The new Chinese social contract by Ana Palacio

Even if China overcomes its immediate economic challenges, double-digit annual growth will not return. This has not escaped President Xi Jinping, who is increasingly seeking to shift the basis of the communist regime's legitimacy from growth to security.

MADRID The European view of China has evolved rapidly in recent decades. What started as a general lack of knowledge about the country has given way to a curiosity about its history and culture. China's economic rise further piqued European interest, particularly after the country joined the World Trade Organization in 2001. Over time, Europe became dependent on cheap Chinese goods and the booming Chinese market has become increasingly lucrative, especially for German automakers.

However, in recent years, the European Union has viewed China primarily through the lens of strategic competition. He accused the Chinese of engaging in unjust business practicesarguing that state-owned and state-backed companies enjoy excessive advantages in strategic sectors. He sounded the alarm on China dominance on supply chains and its control of critical minerals. And he expressed concern about China's rise. geopolitical ambition.

It is in this context that I recently arrived in Beijing, as part of a trip organized by the Chinese Communist Party. And what struck me most was not the evidence of China's global rise, but rather the internal dynamics of the country in particular, the changing provisions of the social contract that underpins the CCP's rule.

For decades, China's social contract has been reduced to a simple bargain: the state ensures strong economic growth with associated opportunities, and the people accept restrictions on their civil and political freedoms. This contract emerged under Deng Xiaoping, who initiated China's reform and opening-up, and whose gospel of wealth getting rich is China's glorious meteoric rise.

But China's economy has suffered a series of blows in recent years. The COVID-19 pandemic and the draconian containment measures imposed by the government in response have caused a sharp fall in growth, as has been the case elsewhere in the world. The Chinese economy, however, never fully recovered. Instead, it faced a housing crisis, a sharp decline in foreign investment, and a loss of consumer and business confidence, driven in part by unpredictable and ideologically driven macroeconomic and regulatory policies.

The CCP is taking measures to accelerate economic recovery. After third-quarter data revealed growth had failed again of government's 5% target, Chinese leaders reported a shift, for the first time in 14 years, from prudent to moderately accommodative monetary policy, and suggested that 2025 would bring more proactive fiscal policy. This approach aims to stimulate domestic demand, which has been sluggish; but exports, particularly to Europe, remain essential to keep the economy afloat.

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Even if China overcomes its immediate challenges, its economy has passed the point where double-digit growth can form the basis of the social contract. This does not escape Chinese President Xi Jinping, the self-proclaimed pilot at the helm (a barely veiled reference to the great helmsman Mao Zedong) who increasingly seeks to shift the foundations of the legitimacy of his regime from growth to security. Today, the Chinese government promises to ensure the well-being of citizens, particularly by protecting the environment, and to promote common prosperityfor example by strengthening support for rural workers flocking to cities.

This approach is not only at the heart of Xi's so-called Chinese dream. national rejuvenation; he also supports China's attempt to strengthen its international position by positioning itself as a global climate leader. At this year's United Nations Climate Change Conference (COP29), Chinese leaders praised the $24.5 billion in climate finance it has distributed, according to its own opaque calculations, to developing countries since 2016.

Green investment is also happening domestically. China accounts for about two-thirds of solar and wind projects under construction worldwide, and the country reached its 2030 target for installed renewable energy capacity, six years earlier than planned. Of course, China was also responsible for 95% of new global coal-fired power plant construction last year. But even as the CCP is under pressure to provide enough energy to support its growing economy, its push for climate action should not be underestimated.

Beyond geopolitical considerations, China's climate leadership is a response to the demands of the country's citizens, who are increasingly concerned about the environmental damage that has accompanied rapid development. Air pollution is responsible it causes around two million deaths in China each year, and water supplies are both limited and polluted. When Xi speak of blue skies, green fields and clean water, it does so for both foreign and Chinese audiences.

The Chinese also expect their leaders to deliver on their promise of economic security. From Xi introduced the idea of ​​common prosperity in 2021, inequalities in China in particular between regions has increase. This helps explain why so many people are eager to leave their less prosperous rural towns in search of opportunities in China's vibrant cities. With the rate of urbanization which should approach 70% over the next five years, supporting the well-being of the city's residents will be a major challenge for Xi's government.

Seeing all of this first-hand and gaining insight into changing people's expectations and government priorities has enriched my understanding of China and reminded me why engagement remains crucial. In an era of increased competition and growing antagonism between China and the West, there cannot be a more important pursuit.