic-themed works.

Context:

From January to August 2022, China exported a total of 1.91 million vehicles, overtaking Germany to become the world's second-largest auto exporter, behind only Japan. Changan Auto, one of the 'Big 3' domestic automobile manufacturers, along with Geely and Great Wall Motor (GWM), held its 150th anniversary at its birthplace, Jinling Machinery Manufacturing Bureau, the first manufacturing facility in Nanjing, a springboard for China’s modern industrialization, and the cradle of China’s national industry.

Key points:

  • In 1865, the Jinling Machinery Manufacturing Bureau was founded during the Qing Dynasty’s “Self-Strengthening Movement” (a period of rapid Chinese modernization). In 1883, when the Sino-French War broke out, the Jinling Machinery Manufacturing Bureau received armament orders from across the country, and its development as a critical manufacturing center began to take shape. In 1888, the Bureau started production of the Maxim gun, the first generation of heavy-machine guns in China. However, in China’s semi-feudal and semi-colonial state, technological advances were hard to develop. At that time, the foreign forces and compradors made it very difficult for China to develop a domestically owned high-grade military industry. The defeat in the First Sino-Japanese War shattered the dream of “industrial salvation”.
  • In 1929, the Nanjing Nationalist Government renamed Jinling Machinery Manufacturing Bureau to the "Jinling Arsenal". In 1937, Japanese invaders attacked Shanghai. The Jinling Arsenal was the largest military enterprise during the War of Resistance against Japan. However, the Republic of China (ROC), led by the Kuomintang (KMT), was also a regime that relied heavily on imperialism, both politically and militarily. The ROC had neither an independent industrial system nor a highly organized and competent military. Oppressed by the bureaucratic compradors inside and the imperialists outside, the national industry barely survived and could not help the KMT army to fend off the invaders' cruel and inhumane forces on the battlefield.
  • In 1926, the Nanjing Municipal Committee of the Communist Party of China (CPC) secretly established a Party organization at the Jinling Arsenal and carried out revolutionary struggles. During the White Terror in 1927, CPC members working at the Jinling Arsenal stayed committed to their missions and united the workers at the cost of their own lives. In 1947, the Party branch was reorganized to fight against the KMT reactionaries in the Chinese Civil War.
  • On April 27, 1949, representatives of the People's Liberation Army freed the Jinling Arsenal from KMT control. After weathering a hundred years of hardship, it was finally returned to the people and began demonstrating robust manufacturing productivity. Changan Auto and Aerosun Corporation, born out of the Jinling Machinery Manufacturing Bureau, have become driving forces for New China’s technological innovation, and have defended peace and stability.
  • Today, the 1865 Creative Industrial Park (renamed in 2007), the former Jinling Machinery Manufacturing Bureau, is a peaceful community with a strong cultural identity and a highly developed digital environment. Yet, it has never forgotten its role in the history of how China’s national industry strived to be strong and resisted against colonial plunder. It also carries the wisdom and hard work of Chinese pioneers, which is the common "industrial heritage" of the whole nation.
The Chinese Nation Is Achieving Significant Results in its Revolutionary Struggles
Jiāng Jīnquán (江金权)
Jiang Jinquan is a member of the 19th Central Commission for Discipline Inspection of the Communist Party of China (CPC), is a delegate to both the 19th and 20th National Congresses of the CPC, and is currently the Director of the Policy Research Office of the CPC Central Committee.

Context:

Over the past decade, the CPC Central Committee, taking Xi Jinping as its core, has been united, has seized the historic opportunities to move the nation forward, and has responsibly led the people. It has overcome many difficulties and risks, accomplished numerous significant tasks of long-term importance, and has written a compelling new chapter in the revolutionary struggles of the Chinese nation.

Key points:

Full and strict governance of all party members: providing a fundamental political guarantee for achieving meaningful revolution

  • The CPC’s leadership is the greatest advantage of socialism with Chinese characteristics.
  • The CPC central committee is committed to raising the understanding of its leadership to a new theoretical level and disseminating it among the whole party.
  • Leadership by the CPC is being implemented in all aspects through the institutionalization of norms of conduct.
  • The Party is adhering to the dynamic standards of good cadres by eliminating the phenomenon of basing advancement on titles, educational background, published scientific papers, and awards.
  • Both the chaos on the internet and the media in general, is being managed more resolutely.
  • Corruption at all levels of the party has and will continue to be severely punished; the culture of not daring to corrupt, not being able to corrupt, and not wanting to corrupt will be continually promoted.

Leading high-quality economic development: providing a long-term and stable economic foundation to achieve a continually successful revolution

  • Over the past decade, the contradictions that have accumulated during the long period of economic growth have come to the forefront, exerting increased downward pressure on the economy, and creating a series of new contradictions arising from changes in the domestic and international situation.
  • China's economic development has shifted from high-speed growth to high-quality development by concentrating on supply-side structural reform, thus promoting a comprehensive green energy transformation, advanced production methods, and more satisfying lifestyles.
  • China is implementing the new strategy of rural revitalization, improving the livelihood of the rural population, and resolutely winning the battle against poverty.
  • To resolve the three main economic challenges ­– the decline in domestic demand in consumption and investment, the possible instability in and insecurity of industrial and supply chains, and the future uncertainty that affects people's economic expectations, in addition to the risk of economic and technology decoupling from the US – the CPC Central Committee has adopted the six stability measures. The goal of these measures is the stabilization of the following areas: employment, finance, foreign trade, foreign capital, domestic investment, and economic expectations. They have also adopted the six security measures, which ensure employment, a basic livelihood, economically viable businesses, food and energy security, industrial and supply chain stability, and the development of grassroots operations. Their purpose is to stabilize China’s economic fundamentals and deal with the decoupling actions of the US and other Western countries.

Continue the struggle for achieving revolutionary success: adhere to fundamental positions and resist external risks and challenges

  • In the last 10 years, China has faced an extremely difficult and complicated external environment. The US and other Western countries have used various means such as infiltration, sanctions, supply disruption, decoupling, and false accusations to suppress China’s further growth. Additionally, through their control of social media platforms, they are waging an ideological war against China and challenging China's bottom line on issues related to Taiwan, Hong Kong, Xinjiang, Tibet, and the South China Sea.
  • In the face of these challenges, the CPC Central Committee has led the nation in a tit-for-tat struggle to defend its national security.
  • Through diplomatic, military, and economic means, China has effectively responded to the despicable acts of interference by the US and other Western countries to incite and support "Taiwan independence" activities on the island.
  • Through legislation on safeguarding national security and improving the electoral system in Hong Kong, China has effectively broken the Western countries’ attempts to instigate a "color revolution" and has firmly maintained the stability of Hong Kong.
  • Through the construction of islands and reefs in the South China Sea, the establishment of Sansha City, and regular military patrols and drills, China has effectively responded to the West’s challenges to its sovereignty in the South China Sea.

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No. 69 | 20.11.2022
A peasant is harvesting soybeans on a farm in Anhui province. [VCG]
China Urgently Needs New Strategies in its Agricultural Development and Food Security
Chén Wénshèng (陈文胜)
Chen Wensheng is a professor, a doctoral supervisor, and serves as the director of the China Rural Revitalization Institute of Hunan Normal University.

Context:

China must feed more than one-fifth of the world's population with less than one-tenth of the world's arable land. Over the past ten years, China’s grain production has grown continuously. While the grain demand is increasing with the industrialization and urbanization of the country, the resource and environmental constraints are mounting, and the contribution of the agricultural sector to GDP is decreasing. These challenges have affected the stable development of the national economy. The global food crisis has placed agricultural production capacity at the core of global competition. At the same time, agriculture must play a role in ecological protection, environmental regulation, and the development of bioenergy as part of becoming a more modern society. These challenges increasingly highlight the strategic role of agriculture in strengthening national survival, consolidating the national economy, and increasing international competitiveness.

Key points:

Strategies for agricultural development and food security: breaking out of the traditional international division of labor and becoming the core of global competition

  • China's strategy for agricultural development and food security cannot be based on their comparative advantage in the existing international division of labor. The domestic food demand cannot rely on the food market that is monopolized by a few developed countries and, in some instances, a few companies. China cannot only position food security in terms of meeting domestic food demand or solely rely on cheap labor and high energy consumption, while continuing to damage the environment, to produce low-end products. It is necessary to have more influence on importing, exporting, and pricing in the world food market and to transform the excessive agricultural production capacity into bioenergy, thus enhancing China's participation and voice in the bioenergy field.

Establishing a new global strategy for China's food security

  • Food security also matters to military and political security. Developing a global food market will boost economic strength and global competitiveness. Currently, the United States and other developed countries impose agricultural hegemony, using food to control the economic, political, and cultural integration between other countries. It is necessary to integrate food security into China’s strategic system of national security within a global context, strengthen the foundation of domestic agriculture, and ensure national food security to restrain hegemonism.

Enhancing domestic food security by improving competitiveness in the world food market

  • As a traditional and major country of agriculture and food production, China should not just focus on its own food security in this global food crisis, as it will lose its voice in the world agricultural market. Instead, China should transform its strong food production capacity into a powerful competitive advantage in the international market to better compete with the United States and other developed Western countries. To accomplish this, China must concentrate on its advantages in low-cost production, continue its development in high-tech and information technology, and improve mechanisms for market regulation in the ever-changing international food market.

The ultimate guarantee of Chinese food security: balancing the increasing grain yield and farmers’ income

  • China must ensure the unity of increasing grain production and farmers' income to protect their enthusiasm for grain production. It cannot let its farmers engage in an unequal competition with Western counterparts who are heavily subsidized. China should implement an effective fiscal subsidy policy, use more market instruments to activate farmers' motivation to increase food production, and channel resources to rural areas to speed up agricultural modernization. The protected minimum price for food should be based on the following factors: the average price of social labor, the price and growth rate of agricultural production materials, the average social profit from technical and capital inputs, and the inflation rate.
In a Soybean Game Dominated by Capital, No One Wins
Wáng Shàoguāng (王绍光)
Wang Shaoguang is an Emeritus Professor of the Department of Government and Public Administration at the Chinese University of Hong Kong.

Context:

China has gone from being the world's largest soybean producer to becoming the world's largest soybean importer. It is trapped in the "soybean game", dominated by four major international grain merchants, and cannot get out. International capital has become the only profitable player in this game.

Key points:

China: from soybean dominance to dependence

  • China accounted for about 90 percent of the world's soybean production until World War II.
  • From 1964 to 2010, China's annual soybean production remained relatively stable at about 16 million tons on average, but its share of the world market fell from 23.3 percent in 1961 to 5.55 percent in 2011. The US, Brazil, and Argentina have become the world's top three soybean producing countries
  • In stark contrast to its stable production, China's soybean consumption went from less than 8 million tons in 1964, to 70 million tons in 2010, then to 108.72 million tons in 2021. The gap between consumption and production has been filled entirely by imports.
  • Now, 60 percent of the world's total soybean exports are flooding into the Chinese market, and China has become the world's largest importer of soybeans.

Soybeans: from food to commodity

  • Between the millions of soybean peasants worldwide and the billions of consumers, there is a complex and highly developed supply chain – from new discoveries in biology to soybean production to ­distribution – that is controlled by a few large international companies. In order to maximize profits, they have monopolized the market of each link in the chain including genetics, seeds, pesticides, fertilizers, trade, production, and wholesale and retail distribution. For these capitalist monopolies, the biggest lure of cornering the soybean market is that it’s suitable for capital-intensive and large-scale cultivation.
  • The four major international grain merchants, Archer Daniels Midland (ADM), Bunge, Cargill, and Louis Dreyfus, referred to as “ABCD”, control 80 percent of the grain trading volume and 90 percent of the soybean trading volume globally. Of these four companies, the first three are US-based and the last is French. They each control the different links in the chain through various forms of strategic alliances, thus eliminating any competitors to their monopolies.
  • By providing production loans, building transportation facilities (railroads, highways, ports), and monopolizing the market, "ABCD" have taken control of soybean production in North and South America, forcing the soybean peasants to sell soybeans at extremely low prices to repay their loans. Buy low and sell high, in the international futures market, is the most familiar "financing game" for capital.

Consumers, peasants, and nature are paying the price for capital’s greed

  • Consumers are the victims of the monopolistic behavior of transnational capital. Especially in countries with a high degree of market concentration, the gap between the retail price and the production price of soybeans is growing, and consumers are paying for this capitalist monopoly.
  • Step by step, international capital acquired fields from poor peasants on a large scale, replacing small and diversified production methods. Land ownership was further concentrated in the hands of big landlords and investors. A large number of family farmers became landless, and the employment opportunities offered by the existing farms were drastically reduced. Moving to the city meant living in the slums but staying in the countryside meant starvation.
  • Likewise, capital's monopoly on the soybean supply, production, and distribution chain has had a significantly negative impact on nature. The rapid growth of soybean production in Brazil has been one of the main reasons for the massive deforestation and burning of the Amazon rainforest, turning this "lung of the earth" into a "carbon emitter", and making Brazil one of the world's largest greenhouse gas emitters. Seventy-five percent of Brazil’s carbon emissions are a result of the destruction of rainforests.

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No. 68 | 13.11.2022
The 5th China International Import Expo in Shanghai, China, November 5, 2022 [CFP]
The China Model of Modernization Inspires Non-Western Countries to Explore Their Own Development Paths
China Now (这就是中国)
China Now is a weekly ideological and political TV program. Professor Zhang Weiwei, Dean of the China Institute of Fudan University, is the program’s host. With a novel style and an international perspective, the program uses the Chinese narrative to interpret China’s miracle and exposes the fallacy of the monopolistic Western perspective.

Context:

In the 165th episode of China Now, on October 31, Professor Zhang Weiwei and Professor Fan Yongpeng, Vice Dean of the China Institute of Fudan University, explained the China model of modernization, which is of great interest to the international community.

Key points:

The characteristics that differentiate the China model of modernization from the Western (especially US) model.

  • People-centered vs. capital-centered
  • Common prosperity vs. polarization
  • Synchronization of material and spiritual development vs. endless pursuit of meaningless consumerism
  • Harmony between humanity and nature vs. exacerbation of the ecological crisis
  • Peaceful development vs. shameless exploitation and plunder by war

The people are an essential element woven throughout the characteristics of the China model of modernization. The Communist Party of China (CPC) is a party that serves the people. Chinese culture exemplifies the ideal of treating people equally and seeking the common good for all humankind.

The development of the China model of modernization is constantly improving.

  • In the 1950s, China placed special emphasis on heavy industry, including steel production and weapons development. Later, China presented a more comprehensive concept of the "four modernizations: industrial, agricultural, national defense, and science and technology.
  • In the 1980s, Deng Xiaoping proposed "socialist modernization with Chinese characteristics", upgrading the original "four modernizations" to "comprehensive modernization".
  • Today, China has taken a completely different path to modernization than that of western countries. Infused with China’s reality in all aspects, it has formed a comprehensive institutional and organizational structure based on practical experiences and has fully developed a model that is neither recognized nor understood by the West.
  • The China model of modernization has created a global platform that fosters communication between nations by sharing experiences and deepening the understanding of their present-day challenges.

Disconnects between the theory and practice of modernization.

  • There is a huge disconnect between the theory and the actualization of western modernization. The purpose of its theory is to conceal the oppression of the world by the West, the exploitation of the poor by the rich, and the destruction of nature by Western capitalism. One of its important functions is to make the non-Western world dependent on the West and to ensure modernization is a dream that is never within its reach.
  • There is also a disconnect between some Chinese intellectuals’ perception of and the actual China model of modernization. While these intellectuals closely follow the theories of western modernization, they have yet to fully understand and thus contribute to China’s model. This lack of acceptance and support is not only detrimental to the Chinese people's correct understanding of themselves, but also to the world's correct understanding of China.

Lessons to be learned from the China model of modernization.

  • Preventing external forces from infiltrating and manipulating the government, social movements, and important NGOs is an important step in the political construct of modernization.
  • There must be a political force that is universally representative of and truly represents the people, such as the CPC in China.
  • Powerful and wealthy special interest groups must not be allowed to hijack the political process. In western countries, the so-called free elections process is riddled with corruption and paid for by wealthy donors and corporations. After funding these elections, elected officials use their power to give back to these interest groups. This results in a political system unresponsive to the people and beholden to the rich.
Understanding the Historical Achievements of China’s Economic Development in the New Era
Huáng Qúnhuì (黄群慧)
Huang Qunhui is the Director of the Institute of Economics, Chinese Academy of Social Sciences, and Dean of the School of Economics, University of Chinese Academy of Social Sciences.

Context:

Socialism with Chinese characteristics entered a new era after the 18th National Congress of the Communist Party of China (CPC). The Party Central Committee, with Comrade Xi Jinping as the core, coordinated the implementation of the strategy to develop the great rejuvenation of the Chinese nation, resulting in major changes not seen in the world for a century, and promoted the Party and the state to lead these historic achievements and changes. General Secretary Xi adapts the basic principles of Marxist political economy to China’s reality and the characteristics of the times and elevates the practical experience of economic development in the new era into a systematic scientific theory. In the last 10 years, since the 18th Party Congress, Xi Jinping's economic thought has continuously evolved, and reflects the CPC's profound understanding of the laws of economic development, especially the laws of socialist economic construction.

Key points:

China's economic strength has risen to a new level; economic modernization has entered a new stage

  • At the end of 2022, China's GDP per capita had nearly reached the level of high-income countries. While the total output of China's economy is rapidly growing, the economic structure continues to be optimized and total labor productivity continues to increase. The structure of economic modernization is being upgraded through maintaining industrial stability and rebalancing the services industry and the agricultural sector.
  • The journey of building China into a modern socialist country, in all respects, has entered a new stage. This new industrialization develops with digitization, urbanization, and agricultural modernization. It provides an alternative path for the world’s countries that wish to achieve industrialization while maintaining their independence. More than at any other time in history, China is closer to and more capable of building a strong socialist country that is rich, democratic, civilized, harmonious, and green, and is achieving the goal of the great rejuvenation of the Chinese nation. With the continuous improvement of the China model of modernization, the economic and social foundation is more solid, and the people are more confident in the modernization path.

In-depth implementation of the innovation-driven strategy and promotion of supply-side structural reform

  • The concept of innovation-oriented development affects all areas of society, and the construction of an innovative country has made significant progress. In terms of innovation investment, the growth rate of research and development (R&D) expenditure as a percent of the GDP is generally in the double digits. The application of new technological development is world class; the number of high-tech manufacturing companies has increased significantly, and their proportion of the total industrial base has also grown.
  • Facing the most prominent structural problems in China's economic development in the new era, the Party and the government are promoting supply-side structural reform as the core of their economic policies. They are implementing a series of major strategic initiatives such as the strategy of coordination of regional development, rural revitalization, and new urbanization with people at its core. In particular, through the campaign for poverty alleviation, absolute rural poverty has been eradicated. The income gap between urban and rural areas has been narrowed, and national economic development has continued to improve.

Significant effects of economic green transformation and China’s role as a global economic leader

  • Lucid water and lush mountains are invaluable assets. The construction of beautiful China has become a major national policy, and the green and low-carbon economic transformation has been accelerated. The Party and the government have focused on a top-level design for this policy, actively promoted technological progress and institutional construction, and are making significant progress in these areas.
  • Adhering to and improving the basic socialist economic system and continuously refining the socialist market economy system are the basis for the miracle of China's economic development. China will continue to elevate the “open economy system” to a higher level, promote the high-quality development of the "Belt and Road", and foster economic globalization in a more open, inclusive, balanced, and win-win direction.

Eliminating absolute poverty and making substantial progress towards common prosperity

  • Eliminating poverty, improving people's livelihood, and gradually achieving common prosperity are the essential requirements of socialism and an important mission of the CPC. China has built the world's largest educational system and social security and health care systems and has made substantial progress towards common prosperity.

Xi Jinping's economic thought has comprehensively deepened the understanding of the principles of economic development

  • The Party’s comprehensive leadership and its commitment to people-centered ideology are the core guiding economic development.
  • High-quality economic development has replaced the pursuit of increased economic growth rates.
  • The "active government" and "effective market" have been organically combined to make the continuing development of the productive forces consistent with the socialist relations of production.

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No. 67 | 06.11.2022
Common prosperity goal, new development pattern added into amended CPC Constitution, says resolution. [cnsphoto]
Amendment to the Party’s Constitution by the 20th National Congress of the CPC
Xinhua News Agency
Xinhua News Agency is the official state news agency of China and the highest-ranking state media organization in China.

Context:

On October 22, 2022, the 20th National Congress (NC) of the Communist Party of China (CPC) adopted a resolution on the amendment to the CPC Constitution. The head of the Secretariat of the 20th NC provided the amendment to Xinhua News Agency.

Key points:

The reason behind the CPC Constitution revision

  • It is customary for the CPC to amend the Party Constitution to reflect the theoretical and practical innovations since the last NC. This process enhances the normative and guiding role of the Party Constitution.
  • It is necessary that the Constitution is aligned with the important contents of the 20th NC so that the CPC can implement these new ideas.

The characteristics of the revision process of the CPC Constitution

  • The entire Constitution revision process was guided by General Secretary Xi Jinping. Opinions of CPC members were widely solicited. Summarizing the comments and suggestions from various regions, departments, and the 19th and 20th NC representatives, the revisions were first considered by the plenary sessions of the Standing Committee of the Political Bureau and then by the entire Political Bureau. Finally, the amendment to the Constitution was unanimously adopted at the NC on October 22.
  • The new Constitution reflects the wisdom and consensus of the whole party, represents the will of the whole Party, and is one of the living practices that the Central Committee uses to fully develop the Party's democracy.
  • In general, the new Constitution has remained unchanged. Only those elements that must be changed to reflect the new conditions of the NC and on which there is already a consensus within the Party have been amended.

The main revisions of the new amendment to the Constitution include:

  • The theoretical development of Xi Jinping's Thought on Socialism with Chinese Characteristics in the New Era: the "two combinations", which connects the basic principles of Marxism with China's specific reality and its important traditional culture.
  • Achieving the Second Centenary Goal of the Party to build a modern, powerful socialist country by 2050.
  • The major achievements and historical experience of the Party's centenary struggle with emphasis on the spirit of struggle and self-revolution.
  • Enhancing the Party’s existing structure with the further development of full and strict governance over the Party, the promotion of the Party’s founding spirit – being loyal to the Party and not letting the people down, and the continual process of the Party’s self-revolution.
  • The comprehensive leadership of the Party; the Party is the highest political leadership force.
  • The basic tenets of the socialist economic system: Public ownership is the mainstay of the economy, with multiple ownership economies developing together; distribution according to labor is the mainstay, with various forms of distribution co-existing; and there is a socialist market economy.
  • The continuous development of China’s defenses and its military by strengthening the multiple military branches with science and technology and the necessary talent, making it a world-class organization.
  • A United Front that comprehensively, accurately, and unswervingly implements the "one country, two systems" policy and resolutely opposes "Taiwan independence".
  • A diplomatic philosophy that promotes the common values of peace, development, fairness, justice, democracy, and freedom for all humankind, and emphasizes that we should work together to build a universally safe, open and inclusive, clean, and beautiful world.
  • The basic condition that the Party's leading cadres at all levels must oppose privilege in all its forms.
  • Safeguarding the basic tasks of the Party's grassroots organizations by promoting the normalization and institutionalization of study and education of Party history, strengthening grassroots social governance, and leading both the United Front work and the women's organizations.
The US Chips and Science Act of 2022 and Its Impacts on China’s Semiconductor Industry
Zhū Jīng (朱晶)
Zhu Jing is a Senior Economist of Beijing International Engineering Consulting Co., Ltd., and the Deputy Secretary General of Beijing Semiconductor Industry Association.

Context:

The United States has made a practice of using legislation as an important tool in their bid for cutting-edge technology leadership. Today, 75 percent of the world's chip manufacturing has been concentrated in the Asia-Pacific region, while US domestic capacity has declined from 38 percent in 1990 to 12 percent. In an attempt to further thwart China's semiconductor industry, decouple it from global supply chains, and promote restructuring and "de-Sinicization", President Biden signed the Chips and Science Act of 2022 on August 9. The funding level for the US semiconductor industry is considered to be the most significant government intervention in industrial policy in decades and will provide long-term strategic support in the US geopolitical competition with China.

Key points:

Content of Chips and Science Act of 2022

  • The act provides roughly US$280 billion in new funding to boost domestic research in and manufacturing of semiconductors in the United States, with the primary aim of countering China. Companies are subjected to a ten-year ban prohibiting them from producing chips more advanced than 28-nanometers in China and Russia if they are awarded subsidies under the act. The allocation of the funding will be spread out over a five-year period. The Chips and Science Act of 2022 is a well-designed planning document that seeks to help the US semiconductor industry to build a complete ecological support system, from advanced manufacturing capabilities to cutting-edge technology development, to talent training, and to technology applications and alliance cooperation.

Main features and trends of the new US legislation for the semiconductor industry

  • The law provides legal protection for all cutting-edge science and technology. The law’s language on semiconductor design and manufacturing reflects US hegemony, with the purpose of containing China’s semiconductor industry through subsidizing U.S. domestic chip manufacturing and unfairly narrowing Chinese companies’ abilities to compete in the global market. However, the practical application of this legislation will be difficult to implement, especially given the historic lack of capital investment in US manufacturing and infrastructure.
  • In support of the US New Cold War “containment strategy” against China, this legislation will scale up funding for the US domestic semiconductor industry, increase export controls vis-à-vis China, especially in the area of advanced semiconductor technologies, and intensify data audits on Chinese companies, under the guise of privacy protection and security reviews to suppress and marginalize Chinese companies.

Impacts on China’s semiconductor industry

  • US-led western countries have fallen into line in support of the US as it attempts to control key semiconductor resources, technologies, and supply chains in Taiwan, and the countries of Japan and Korea, and Europe. Its goal is to slash China's access to international resources and innovation techniques by forcibly decoupling it from the global semiconductor industry supply chain. These tactics by the US have begun to negatively impact China’s growth in the hi-tech sector, making market fluctuations more uncertain and challenging the survival of domestic companies. The difficulties in creating quality domestic alternatives are mounting.

Response to the challenges

  • More emphasis is being put on the necessity of sustainable investment and scientific economic planning. The reconstruction of the global semiconductor industry chain is accelerating amid the competition between major countries. Many countries have followed China's example in promoting development in their domestic high-tech industries. China should strengthen its strategic determination to explore new national mechanisms to respond to the risks and challenges emerging from the restructuring of the semiconductor industry’s global value chain. In addition, China must improve the autonomy of key technologies, especially in bottleneck fields, accelerate the development of domestic production in all industries, but specifically in the semiconductor manufacturing sector, encourage enterprises to actively explore new opportunities by adopting diverse sources and localization measures, give full play to the domestically developed innovation capability of new technologies, and develop new government policies and financial mechanisms to guide the sound development of China’s hi-tech industrial sector.

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