China's development: What we do and don't know

On March 23, 2013, the World Bank and the Development Research Center of the State Council jointly released an analysis report called "China 2030: Building a Modern, Harmonious, and Creative Society". This report argues that China needs to move from a growth model appropriate for a period of "catch up" to one driven by efficiency and innovation. The year of 2013 witnessed the ongoing China's economic transition, just like what the report indicated. But what is neglected in the China 2030 report, which is important, is China's political transition.

By any standard, China's economic performance over the last three decades has been impressive. That being said, China's economy per se is not without structural problems and vulnerabilities. China's GDP growth rate are 8.7%, 9.2%, 9.2%, 7.8%, 7.7% from 2009 to 2013, respectively. It seems that China is shifting from a high growth rate stage to a moderate one. Does this suggest a gloomy future for China? The answer is no. According to economist Yifu Lin, China has the potential to keep an 8% growth rate in the next two decades. But the question is how to develop China's potential? This is a main task for China's new leadership. Beijing implies that China needs both economic and political reform measures to realize the China dream which is based on a healthy and rapid growth economy.

In 2013, China's new Premier Li Keqiang started a whole new package of governmental reform plan at the very first Executive Meeting of the State Council, which sends signals to outside economic players that government would refrain itself from intervening the market. The Third Plenary Session of the 18th Central Committee of the Chinese Communist Party comes up with a comprehensive 60-point reform project. What also most attracts people's attention in 2013 is perhaps the new wave of Anti-Corruption campaign. Chinese President Xi Jinping said that the objectives of Anti-Corruption are tigers and flies. In last year, more than 180,000 government officials which includs 19 leaders at the provincial or ministerial level have been punished by legal means. What we know about the year of 2013 is that it lays out a new blueprint for China's development, politically and economically.

What is the year of 2014 going to be? We don't know. But there are two types of "don't know" and they have different consequences. The first type is we don't know because of uncertainty. For example, we don't know 2008 financial crisis would happen before 2008. Or, we don't know SARS epidemic would break out in 2003 suddenly. This type of "don't know", normally will create a crisis which requires government to take immediate measures. But China doesn't need to worry about this too much in 2014. First of all, uncertainty always exists and we can't accurately predict the timing and magnitude of "surprise event". Secondly, China has a relatively high degree of state capacity and technical capacity, which means that the central government is competent enough to handle crisis.

The second type of "don't know" is people pretend not to know, or they do not want to know. China is in a transformation process during which new challenges and risks will come out frequently. But the difficulties to handle these new problems do not only lie in the problems per se, but also the connections and interactions of these problems. Government won't successfully solve these problems if they just pay attention to the problem themselves. Implementing economic reform and launching Anti-Corruption campaign are just the first step. And we can anticipate these economic and political reforms will continue in 2014. 2014 is definitely another year of reform. But what can really make a difference in 2014 is to see whether the government can make more progress in dealing with the complexities of economic and political reforms. It's an exciting news that CPC created the Central Leading Group for Comprehensively Deepening Reforms. It's a good start and we will see how it works in 2014.

The author is Phd student in Johns Hopkins University.