C3S Paper No. 0038/2016
Courtesy: DNA India
The legislature sessions of a state controlled by the Communist Party is doing more to encourage private capital than parliamentary democracy in the neighbourhood. This is in contrast to the situation in India, where Parliament is stalled, and the government is unable to deliver promised reforms (GST, for example) that would bring forth investments into the market and for infrastructure development. This is ironical when most Indian political parties, even those opposed to economic reform, are known to be business-friendly.
Comparisons may be odious. However, the contrast is striking because China, like India, is an emerging market striving for investments to sustain a growth rate that could be slowed by many factors. Therefore, it may not be surprising if corporate India, especially cash-rich entities seeking investment opportunities, find China more attractive for doing business.
Today, it would be apt to say, like of the U.S, that “the business of China is business”. That is more than borne out by the ongoing “Two Sessions”, which means the fortnight-long proceedings of China’s legislature (National People’s Congress) and top advisory body (Chinese People’s Political Consultative Conference).
The economy was expected to be high on the Two Sessions’ agenda as China’s 13th five-year plan kicks off towards the goal of a “moderately prosperous society” by 2020. What came as a surprise was the emphasis, by both President Xi Jinping and Premier Li Keqiang, on the private sector at the very beginning of the NPC and CPPCC sessions.
On March 4, President Xi joined a group discussion of business leaders, who are members of the CPPCC, and delivered a keynote address on the private sector. He spelled out the place and function of the private sector in China’s economic development. Underscoring expectations in this regard, Xi said that in 2016, private enterprises would enjoy many policy bonuses, such as relaxed control over market access, reduced taxes and lower charges. He called these “mind relief” and “cardiac stimulant” for the many circles of economic activity in the private sector. The significance of Xi’s brainstorming with CPPCC’s politico-economic heavyweights, including from the Federation of Industry and Commerce, would not be lost on global capital. As if to stress that this is nothing new, he recalled that one of the Party’s “two firm resolves” since its 16th National Congress in 2002 is “unshaken conviction in encouraging, supporting, and navigating the course of the privately-owned economy”. In short, his message was: “no change” in the policy to create conditions for the private sector’s success.
The next day, in his report on government work to the NPC, Premier Li continued in the same vein. He said that “China’s investment environment will become even more fair, transparent and predictable. China will be able to maintain its strong appeal and serve as a favourite destination for overseas investment.” Hong Kong, which symbolises the principle of “one country, two systems”, is sought to be “mainstreamed” in economic activities although it remains politically separate. As an international financial centre, it would be encouraged to promote the Silk Belt & Road Initiative, by cashing in on its diplomatic strengths. China’s 13th five-year plan wants to make the mainland a magnet for owners of medium and small enterprises and young people from Hong Kong and Macao to start new businesses. As a democracy, India is a more attractive destination for foreign investment. Far from making the most of this advantage, the political class in India seem to be engaged in persisting with their indifference to economic development.
(The author is an independent political and foreign affairs commentator.)