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Opinion | Why China’s GDP growth needs to be read against its social contract
- Economic development and sustainability are both part of the contract and one cannot come at the expense of the other
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China concluded its third plenum last month, which came off the back of lower-than-expected second-quarter GDP growth of 4.7 per cent. The outcome of the plenary session was a disappointment, once again, for Western analysts who seem bent on pressing China for more stimulus to boost its gross domestic product.
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Economic development is a tenet of China’s social contract. President Xi Jinping warned, in his new year speech, that “some enterprises had a tough time”, and “some people had difficulty finding jobs and meeting basic needs”.
The magnitude of China’s economic slowdown is not lost on its leadership. But sustainability is also a tenet of the social contract, and economic growth should not be achieved to the detriment of sustainability – this, too, is not lost on China’s leadership.
China cannot claim to support globalisation yet brush aside the concerns of Western analysts. So its policy agenda is a delicate juggling act of Western concerns and its social contract. A case in point: it announced US$42 billion of stimulus for consumption, but not before earmarking US$139 billion for public projects.
China’s leadership is profoundly influenced by the philosophical notion of “harmony”, which dates back thousands of years and continues to feature prominently in its policy agenda. In “harmony”, the cause-effect relationship isn’t linear but a dynamic cycle of change and balance, so a linear approach can lead to an incomplete assessment of China.
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Unlike “harmony”, the modern form of GDP is an American notion developed in the 1930s. Once lauded by the US Department of Commerce as “one of the great inventions of the 20th century”, it has become the yardstick for the global pecking order, with the US-led Group of Seven (G7) at the pinnacle.
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