Read the change in ChinaIn Beijing, the National People’s Congress and the Chinese People’s Political Consultative Conference, two major political events to determine the Chinese government’s policy direction, are currently being held. The events attract our keen attention because this year marks the beginning of China’s 12th five-year plan, which will end in 2015. Moreover, the events are taking place amid sporadic pro-democracy protests sparked by anti-autocratic movements sweeping across North Africa.
The 12th five-year plan submitted to the National People’s Congress by China’s State Council is aimed at shifting China’s economic structure from an export-oriented one to a domestic consumption-oriented one, all while focusing on distribution and aiming for a 7 percent growth rate for the five years. But it remains to be seen if China can succeed in attaining the new growth rate. As witnessed already, China registered an 11 percent annual growth rate despite its original goal of 7.5 percent.
But the widening income gap and social unrest stemming from unbalanced regional development will pressure the government to seek a new policy direction. So the central government will most likely invest more resources in developing inland areas that lag far behind the prosperous coastal regions. The government will also try to lure foreign companies to inland areas.
In the opening ceremony of the People’s Congress on Saturday, Prime Minister Wen Jiabao promised the government would substantially improve living standards in five years. He vowed to create 9 million new jobs annually while raising the minimum wage by 13 percent each year and controlling unemployment at a 5 percent level. Those goals, however, will be tough to achieve with a 7 percent goal in mind. Wen stressed that boosting domestic demand will lead to balanced growth. Beijing’s decision to raise the service industry’s share from 43 percent last year to 47 percent in five years comes from the same philosophy.
Korean companies should examine all of the probable changes. Businesses that pollute the environment will no longer be welcomed in China, let alone the many companies seeking to take advantage of low wages.
As local workers demand increases, our companies must be extra careful about labor management, too. Above all, they must craft a strategy that targets the Chinese market itself rather than regarding China as an export destination.