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What China’s 20th National Congress means for B.C. and the rest of Canada

At the time of publication, the results of the 20th National Congress of the Chinese Communist Party (CCP) are expected to be public, and the world will be allowed to see the new lineup of senior men who will lead China for the next five years.

At the time of publication, the results of the 20th National Congress of the Chinese Communist Party (CCP) are expected to be public, and the world will be allowed to see the new lineup of senior men who will lead China for the next five years.

The congress has long been expected to confirm Xi Jinping in an unprecedented third term as CCP general secretary. What impact will this mysterious conclave have on British Columbians and Canadians generally?

As many readers know, the CCP holds a congress every five years to shuffle political leadership positions, in the process setting policy directions for the coming five-year cycle. The Party Central Committee elects a 25-member politburo, the inner circle of power brokers from which key decision makers are selected to form the standing committee of the politburo, chaired by the party’s general secretary. The makeup of the standing committee will give an indication of future policy direction. Some incumbents will retire because of age limits, which have been bent to accommodate Xi, who is past the normal retirement age.

The pecking order will reveal the extent to which Xi has dominated appointments or has had to make some compromises with other factions.  However, what appears certain is that Xi’s general policy direction will continue, despite the numerous economic and political challenges China is facing. How these challenges are handled is of real relevance, given the role of China as one of B.C.’s largest markets, and the cultural, ethnic and financial ties to China of many B.C. residents.

In 2021, China was B.C.’s second-largest export market after the United States, accounting for 16.5 per cent of provincial exports by dollar value ($8.8 billion) – almost double that of the next largest export market, Japan. Leading exports were coal (38.5 per cent), followed by pulp (26 per cent), metals (17 per cent) and wood products (7.9 per cent). The extent to which China’s economy continues to thrive will clearly have an impact on China’s need for B.C.’s resources.

China is currently facing a number of economic challenges that the new leadership team will have to deal with. Among these are the impact of the zero-COVID policy, unfavourable demographic trends, rising economic and social inequality, a property bubble and technology pinch points. Economic challenges are linked to the broader strategic and political environment, with the U.S.-China trade and technology “war” getting more intense and Chinese policy towards Taiwan becoming more aggressive.

China’s growth is slowing (GDP growth is expected to be only 3.3 per cent this year, according to the Asian Development Bank) and its population is aging. Because of sharp disparities in income distribution, Xi has pushed a policy of “common prosperity” designed to bring about a more equitable distribution of economic benefits. He has also pushed a “dual circulation” strategy whereby China will lessen its dependency on export-driven growth and rely more on internal consumption. Under Xi, China has also doubled down on acquiring breakthrough technologies in artificial intelligence and semiconductor production. To do this, he has reversed many market-oriented policies that drove Chinese economic expansion in the past and has restored the state sector, backed up by close party control, to a lead role in the economy. Simultaneously, China has hardened its position on Hong Kong, Taiwan and the South China Sea. These policies will be even more evident once Xi cements his third term.

With the congress behind it, China will need to adjust its zero-COVID policy and end the draconian lockdowns employed to date, bringing interruptions that have severely affected its economy. Recent U.S. technology restrictions will further disadvantage China with respect to chip production and the acquisition of latest technologies; China will respond by accentuating domestic research and development to follow Xi’s push for technology self-reliance. The emphasis on domestic consumption will continue, although China will continue to need export markets.

Under Xi, China’s more assertive policies toward Hong Kong, Taiwan and its near neighbours will be maintained, if not increased. The leadership’s emphasis on the central role of the party in Chinese society will continue, and will result in increased restrictions on individual Chinese citizens, including the monitoring of those living abroad.

We will need to learn to deal with a more assertive, more inward-looking, self-reliant China. The mythic grease of “friendship” will be more difficult to apply when frictions occur. China will continue to rely on B.C.’s resources, but that trade could be subjected to retaliation should other elements of the Canada-China relationship turn sour, as happened with Australia. (It is worth noting that B.C.’s coal exports surged by five times in 2021 when China boycotted Australian coal because of Australia’s alleged anti-China policies).

Given China’s willingness to weaponize trade (as the U.S. has weaponized technology) and impose trade barriers for political reasons, B.C. businesses would be well advised to continue to work to diversify exports in the Asia-Pacific region while maintaining B.C.’s reputation as a reliable supplier. Despite these trade challenges, individual money and talent will continue to flow from China, in many cases driven by a desire to pursue opportunities in a less controlling society.

The 20th National Congress will not mark a turning point but rather a consolidation of recent worrying trends in Chinese policy. These are the new realities we now face. •

Hugh Stephens is a distinguished fellow with the Asia Pacific Foundation and an executive fellow with the University of Calgary’s School of Public Policy.