Chinese national congress Lintao Zhang/Getty Images

What’s Really at Stake at the CCP Congress?

Whenever the Chinese Communist Party holds its quinquennial National Congress, pundits revel in speculating about the behind-the-scenes political dynamics driving what is invariably a carefully choreographed event. But they should really be focusing on whether China's leaders will signal continuity or change regarding the country's economic and trade policies.

LONDON – This month, international media are understandably focused on the Chinese Communist Party’s 19th National Congress, a carefully choreographed event that will reveal who’s “in” and who’s “out” with Chinese President Xi Jinping.

But while it is important to know who Xi’s favorites are, I do not find the theater and intrigue of the event to be as interesting as it is made out to be. Far more important is whether China’s leadership is acting in accordance with what the CCP has promised the country’s 1.3 billion people.

Just before the last congress, in 2012, Xi’s two-week absence from public view raised concerns. In the unlikely event that the same thing happened again this year, alarm bells would have rung. Moreover, if the agenda that Xi presents for the next five years suggests that he and the rest of the CCP leadership are losing credibility and struggling to maintain the party’s economic and social contract with the people, the 19th Congress will be very relevant. But I doubt we should worry too much.

More pertinent questions come to mind – two in particular. First, will the modest rise of the Chinese consumer continue to fuel 6-7% annual growth? And, second, will the somewhat undefined Belt and Road Initiative (BRI) – continue to be a major priority for China’s leadership?

As for the first question, despite the slower growth trend this year, China will still add around $1 trillion or more to its nominal GDP, giving it a $12 trillion economy by the end of this year – nearly double the economy’s size in 2010. To be sure, $12 trillion is just two-thirds the size of the US economy; but the $1 trillion added this year is more than all but the top 15 economies in the world. It is larger than the entire GDP of Indonesia or Turkey, and almost as large as the Mexican economy.

According to official data, private consumption in China accounts for just 39.2% of GDP. This is very low by the standards of most high-income economies, but it has increased from 35.5% of GDP in 2010. When that increase is translated into hard numbers, it amounts to an additional $2.58 trillion since 2010 – an increment that is larger than the entire Indian economy. The growth of Chinese consumption is easily the most important factor in global consumption growth today.

The World’s Opinion Page

Help support Project Syndicate’s mission

subscribe now

If Chinese consumption growth were to continue on its modest upward trajectory until 2020, it would account for just over 41.5% of GDP, which is to say, almost another $2 trillion. And yet there is some anecdotal evidence to suggest that Chinese consumption growth might actually be accelerating faster.

So, the real question for China watchers around the world is whether anything that happens at the 19th Congress will affect this trend. If the trend continues or accelerates, Chinese consumption could start to approach half that of the United States, which would be an extremely encouraging sign that the world economy is undergoing a badly needed rebalancing.

As for the second question, I suspect that China will stay the course on the BRI, especially given the growing concerns about trade elsewhere in the world. While we don’t yet know the precise dynamics of this grand project, it is safe to assume that linking China, Europe, and everywhere in between through better infrastructure will have a significant positive impact on world trade.

To be clear, I do not think that the BRI is as important as the Chinese consumer to the world economy. But in terms of trade, specifically, its impact could be enormous. The BRI stands to have a direct effect on as many as 65 countries, including Russia and India, which along with China constitute three of the four BRIC countries (the other one is Brazil). And nine of the 11 most populous emerging countries after China lie within the BRI’s broad geographical scope.

Most of these countries have not yet matched China’s success in unlocking their economic potential. Many of them devote more resources to domestic infighting or conflict with one another than to participating in international trade. But with BRI, cross-border trade could increase, and some of the feuds could be laid to rest, benefiting the region’s citizens.

Indeed, far more interesting than the BRI’s infrastructure projects are its geopolitical implications. The BRI could subtly but significantly improve relationships between China and its neighbors, and between the neighbors themselves.

China’s relationship with India and other countries on the Indian subcontinent is of particular importance. When Xi held a regional conference to promote the BRI in May, Indian Prime Minister Narendra Modi did not attend, much to Chinese leaders’ chagrin. But then, at a BRICS summit in September, China and India seemed to achieve a significant diplomatic breakthrough over a territorial dispute. If this turns out to be the beginning of a limited Sino-Indian rapprochement, and if other rivals in the region follow suit, then the BRI could end up being a landmark policy indeed.

So, when you are reading your favorite newspaper’s analysis of the CCP’s 19th National Congress, don’t be too distracted by the court intrigue. The two questions that really matter are whether China’s consumer-led growth will stall; and whether the BRI will be abandoned. Neither would be good for the global economy. But, fortunately, neither seems likely.;

Handpicked to read next

  1. Television sets showing a news report on Xi Jinping's speech Anthony Wallace/Getty Images

    Empowering China’s New Miracle Workers

    China’s success in the next five years will depend largely on how well the government manages the tensions underlying its complex agenda. In particular, China’s leaders will need to balance a muscular Communist Party, setting standards and protecting the public interest, with an empowered market, driving the economy into the future.

  2. United States Supreme Court Hisham Ibrahim/Getty Images

    The Sovereignty that Really Matters

    The preference of some countries to isolate themselves within their borders is anachronistic and self-defeating, but it would be a serious mistake for others, fearing contagion, to respond by imposing strict isolation. Even in states that have succumbed to reductionist discourses, much of the population has not.

  3.  The price of Euro and US dollars Daniel Leal Olivas/Getty Images

    Resurrecting Creditor Adjustment

    When the Bretton Woods Agreement was hashed out in 1944, it was agreed that countries with current-account deficits should be able to limit temporarily purchases of goods from countries running surpluses. In the ensuing 73 years, the so-called "scarce-currency clause" has been largely forgotten; but it may be time to bring it back.

  4. Leaders of the Russian Revolution in Red Square Keystone France/Getty Images

    Trump’s Republican Collaborators

    Republican leaders have a choice: they can either continue to collaborate with President Donald Trump, thereby courting disaster, or they can renounce him, finally putting their country’s democracy ahead of loyalty to their party tribe. They are hardly the first politicians to face such a decision.

  5. Angela Merkel, Theresa May and Emmanuel Macron John Thys/Getty Images

    How Money Could Unblock the Brexit Talks

    With talks on the UK's withdrawal from the EU stalled, negotiators should shift to the temporary “transition” Prime Minister Theresa May officially requested last month. Above all, the negotiators should focus immediately on the British budget contributions that will be required to make an orderly transition possible.

  6. Ksenia Sobchak Mladlen Antonov/Getty Images

    Is Vladimir Putin Losing His Grip?

    In recent decades, as President Vladimir Putin has entrenched his authority, Russia has seemed to be moving backward socially and economically. But while the Kremlin knows that it must reverse this trajectory, genuine reform would be incompatible with the kleptocratic character of Putin’s regime.

  7. Right-wing parties hold conference Thomas Lohnes/Getty Images

    Rage Against the Elites

    • With the advantage of hindsight, four recent books bring to bear diverse perspectives on the West’s current populist moment. 
    • Taken together, they help us to understand what that moment is and how it arrived, while reminding us that history is contingent, not inevitable

    Global Bookmark

    Distinguished thinkers review the world’s most important new books on politics, economics, and international affairs.

  8. Treasury Secretary Steven Mnuchin Bill Clark/Getty Images

    Don’t Bank on Bankruptcy for Banks

    As a part of their efforts to roll back the 2010 Dodd-Frank Act, congressional Republicans have approved a measure that would have courts, rather than regulators, oversee megabank bankruptcies. It is now up to the Trump administration to decide if it wants to set the stage for a repeat of the Lehman Brothers collapse in 2008.