Category: CV EN REAL

Context:

On January 5, 2018, president Xi Jinping made an important opening speech at a seminar for the new and alternate members of the CPC Central Committee, and leading cadres at the provincial and ministerial levels. On September 16, 2022 – four years later – a portion of the speech was published by Qiushi, the official publication of the CPC Central Committee. The speech affirms that socialism with Chinese characteristics is an organic historical component and continuation of the world socialist movement, that Chinese communists are holding high the banner of this movement, and that China is thus becoming the beacon for the global struggle for socialism. We, the editorial collective of Chinese Voices, believe that this view will be reflected in the political report of the 20th CPC National Congress. Therefore, we are sharing some key takeaways from the speech as follows.

Key points:

Extracts from General Secretary Xi's speech:

• "Socialism with Chinese characteristics did not just drop from the sky, but is the result of the great practice of 40 years of reform and opening up, the consistent exploration [of socialist construction] since the founding of the PRC nearly 70 years ago, the 97 years of the people's great revolution led by the Party, the 170-plus-year historical process during which the Chinese nation became prosperous after years of decline, and the inheritance and development of Chinese civilization in the past 5,000-plus years. It is a priceless result of the painstaking efforts made by the Party and the people, at great cost, a hard-won achievement…The principal challenge [for the Party and the people], is that building socialism in a formerly semi-colonial and semi-feudal society is an unprecedented project that did not have a ready-made model to follow. "
• "Socialism with Chinese characteristics was initiated in the new period of reform and opening up; but, to understand its formation and development, to recognize its historical inevitability and its scientific truth, we must put it in its historical context and grasp it as a part of the evolution of socialism in the world. More than 170 years ago, Marx and Engels…proposed the dialectical materialistic approach to history and the theory of surplus value, laying scientific theoretical foundations for the socialist ideology and thus creating scientific socialism…The combination of scientific socialism and the workers' movement led to the success of the October Revolution and the establishment of the world's first socialist state…In the aftermath of the Second World War, a host of socialist countries emerged; with the founding of New China by the Chinese people under the Party's leadership in particular, scientific socialism grew from being practiced solely in one country to being developed in many nations. At that time, the socialist camp was thriving, and alongside the anti-imperialist and anti-colonialist struggles across Asia, Africa, and Latin America, it developed overall equilibrium with the capitalist world. That's why comrade Mao Zedong said that 'the east wind prevails over the west wind.'"
• "In the late 1980s and early 1990s, with the collapse of the Soviet Union and the Communist Party of the Soviet Union (CPSU), and the dramatic changes in Eastern Europe, not only did the first socialist state and Eastern European socialist countries cease to exist…but also, many developing countries were forced to follow the path of copying Western institutional models. Global socialism suffered major setbacks."
• "Last year marked the 100th anniversary of the October Revolution. I started the second part of the report of the Party's 19th National Congress by mentioning this significant historical event in order to declare the historical impact of the October Revolution on the birth and growth of CPC. As Lenin profoundly pointed out at the celebration of the 4th anniversary of the Revolution, '…the first victory is not yet the final victory,' but 'we have made the start. When, at what date and time, and the proletarians of which nation will complete this process is not important. The important thing is that the ice has been broken; the road is open, the way has been shown.'"
• "A wide range of developing countries have cast an admiring eye on China and expressed their desire to learn from China's experience in governance. Socialism with Chinese characteristics is becoming the banner for the development of scientific socialism in the 21st century and the mainstay for the revitalization of socialism across the world. Our Party has the responsibility, confidence, and ability to make greater historical contributions to the new development of scientific socialism."
• "Staying true to our original aspiration and founding mission means that we should not forget that we are communists and revolutionaries, and therefore should not lose our revolutionary spirit. Some people say that our party has now turned from a 'revolutionary party' to a 'ruling party'. This statement is inaccurate. The official formulation of the Party is that, through revolution, construction, and reform, our Party has changed from the Party that led the people in their struggle to seize national power to the Party that leads the people to hold national power and rule permanently; from the Party that led the construction of the country under the conditions of external blockade and a planned economy to the Party that leads the construction of the country under the conditions of opening to the outside world and developing a socialist market economy…Our Party is a Marxist ruling party, but at the same time, a Marxist revolutionary party."
• "Ensuring that CPC does not collapse, and the Chinese socialist system does not fall is an extremely difficult and risky challenge. There was a time when the CPSU was so strong, and the Soviet Union was so powerful."
• "We are like exam candidates sitting for the tests posed by this era, and the people will review our results. To achieve prosperity, stability, and longevity for the Party and the state, all comrades of the Party must maintain the revolutionary spirit and morale, courageously continue the great social revolution in which our party has led the people for 97 years…[and] strive to make socialism with Chinese characteristics shine with a more powerful and persuasive force of truth."

Context:

Xi Jinping pointed out in the 20th National Congress (NC) Report that, based on the long-term exploration and practice of socialist construction since the founding of New China, especially the reform and opening up, and through the innovative breakthroughs in theory and practice since the 18th NC, China has successfully promoted and expanded the China model of modernization. In the 20th NC Report, Xi provided important explanations on this subject.

Key points:

Central task of CPC

From this day forward, the central task of CPC will be to lead the Chinese people of all ethnic groups in a concerted effort to realize the Second Centenary Goal of building China into a great modern socialist country in all respects and to advance the rejuvenation of the Chinese nation on all fronts through a Chinese path to modernization.

Main characteristics of the China model of modernization

The China model of modernization is socialist modernization pursued under the leadership of the CPC. It contains elements that are common to the modernization processes of all countries, but it is more characterized by features that are unique to the Chinese context.

It is the modernization of:

• A huge population.
• Common prosperity for all.
• Material and cultural-ethical advancement.
• Harmony between humanity and nature.
• Peaceful development.

Essential requirements for the development of the China model of modernization

• Upholding the leadership of the CPC.
• Upholding socialism with Chinese characteristics.
• Pursuing high-quality development.
• Developing whole-process people’s democracy.
• Enriching the people’s cultural lives.
• Achieving common prosperity for all.
• Promoting harmony between humanity and nature.
• Building a human community with a shared future.
• Creating a new form of human advancement.

A set of long-range objectives for China to essentially achieve socialist modernization by 2035

• Significantly increase economic strength, scientific and technological capabilities, and composite national strength; substantially grow the per capita GDP to be on par with that of a mid-level developed country.
• Join the ranks of the world’s most innovative countries, with great self-reliance and strength inscience and technology.
• Build a modernized economy;form a new pattern of development; generally achieve new industrialization, informatization, urbanization, and agricultural modernization.
• Basically modernize the system and capacity for governance; improve the system for whole-process people’s democracy; and build a law-based country, government, and society.
• Become a leading country in education, science and technology, talent, culture, sports, and health; significantly enhance national soft power.
• Ensure that the people are leading better and happier lives; bring per capita disposable income to new heights; substantially grow the middle-income group as a share of the total population; guarantee equitable access to basic public services; ensure modern standards of living in rural areas; achieve long-term social stability; and make more notable and substantive progress in promoting the people’s well-rounded development and prosperity for all.
• Broadly establish eco-friendly ways of work and life; steadily lower carbon emissions after reaching a peak; fundamentally improve the environment; and largely accomplish the goal of building a Beautiful China.
• Comprehensively strengthen the national security system and national security capabilities;achieve basic modernization of national defense and the armed forces.

The next five years will be crucial for getting our efforts to build a modern socialist country in all respects off to a good start.

Firmly adhere to five major principles

Our country has entered a period of development in which strategic opportunities, risks, and challenges are concurrent and uncertainties and unforeseen factors are rising. Various "black swan" and "gray rhino" events may occur at any time. We must therefore be more mindful of potential dangers, be prepared to deal with worst-case scenarios, and be ready to withstand high winds, choppy waters, and even dangerous storms. On the journey ahead, the following five major principles must be firmly adhered to:

• Upholding and strengthening the Party's overall leadership.
• Following the path of socialism with Chinese characteristics.
• Applying a people-centered development philosophy.
• Remaining committed to deepening reform and opening up.
• Carrying forward our fighting spirit.

Dear reader,

For the upcoming holiday to celebrate the founding of the People's Republic of China (October 1-7), Chinese Voices will be taking a two-week break. Look out for our next issue published on October 16th.

—Dongsheng editorial collective

Context:

Since the reform and opening-up, China has transformed itself into the world's largest manufacturing country and the second largest economy. It has eradicated absolute poverty at an unprecedented scale and speed. And, it has embarked on a new journey of building a modern socialist country. Unlike the rise of the West, which was linked with maritime trade and colonization, the "miracles" of China's development are a result of the path that China has chosen. Han Zhen explains China’s success of opening-up along a socialist path through a historical lens.

Key points:

• The ongoing process of opening-up. In a response to the West's expansion in seafaring trade and colonization, China implemented the Hăijìn (海禁), or sea ban, during the Ming dynasty (1368–1644), restricting maritime trade and colonial settlement in China. This was a turning point in Chinese history, leading China to retreat from the world, become a greater target of Western colonialism, and enter a period of economic and social isolation. China has, however, learned that economic and social development, and knowledge and cultural innovation require mutual communication and learning between civilizations. Since 1978, China has gradually opened its doors, paving the way for China’s modernization path.
• Adhere to socialism instead of replicating the Western colonial modes. Since losing the Opium War in 1840, China tried to rely on Western models for its economic development. The imperialist aggression, however, eventually shattered that illusion. History proved that only Marxism could help China by recognizing the importance of developing the productive forces, while simultaneously fighting against feudalism, capitalist exploitation, and imperialism. The national modernization project of building a New China would not be possible without socialism.
• Reform is ongoing. After the Chinese Revolution of 1949, China drew on the Soviet model to begin socialist construction. But, as time progressed, China adapted its socialist construction by using reform mechanisms that responded to its conditions. A key to China’s success has been the understanding that no mechanisms are enduring and that new reforms are constantly required to solve the challenges of building a prosperous, modern socialist country. China should not be restricted by rigid and outdated mechanisms and regulations and must continually use reforms to enhance social vitality.
• Uphold the principle of following an independent path. China cannot continue to be successful in socialist construction without adhering to the principle of maintaining an independent path to development. Too often, the "globalization" of capitalism has been used to justify global economic policies that subjugate developing countries. Understanding this, China has continued to expand reforms and a policy of openness, but according to its own goals, pace, and path. CPC leadership is the key to China’s success. The CPC united and led the Chinese people, guiding the process of opening-up and reform along an independent and socialist path. Without the CPC, China would have remained subordinate to a capitalist world order and US hegemony, or under the control of certain interest groups. Accordingly, China's success has caused panic for the West, whose development model has shown many more shortcomings versus the Chinese one.

Context:

In 1956, a series of conflicts, over ideology and national interests, began between China and the Soviet Union, unfortunately leading to a military dispute. Chinese scholars generally agree that beginning with the Khrushchev-era (1953-1964), the Soviet Union embarked on a path of revisionism. Zhang Wenmu writes that 1978 was a watershed year for the economic development of the Soviet Union. When its military expansion finally pushed China to align itself with the US, the Soviet Union was forced to confront both China and the US, which was beyond its capabilities. This was followed by so-called "political opening" (glasnost), "economic reform" (perestroika), and "new thinking" in foreign policy (novoye myshleniye), all of which betrayed the principles of socialism. In the end, the Soviet Union, a world superpower, was "peacefully" dismantled without military conflict.

Key points:

• Beginning in 1960 until 1978, the socialist system, complemented by planning policies and abundant natural resources, allowed the Soviet Union to have a higher growth rate of their real gross domestic product (GDP) than the US. Strong economic development enabled the military power of the Soviet Union to combat US hegemony. Gorbachev's political reforms, however, during his six years in power (1985-1991) led to the USSR's weakening and dissolution.
• In 1973, Mao Zedong pointed out that the Soviet Union's expansionist ambitions contradicted its capabilities. During the Brezhnev-era (1964-1982), the Soviet Union’s military expansion led to a conflict with China and the invasion of Afghanistan in 1979, putting the Soviet Union under excessive political and economic pressure.
• With Gorbachev at the helm, the Soviet Union implemented the "new thinking" reforms – propagated and supported by the West – abolishing the ruling party position of the proletariat, promoting capitalism, and privatizing state assets. As a result, the political environment and economic development of the Soviet Union began to deteriorate rapidly, and the peoples’ standard of living declined. The eventual disintegration of the Soviet Union was the inevitable result of its betrayal of socialist principles. The Soviet Union was not defeated militarily but was dismantled from within by the West through ideological subversion.
• The capitalist reforms of the Soviet political and economic systems, from Khrushchev to Gorbachev, adversely affected the history of the Soviet Union, and thus the history of the world. China learned a great deal from the mistakes of the USSR and has been able to chart a course for itself and the world in the 21st century.

Context:

The supply of tech talent has been altered worldwide during the pandemic resurgence and the protracted Russian-Ukrainian conflict. Global enterprises are engaging in a new round of competition to win over talent in the digital technology field.

Key points:

• The United States and some western European countries have been mired in this talent shortage for decades, relying on and enticing international workers to underpin their technology development. In the past 20 years, the US has filled the gap by mainly recruiting international students and building enterprises in target countries. The latter approach has become increasingly common as a part of the globalization process.
• India has developed abundant IT talent through their elite schools and giant IT companies. There has been a huge influx of top-ranked Indian technology graduates into the United States. In the past 10 years, the west has also begun outsourcing IT operations to Poland, Russia, Belarus, Ukraine, and other countries in Eastern Europe. Ukraine inherited the Soviet-built technology foundation and has become an internationally renowned hunting ground for technology talent.
• China has the largest pool of technological talent. However, the Chinese government and people are not interested in being a talent supplier to the West. China also needs global tech talent, especially Chinese IT giants that need more tech workers to better compete with their European and US counterparts. These Chinese companies have set up R&D centers in India, Russia, the US, Japan, France, and many other countries, recruiting high caliber workers from around the world.
• Inevitably, geopolitical risks will alter the talent supply globally. Confronted with fierce competition in the technology industry, instead of solely relying on domestic talent resources, Chinese companies need to increase their efforts to seek talent from other countries. Apart from those in Eastern Europe, China should look to India’s elite technology talent and, despite the border friction, provide excellent employment opportunities both in India and in China.
• In the future, Chinese companies should continuously look to the Global South in creating their strategic development plans. With solid economic strength and promising development prospects, China is able to acquire more tech talent and lead a new round of digital industry development.

Context:

With developed transportation and abundant natural resources, the Northeast region was, historically, the industrial heart of new China. In the first five-year plan of socialist construction, many heavy industry projects were implemented in the Northeast, shaping the foundation of the state-owned economy. From 1949 to 1979, the region ranked among the top Chinese regions for urbanization, education, and per capita income. However, since the market-oriented reform period, most of the management and technical talent from the state-owned enterprises in the Northeast have migrated to the Yangtze River Delta and the coastal region, and many of the top-ranking graduates from Northeast universities have gone to the first-tier cities like Beijing, Shanghai, or Guangzhou. Most of the state-owned factories lost their market share to products that were imported or produced by joint ventures. Also, the factories in the Northeast did not have the technological knowledge needed for manufacturing innovation, which, in turn, caused a vicious circle of capital and talent fleeing from the area, leading to the deterioration of the social ecology and serious corruption. On numerous occasions in the past three decades, the Chinese central government has made a plan to "revitalize the Northeast". In 2002, Pan Wei reflected on the problems of the area and proposed the idea of building a "special social zone", which essentially means that the market mechanism of profit maximization should not dominate the Northeast, but that the social planning mechanism should systematically rearrange the various resources in this region. In the latest discussion on the revitalization of Northeast China, this socialist idea has again been revisited.

Key points:

• Capital is not an inevitable intermediary for the combination of labor and the means of production. In China’s first 30 years, when capital was in short supply, it built up its national industrial base, relying on state planning and the socialist spirit of the "glory of labor, and the shame of not working". However, a market economy is profit-driven, and the industrial base of Northeast China, due, in part, to the lack of technology and management talent could no longer compete and was abandoned.
• Northeast China should follow the path of the "social-interests-led economy": "planning" plus "spirit", supplemented by the "market". The starting point for this idea should be the following: (1) the Northeast is of vital geostrategic importance; (2) China's further development is in great need of independent heavy industry and large-scale agriculture; (3) the basic conditions exist for reviving the Northeast: a developed infrastructure and a trained labor force; (4) the spirit of socialism has deep roots among the people; and (5) China's market economy is already quite developed and can coexist with a modified planned economy.
• The basic idea of establishing the "special social zone" – as opposed to a "special zone" for profits – is to put the interests of society above the interests of capital, to put people first, and to quickly restore production. The government should draw up a ten-year economic recovery plan. It should give bankrupt or near-bankrupt enterprises to workers and change the ownership from state-owned to collectively owned. A unified department for material deployment should be established to manage the supply chain according to the Northeast regional plan. Simultaneously, the government should mobilize national support for the recovery of the Northeast industrial and agricultural economies through market incentives and provide assistance through taxation and finance.
• The government must also hold corrupt officials responsible. Party officials should educate the workers about the objective problem, explaining how the old Northeast enterprises are not market competitive. The role of Party members, Party branches, and model workers should be mobilized to promote the socialist spirit of the “glory of labor” and to motivate workers to revitalize the Northeast region.

Context:

Due to the impact of Covid-19, the first half of 2022 ended with an economic growth rate of 2.5 percent, which was below the annual target of 5.5 percent proposed by the Chinese government at the beginning of the year. The author systematically analyzes the current problems that China faces in achieving the proposed target in the second half-year and provides potential solutions involving both the demand and supply sides.

Key points:

• Covid-19 will continue to be a key uncertain factor impacting China’s economic growth, which needs to be balanced with epidemic prevention and control. A stable business environment should be created to minimize the negative impacts on the majority of people and businesses.
• Global inflation is another factor weighing on China’s economy. With international energy and food prices rising sharply, the domestic Consumer Price Index (CPI) published in June was 2.5 percent and continues to rise. The author suggests that these external impacts can be contained within a limited range for three reasons: 1) internal circulation can absorb the external impacts, 2) sufficient supply, especially for food and energy, stabilizes prices, and 3) strong regulation also stabilizes prices.
• On the demand side, the real estate market is the key to stabilizing economic growth. According to the author’s analysis, demand peaked in the Chinese real estate market a few years ago. Beginning in the second half of 2021, however, it has steadily declined. With its large influence on other industries, especially finance, and on people's livelihood, continuing deterioration in the real estate industry will have a systemic impact. Timely and effective measures must be taken to stabilize the real estate market, and a long-term strategy of healthy development should be considered.
• With regard to increasing consumption, the author suggests that two problems need resolution: 1) relieving the economic burden on the low-income group, and 2) boosting the consumption of the middle-income group. During the pandemic, the low-income group’s real income decreased. The existing social security compensation programs are under-utilized by this group and should be simplified and publicized so that they can be more easily accessed by the people who need the relief. Also, more public monies should be used to expand equal services for low-income groups.
• The author proposes the “1+3+2” plan for potential economic growth: First, “1”, is to further develop the metropolitan areas; second, is to resolve the “3” major shortcomings (inefficiency in basic industries, an insufficiently large middle-income group, and weak basic research and development capabilities); and finally, it is necessary to incentivize the “two” economic growth drivers, the digital economy and green development.
• It is also important to set reasonable expectations for economic development. When economic growth slows, the people may become doubtful about and criticize socialism with Chinese characteristics. It is necessary to fortify the people’s faith in the overarching strategy, as well as those in private enterprises, which is key to promoting common prosperity.

Context:

The Outline of the National Medium and Long-Term Science and Technology Development Program (2006-2020), China’s principal guide for independent innovation strategy, has been completed. Over the program’s 15 years, China has made significant progress in the fields of high-speed railroads, semiconductor displays, UHV electricity transmission, energy equipment, and new energy batteries. However, many industries are still stymied by US-imposed technology restrictions. From the sanctions on Huawei to The CHIPS and Science Act, and the latest US Department of Commerce Economic Development Agency’s export controls, all signs indicate an intensifying technological blockade against China. However, the trade disputes, and the challenges caused by Covid-19 have provided a new window of opportunity for China’s innovation and accelerated the domestic application of technological industries.

Key points:

Two perspectives on innovation evolution and the problems to be solved in China’s innovation practice

• There are two perspectives on China’s innovation evolution: the supply-side and the demand-side. The former focuses on the production of technological knowledge and organizational capabilities, dominating international innovation research, and innovation practices in China; the latter is more concerned with the scale and attributes of markets and end users, thus playing a complementary role. The "open innovation", however, that has gained more emphasis in recent years, still does not balance the supply side with the demand side approaches.
• At present, the biggest resistance to independent innovation increasingly lies on the demand side, the market for and application of this innovation. The government has been encouraging SOEs to purchase domestic products in the petrochemical, energy, and military sectors. However, in regard to core technological products, domestic enterprises are often treated as back-ups. In the increasingly open and competitive market, policies should be implemented to guide users to purchase domestic products, so that domestic companies have opportunities to improve innovation quality and prove that they are competent to compete in the international market.

The new trend and adaptation of China’s innovation

• The US technological blockade and Covid-19 have unintentionally provided historic opportunities for China’s technological products and formed a new trend. Downstream users are forced to shift to domestic suppliers. Sanctioned by the US in 2018, Huawei was forced to turn to the domestic supply chain and to strive for "de-Americanization" of its core products. This, in turn, created opportunities for many Chinese companies. The outbreak of Covid-19 also drove the domestic medical supply companies to provide qualified medical equipment and meet the urgent demand of masks and ventilators. The strength and potential that Chinese companies have shown during the disruptions of the international supply chain have been significant.
• The Chinese government should maximize the potential and strength of domestic suppliers in each industrial chain and promote them in the domestic market. The government should also encourage domestic companies to meet the continuous and urgent demand of medium and high-end technologies and support the core technological innovation of upstream producers. As Chairman Mao wrote, China shouldn’t be intimidated by blockades; instead, it should seek opportunities and solutions from these difficulties.

Context:

A reasonable size and structure of the youth population (aged 14 to 35) are an important foundation for social development in China. China’s demographics are changing as the fertility rate continues to decline, the population is aging, urbanization is accelerating, and population mobility is intensifying. Significant intergenerational and interregional differences in the size and structure of the population require further attention.

Key points:

Characteristics and Changes of China’s Youth Population

• The co-occurrence of a declining youth population and an increasingly aging population has imposed structural challenges on social development. According to the first census in 1953, the youth population was only 196 million. It reached its peak of 491 million in 2000, according to the fifth census, after which a downward trend began. At the end of the 1980s, the proportion of Chinese people over the age of 65 grew relatively faster than other population sectors. In 1953, the population over the age of 65 was only 4.41 percent; in 2000, it rose to 6.96 percent; and in 2020, it reached 13.50 percent. The decline in the youth population is partially a result of China's one-child policy and rapid economic growth with a corresponding social transformation.
• Comparing China to the world’s population age groups, the proportion of China’s youth has declined significantly and is growing closer to that of Japan and other developed countries with serious aging problems. In 2020, the global population of those 14 to 35 years-old was 2.65 billion, but China's youth population accounted for only 16.43 percent, about 8 percentage points lower than the peak level reached in 1986. In 2025, according to statistical models, China’s youth proportion will drop to 14.58 percent, 13.58 percent in 2030, and only 11.15 percent in 2050. Although India's youth population will also trend downward after 2027, it will still be 16.82 percent in 2050. The gender ratio of China’s youth population is also in a state of imbalance.
• The rapid urbanization after the reform and opening up drove more young people to urban areas. In 1982, the domestic migrant population was only 6.57 million; the seventh population census shows that this figure has increased 57 times to 376 million. For the youth population, this translates into 22.53 percent in 1982 and 71 percent in 2020. The gender breakdown indicates that there are more female youth than male youth.

Challenges Hidden in these Changes and Potential Solutions

• With a declining female youth population, a high unwillingness to marry, and low fertility rates, the declining birth rate fluctuates. Even if the fertility rate increases in the future, the size of the youth population and its proportion of the total population will continue to decrease in the long run, which may widen the development gap of the youth population in different regions, causing negative impacts on rural revitalization and common prosperity. Also, a larger number of unmarried men in rural areas may bring potential problems to the governance at the grassroots level.
• In the face of these challenges, China should redefine the culture of marriage, reduce the cost of childbirth, childcare, education, and other economic necessities to solve the practical problems facing the youth of marriage age. Gender-biased sex selection for non-medical reasons should be stopped, to ensure gender equality and reverse the long-term imbalanced gender ratio among newborn babies. We should also accelerate the development of high quality public services in central and western regions and rural areas to encourage youth to return to their hometowns for employment and entrepreneurship.

Context:

The real estate market is facing a serious crisis. Key indicators in several segments, from land purchasing to construction to sales, have seen severe negative growth in the first half of 2022. Some real estate development companies were unable to deliver occupancy-ready housing, and homebuyers stopped payment on their mortgages. Government intervention and supervision are beginning to address these issues. In this article, the author discusses his perspective on the development of today’s real estate market and forecasts the trends for the market’s future.

Key points:

• During the 1990s, the following three policies provided huge supply side economic stimulation and set the stage for the rapid development of China’s real estate market in the following two decades: 1) allowing local governments to collect revenue from selling land usage rights, 2) stopping the distribution of public housing to promote the commercial housing market, and 3) nationalizing collectively owned rural land and making it available for construction. With China's accession to the WTO in the early 2000s, rapid economic growth, urbanization, and investment stimulated residential demand, causing rising home prices.
• In the last 20 years, the boost from the real estate market positively influenced national economic growth. However, the dependence on the real estate market for this economic growth also significantly increased, which made policy adjustment difficult and uneven. A variety of problems continued to accumulate, eventually leading to today's crisis.
• Relying on continuously rising home prices is not a sustainable growth model for four reasons: 1) Housing prices are unaffordable in some cities; this has the potential to cause social issues such as homelessness and political instability. 2) With the increasing urbanization rate and an aging population, housing inventory in third and fourth-tier cities has increased significantly; the oversupply problem is gradually becoming prominent and could create an inequality gap. 3) Some real estate companies are on the verge of bankruptcy due to large-scale debt and no longer have the funding for land purchases. 4) Revenue from land sales, which contribute to 40 percent of local government income, is decreasing while the systematic risk of local hidden debt is expanding. It is time to change the model of “Land Finance”.
• In order to reform the real estate market, first, we should adhere to the principle that President Xi has emphasized— "houses are for living, not for speculation"— treating houses as consumer goods rather than financial investments. Second, a sufficient supply of public rental housing and government-subsidized housing should be guaranteed to low-income groups, especially migrant workers. Third, the government must ensure occupancy-ready home delivery to create stability in the national real estate market. Last, but not least, a dedicated group should be organized to propose a long-term mechanism and policy system for the healthy development of China's real estate market.
• The government will not offer infinite financial support to real estate companies. Based on the premise of ensuring social stability, a group of real estate companies, which have long performed poorly, must be liquidated.

Context:

One of the results of the recent July 28 meeting of the Political Bureau of the CPC Central Committee was to mandate the stabilization of the real estate market through adhering to the principle that "houses are for living, not for speculation". A basket of policies will be implemented in accordance with local situations to fulfill people’s reasonable housing needs. Local governments are held accountable for ensuring delivery of occupancy-ready residential buildings. The real estate market is expected to enter a healthier development cycle in the second half of this year, with the assistance of state-owned assets.

Key points:

In Shenzhen, state-owned enterprises (SOEs) are involved in several real estate projects, which are on the verge of financial collapse.

• On May 30, Peninsula Estate declared that it lacked the funds to deliver its residential building project. All its employees were furloughed for 6 months. Beginning in April, Nanhai Corporation Limited, the parent company of Peninsula Estate, was suspended from trading on the Hong Kong Stock Exchange. On August 1, China Merchants Real Estate (one of four major SOEs in the real estate market) and Peninsula Estate signed a "Strategic Cooperation Agreement on the Phase V Project of The Peninsula" to extend further cooperation in liability settlement and equity acquisition. It was a key move to help Nanhai tide itself over.
• KAISA, another private real estate company, was caught up in overdue payments and financial mismanagement that forced the Fengming Water Bank project in Baoan district to shut down. Sinochem Capital (another SOE) provided financial support to resume KAISA’s operations. The China International Trust Investment Corporation (CITIC) was one of KAISA’s major creditors, providing the fund 30 billion yuan (US$4.4 billion) in 2016. Currently, CITIC Urban Development & Operation has taken over four KAISA projects in Shenzhen, with an equity value of over 50 billion yuan (US$7.3 billion).
• Affected by trade frictions, a Covid-19 resurgence, and a “once-in-a-hundred-years” rainstorm in Zhengzhou, China South City has been further afflicted in its performance and liquidity. As of March 31, 2022, their total interest bearing debt amounted to 31,26 billion yuan HK$35.975 billion (about US$4.6 billion), with a 69.4 percent debt-to-capital ratio. In March, China South City and SOE UPDIS of Shenzhen SEZ Construction and Development Group launched urban renewal projects worth 100 billion yuan (US$14.7 billion).
• SOEs eased the short-term solvency risk and pressure on Peninsula Estate, KAISA, and China South City, developing more high-quality project cooperation and economic stability.

The People’s Government of Shenzhen Municipal State-Owned Assets Supervision and Administration Commission (SASAC) has been active in major business activities in China and has improved its asset portfolio.

• In what was the largest hostile attempted M&A take-over in China’s A-share stock market (only domestically-based Chinese companies), in 2017, Baoneng, a privately-owned company, vied for the management rights of Vanke. To rescue Vanke from Baoneng’s speculation, SASAC bought shares representing 29.38 percent of Vanke A stock, becoming the largest shareholder. In 2020, SASAC invested 25 billion yuan (US$3.7 billion) in Evergrande through its Shenzhen Talents Housing Group, helping Evergrande to pull through its debt crisis. Shenzhen Zhixin New Information Technology, a subsidiary of the Commission, acquired all the business assets of Huawei’s Honor brand (the lower-end smartphone brand), protecting it from a hostile takeover. SASAC also bought 23 percent of the Suning Group worth 14.8 billion yuan (US$2.1 billion) to ease their immediate debt difficulties.
• Shenzhen SASAC owns about 4 trillion yuan (about US$589.4 billion) in assets. The Commission and SOEs have already become an important factor in ensuring stability of the market and society.

Context:

Following the Jinmen Bombardment in 1958, nearly a decade after the founding of the People’s Republic of China (PRC), Mao Zedong reiterated and deepened his famous “paper tiger” thesis for a wider audience. The thesis was first publicized in a 1946 interview, shortly before KMT’s troops were about to take over Yan'an, which at that time was the “red capital” of CPC. This thesis has greatly invigorated the fighting spirit of the Chinese nation, both before and after the founding of PRC, and today is still inspiring the Chinese people to stay confident in their fight against US-led imperialism and to bravely continue the development of socialism.

Editor's note:

The Jinmen Bombardment was a major military operation, designed by Mao himself, to crack down on the US-led conspiracy for Taiwan independence in 1958. This operation tested the US’s attitude toward Taiwan independence and determined that the safeguarding of Taiwan by US forces faced real limits and constraints. This military surprise attack was planned very carefully and kept confidential for months in advance. On the day of the bombardment, all wired communications on Jinmen Island were interrupted, and three high ranking KMT generals became casualties of war.

Key points:

• After the Jinmen Bombardment, the US immediately responded by issuing an intimidating statement threatening the Chinese people with war. However, Mao remained calm and unperturbed. He stated that the West's attitude of interventionism must be stopped not only in China but also in Asia, Africa, and Latin America. China should treat imperialism as a paper tiger, show contempt for it strategically, but deal with it seriously at a tactical level.
• At that time, the US military advocated using nuclear weapons against China, while its ally, the Soviet Union, did not want to be implicated in the Taiwan question and was hesitant to provide China with nuclear technology. Mao asked the People’s Daily to publish his statements titled, “Comrade Mao Zedong’s Assertion that Imperialism and All Reactionaries are Paper Tigers”. The article aimed its appeal at all progressive people, Marxists, and revolutionaries both in China and the socialist camp, to equip them with more revolutionary confidence and determination to fight against imperialism. With revolutionary foresight, Mao shared his belief that "The East wind has prevailed over the West wind" within China and throughout the international socialist camp. Treating US-led imperialism as a paper tiger constituted an indispensable spiritual condition for the victory of international revolutionaries.
• The reiteration of the “paper tiger” thesis not only guided the military struggle, but also motivated China’s national industry to strive to surpass the UK, as this was a crucial development period for China, known as the “Great Leap Forward”. Liu Zhijian, then deputy director of the General Political Department of the PLA, pointed out the significance of the “wave of study” that followed the publication of Mao’s article. He witnessed the fact that Mao’s thesis helped to break the people's superstition and fear of US imperialism. Zhou Enlai considered Mao’s “paper tiger” thesis to be an extremely important document; he ordered the text to be made available to cadres at all levels and to the Chinese public.