The Impact of the 20th Party Congress on the US-China Economic Competition

Park Han Jin

(chinapark@naver.com)

Director,

Institute of Chinese Economy Observation

English Abstract

The Economic Message of the Party Congress

The four focal points of China’s future industry policy include stabilization of the industrial supply chain, energy diversification, balanced development between regions and classes, and improvement of public welfare.

The main economic messages of the current Party Congress are development and stability. China’s shoring up of its trade diplomacy may result in intensified conflict with the US.

Furthermore, to achieve balanced development between regions and classes and improve public welfare, China is likely to continue its urbanization strategy. The post-Party Congress leadership will put forth policies on employment, education, healthcare and public service on a nationwide scale after launching in the second quarter of 2023.

The Direction of the US-China Economic Competition

The US-led deglobalization is a risk factor for China as it has used globalization as its main engine of economic growth and development after joining the WTO.

China cannot back away from the intensifying conflict between the US and China in the semiconductor industry. However, China’s plan for technological rise may have to undergo considerable adjustments. For example, China may have to extend its planned incubation periods for certain industries or adjust the level of intended objectives.

A New Approach towards the Chinese Economy and Policy Directions

A new perspective rather than immediate judgement is necessary to observe the Chinese economy. The following three proposals are made.

Firstly, the level of economic recovery. It has become practically impossible for China to achieve its annual growth goal of 5.5%. Determining the possibility of economic recovery is also difficult. But the rapidly growing economic sector of O2O(online to offline) business could be a new driver of economic growth.

Secondly, there is a need to examine new indicators that critically affects the present and future economic flow. Retail sales, price index, investment on manufacturing, and new economic sectors are presently rising as key indicators.

Thirdly, it has to be noted that the ratio of consumption in the economy is gradually increasing with different policies being implemented in across regions. Observing the consumption-oriented policies of each region may serve as reference in strategically subdividing the domestic market.

Policy Implications for South Korean Government and Firms

China has repetitively shown that it does not intend to avoid facing the worst crisis with the US. South Korea should be aware of the fact that both the US and China need South Korea.

South Korea should carefully maintain both its alliance with the US and its economic relations with China. It should wrap up its second phase of FTA negotiations with China and increase cooperation between local governments. Furthermore, it should look for new market opportunities within policy changes.