past five years of looking for credibility on reform. i think what we need to see is every time the party rubs up against some sort of potential it alwayscertainty, pulled back and reverts to the old tools of the control and propping up growth to a credit growth. ethically -- i think what we need to see is the credit bill push through on a meaningful economic reform. i would caution at the same unveiledna has industrial planning, whether that is made in china 2025, --ch calls for essentially a in the next decade. let us also remember the big strategic objectives of the party, which do not necessarily include foreign companies. for china argument

a veryk, you do have closely held economy, it is centralized. they have a lot of debt building effective shifted from one hand to the other. you can have a miniature kicking the can down the road but it will not become systemic and a horrible crime. this is a stability type question. you someone traveling around china doing a story. cities relied on seal for their only out ports. people have taken pay cuts. they are being retrained. is that going to happen quickly enough, or do you think there still is this sort of string of social unrest because the transition to the new economy is not happening fast enough? >> unfortunately, the data we use to have about the social unrest is not recorded anymore.

we know for sure there is a great amount of dislocation that is happening as china is beginning to move out of what it calls old industry. moving its workers into the new economy and digital age. plaster, there was a lot of talk coal laying off steel and workers and transferring them into a high-tech industry. nonetheless, you see what the master plan is. we are seeing that base. i think there is a fear of the of social unrest and social instability. this initially was thought to be driven by visibility -- the ability of people to get into activities because of wechat and using cell phones to converse. party has taken an aggressive role system that as a possible avenue for organizing.

yes, stability is there. i think the party has shown conclusively it has been able to maintain those forces. haidi: very quickly, are you optimistic? >> long-term yes but we're entering a period where we should be wary of where xi jinping is taking the country. haidi: over the past hour as we continue to pass the lands from president xi jinping, who is delivering his keynote address. the congress gets underway here in beijing. let us get it over to our correspondents who is on the ground in tiananmen square in front of the great hall of the people. you're getting these lines and it strikes me with a resounding theme of pushing it home. what are you taking away from the speech so far? i am the rejuvenation of the

great chinese nation, of course. i articulated this as he took over in 2012. his father is a member of the party, he comes from a high-ranking part of the family. when it comes to economics, he talked about problems around imbalances and efficiencies. he talked about the need to achieve a moderately prosperous society. that that would happen and it would happen relatively soon. that ties this push to double per capita income from 2010 but 2010 levels. gdpries -- it ties into the target. above 6% in order to get to that point. he talks about china's international status and i talked about how he has taken a stronger and more confident and more bold approach on the

international stage as he took over as president. he was highlighting some of those areas. although saying china is still the largest developing country. that hasn't changed. he says china is facing a new era and is capable of rejuvenating. it ties into the chinese dream question. about some of the big state companies as well working for the good of the party and the nation. about two thirds of this speech.gh he will wrap up in 10 or 15 minutes. some of the commentary we may from delegates open at the days, the unveiling of the standing committee on wednesday when we find out what the new elite lineup for china is going to be. expected, there is

nothing really so far that investors can get 30 into here. it has been low on politics, well, bolstering the chinese people to some extent. we will need to have something surely. will we get anything on policy to see which stretch and he is going and -- which direction he is going and? -- in? tom: it is more of a framework but you are right. it ties into what the strategists have been saying witches is he will recap some of the past achievements and that he will throw it forward. by throwing it forward, it is underlying the key policy objectives we have seen being worked out and put together in the last few years. it is pushing those forward up until 2022. about theked already problem around imbalances. cutting back on over to and rebalancing toward the services

side of the economy. things we have heard a lot about before. this is really a case of identifying how much emphasis he is putting on certain parts of his speech and areas where he may be deemphasizing. he talked about china's role on the international stage. we have heard these lines before. any nuggets of detail when it comes to policy, ,ut it should set a framework and a direction for where china will go from here. this is really about president xi. this is his party congress. this is hence damping his authority on the communist party. let us not forget the role in society, common business, and the party. that is likely to continue. the role of the party in driving this country forward and the challenges and the tensions that

will pose as the private sector pushes for greater freedoms and liberalization's. that likely to happen in the next five years. >> our guest has just left us from the conference board. talking about that congratulatory message saying it was like getting a birthday card from your ex-wife. move away from that and talk about the environment. normally is clear skies during an event like this in beijing. it does not seem like this in a moment -- at the moment. i wonder if he will address environmental issues. he will likely touch on pollution being an issue. he touched on it before. in fact, curbs on pollution have been stepped up in the run-up to this congress. there are question marks about how much this curbs remain in place after this political

event. we have seen the impact on commodity producers and on some of the pricing, as well. .e have an outside of beijing that also ties into the attempts to cut back on the overcapacity .ituation the air is appalling. it is gradually getting better. he knows it ties into social stability. we have seen protests from middle-class chinese in cities against the high levels of pollution and smog. affect social stability. it will likely continue to be a theme. and inequality question was inequality- an question was mentioned in his speech. there is a gap between urban and rural dwellers. that is something he will have

to address, as well as the job scene. as some of these big lumbering industries shut down and are closed off, what happens to the workers? how can they be put back to work? from what we have seen, they have a long way to go before they have a structure in place and put the laid-off workers back into the workforce. >> stick around there. just to get you back to the great port of the people, president xi jinping has been talking about prospects for the people and those challenges being severe. at the same time, he is saying the country's prospects are right. he said china will deeply reform comprehensively. ideology.

we must of saul -- it's all -- absolve the scientific achievements of all mankind and take advantage of our socialist construction. development is the key to solve our problems. development must be sustainable. we must stay with creativity based on green technology. we must carry out our socialist systems in division of the properties, social wise. make markets take new roads and

a social wealth division. in economic growth, strengthen our economic power nationwide. this is common for socialists. we must take part in the system of people who present this and consult in them based on different people.

consult in the democracy of our nation to guarantee the people to function. carry out measurements of our basis.on a legal asus -- leadershiply party in each area. we must do this to prevent the legal system.

we must establish a legal country based on socialism. manage based on the law. we must strengthen the development and growth of the law. look for the combination of management of the nation and the party. carry out the full value of thealism development, .ultural confidence

marxism.arry out [indiscernible] the leadership and talking power. care out revolutionary culture. --. out revolutionary culture. we must remember the past out revolutionary culture. we must remember the past. china'swork based on value and provide leadership for

thepeople to guarantee 'the nation is people -- that the nation is people's lives. we must create a balance. the people need to all be taken care of. we need to guarantee all peopl'' are good.ditions china's president

xi jinping. let us bring in some analysis from david kelly. this is very much a speech that is in large part directed to a domestic audience. these lines are coming out only was socialism. can we say china. what is he trying to say china from? saved froms to be from the, i would say, ash, i would say, from a change in regime and the united states. there was a decline in the world trade. therefore, in the basis of seen.rity that china has

of course, there are another host of problems that xi just listed. in fact, your question really is --eightedf one because weighted one because, to some x extent, there has to be something for which you are fighting. this reference to battle and struggle, this is keeping alive something which some other administration might have brought a long time ago. the interesting thing is he continues to talk about to in hiscomprehensively speech. is it really appetite for that? this progressive reform we have in mind when we talk about structural reform? is he likely to consolidate

power and the cap mandates and sacrifice some of the short-term growth prospects in order to build this longer-term trajectory for china? m" is really aefor kind of space when various political interest fight for interests fight for leverage. this is measured, for example, by foreign investors. not all the reforms on the table here today. we have to look at reform is a word that is playing a great political role. it really is replacing the word revolution. revolution was the basis of the party's authority. there was a big switch 30 or so when they opened up

the reform era. since then, a reform has an almost sacred meaning. you have to be identified with reform and show you are the bearer of reform. that is the main reason for this work appearing so often. its actual meaning is not settled in this sort of message. david, how far does report also mean keeping people happy, content, and giving them jobs? is that the ultimate goal he has to have? the biggest challenge he faces is china attempts also simultaneously to go up the value chain. yes, that is clearly in the mix. be withinust always the framework of the party

preserving its leadership. the language of reform that we of thesethe last 2012,gs in 2013, sorry, in its first year in operation. the big statement of economic lines was more along the that you have mentioned. it was much more about market forces. it is market forces that, for example, provide food security. as for the first time this year, china abandoned the expression sufficiency" in food. they depend on the world market for this basic likelihoods. it does not have much to do with

a report as much. it has a long way to move that has been kept very quiet. stayl of it designed to r worded the other you mentioned in the weakening of the party. revolutioncultural try to institutionalize revolution. they thought the young have forgotten the mission of the party. the only way to relight the frame was by struggle and violence. this turned out to affect every family in the country. somebody in every family ended up victim of this. and so there was a repulsion from it in the early 80's. that is one reform really was

moved into the legitimate place. reform became the party's holy mission. struggle, unspoken or spoken, is over what is the process content of that mission. what is attempted? haidi: let us get back to the nitty-gritty in terms of the personal reshuffles. expecting a lot of speculation that he will go for another 10 years. what we haven't seen through to 2027? we talk about this retirement age, but it really is not a hard and fast rule, is it? da it has been stated by the partyvid: -- david: it has been stated by the party's own research that has -- that there has never been such a convention.

it is the right feeling that has been growing in the past years that an authoritative party makes its constitution as it s fits. the idea of a constitutional government to a set of norms is really not the guiding philosophy. the real thought that a strong leader makes the constitution that is needed at this moment. we talk about this consolidation of power. beenort of groundwork has laid going into this congress. if he does get absolute power, what does it mean and what does he do with it? d: is pretty impossible to think of absolute power over a million,roughly 90

larger than some national populations. what he has to do is always think about that network that is going to answer to his call. it is going to back them up, it is going to cover his back if you like against threats. a very important historical fact is he came to power in the midst of an unspoken crisis that we only have really come to understand later. korea -- t had risen so fast in the party. hat he had to be removed. had to be remote. not only he but his network. that was at a standing committee level. people in charge of the legal and political affairs commission. they threatened what was next

door. priority is to crate a network that have -- create a network that has his back. they have to be united under some statement and goals and guiding code. strongly, so far, and the work report this morning. the terms of national rejuvenation. national rejuvenation is something that can be pushed very hard by a concentrated party elite. you heard him talk, about the economy moving toward a more conservative one. that is a mix. we have had revenue growth in manufacturing grow every order and in some cases accelerate

since it bottoms out in 2015. is it rebalancing? the other thing is real averaging. there's a lot to say about the country not deleveraging at all. some people are borrowing more. when we saw credit slowing down, we saw it accelerate once again. how much storage we put into these words? david: you may have seen the term in the last few days debalancing suggesting by some the actual game plan. been moved off the previous reform objective of market guidance, of transferring guiding authority to the market. we have seen quite an explosion

of party-controlled devices, which if they are innovations. under xi, we have seen the use of inspection teams. these have been used in the first place for anticorruption. but now, they have been applied to seo management and they are grassroots to the levels at certain ecological goals. this goes along with another phenomenon, which is the proliferation of leaving small groups. leaving small groups -- leading small groups. leading small groups leads back to mao in the 50's. they have multiplied in recent years.

the most prominent of them is the central leading group for a deepening reform. "deeprd this expression, reform." with all you heard, we have to take a grain of salt with that. i would agree that the real policies the economic of the moment, most notably, supply reform, goes back to direction in new forms with this new network of agencies. >> we will move over to tiananmen square who is standing by there. where have we heard of late? -- what have we heard of late? what is going on? tom: a few more lines from the

"theh, including his line, market should play a bigger role in asset allocation." similar to what we heard from him in the past. it. on talking about comprehensively pushing ahead. you were just talking about what that means in terms of reform. question marks still about what the flavor of reforms may be. he also talked about china upholding the rule of law, international law, and that brings us to the south china sea, which has been eclipsed by north korean intentions but remains a source of tension for china and many of its allies, with china saying it would uphold international law. china has been playing quite a role in terms of the global

stage with things like the asian infrastructure investment bank and in terms of what we see around the paris climate change accord. we have heard basically a reiteration of many of the same policy ideas and same trajectory we have heard from president she in the past.xi not much stood out as being new, just possibly reemphasizing some of these things, saying that china would get to a point of a moderately prosperous society. we know they had wanted to talk about doubling per capita incomes by 2020 and 2010 levels. that is something he said will happen. coreenation has been a area of emphasis, and he highlighted that again in his

speech. quickly yeah, the rejuvenation of the chinese nation, one of these key things we keep coming back to, the victorious new chinese dream, some of these grand statements in the speech. we've beene things looking at our perspective, and it may not actually play out the way reformists would want it to. >> that's right. i think there was a lot of expectation when he took over in 2012, when he talked about reforms of the state, that that units,n spinning off lifting, privatizing parts of these big state companies. few has happened in a incidents, but you have not had a comprehensive shakeup, a comprehensive breakup of some of these monoliths companies, and in fact, what we've had is a drive to assimilate some of the

, being able toes be a driver of china's economic clout on the international stage, these big state companies. the problem is that they do not nearly as efficiently. they suck and a lot of the credit that can be going to private. they do not use spending as efficiently as private enterprises. the private sector generates most of the jobs, most of the growth, and most of the tax revenues, but the state revenue sucks in most of the credit, and yet, we have had that rrr cut with some big banks encouraging them to lend to the private sector, but as have -- as we have been hearing in this speech and previously, it seems reform is more about creating giants that can compete rather than breaking those of you. >> that's it, isn't it?

at the momentrty being struck as being right at the center of society and the economy here, and ultimately, the government is central in the part it plays in chinese development. he's been talking while we have been on air about hong kong and macau, again, suggesting that the party central authorities are right there. let me quote, actually -- we must maintain the central authority of hong kong and macau while protecting behind degree of autonomy of the autonomous region, so there we have it. on the one hand giving in the other hand taking. >> that's right. where hong kong is likely to continue to be a source of tension for the next few years as well, of course, the independence movement and the democracy push their and the one-partyg of the

two-system setup and the fact that china has in many people's eyes overreached and overstepped booksellers, people of canadian nationality, british nationality, and chinese law enforcement who have stepped up, and those tensions will exist and will remain, but it seems like president xi would want to continue to push central party control onto hong kong. the role of the party is much stronger than it was under hu jintao. it does stretching out into many more sectors of the economy, and he does see that as fundamental. as a former revolutionary hero, it seems very much ingrained in

president xi that the party remains at the forefront. greater control on what can be said, what can be spoken about, and what can be printed online. those discussions. [no audio] much for that, tom mackenzie at tiananmen scale -- square. the speech now 90 minutes strong, still continuing, reflecting on the past five .ears not a lot of detail, but certainly some very broad themes , the veryough paramount nature and status of

the chinese communist party, socialism with chinese characteristics. resounding applause. let's bring back david callahan, .irector of chinese policies you are right in the heart of political power here in beijing. what i find quite interesting is this idea that in davos, we heard from him, right, he gave the really powerful speech and had a lot of people questioning if china is now the helm of the global liberal order, if you will. this is a very different voice that we are hearing now, isn't it? >> he has moderated some of the language. notice of that speech. at the time, a new concept had emerged called the china solution. this was first promoted at the in septemberthink

2016, so just over a year ago, but it was given enormous play in the chinese media. international media hardly picked it up because it seemed so generic. china solution follows the china dream, china model, but it was a news package, and it was just sounded today. david, we are going to take you back to what xi jinping is saying at the moment. he's talking about reforms, talking about the economy shifting, seeking the high value chain. ofspeed up the development in consumptiont

of medium to high level in ecologyg healthy, green for the provision of traditional production sections. promote our production into the ,igh-quality level worldwide , andoad, highway, airline other infrastructure construction.

with forbearance of demand and requirement. a real generation of working power based on technology to , move creativity. creativity is the driving force of development.

it can strengthen basic infrastructure construction and withtific research prospective future. to build scientific nation, aviation, transportation, and in strengthenreas to area of theic country and promote national , establish the

scientific systems with the market is the driving force. speed up the scientific withdrawal to the productivity. educate large numbers of talent , and science, technology management. our culture is the central issue . very much stick with the

prosperous development of agriculture, balanced with a balanced increase of construction of countryside to deepen the land reformation of the countryside. stay with the prosperous status and safeguard the current land policy for 30 years. safeguard farmers so they can

better control their income, systems,conomic , give rise to a new form of agriculture, strengthen a balanced development of the culture of agriculture areas, strengthen the infrastructure of legaluntryside, promote construction of the countryside, .ducate talent

>> let's bring back and david and we are presumably getting toward the end. he is touching on key themes that have really driven our china coverage this year, the deleveraging campaign saying they will stick to this, put ,hrough more capacity cut saying that china shifted to a point where they look for higher quality growth. is that really happening, though? we are seeing a pretty timid , and we, baby steps -- seen aseeing pretty halfhearted approach, so i understand the challenges he has faced. are we going to see renewed commitment? >> i think we should look on the last couple of years as really

setting the framework for what will follow. the high water mark of reform hadthe 2013 program which 100 16 programs, each of which very complicated and novel. were,y ways, they however, repeating what the world bank had put in earlier that year, and it's reasonable to think that xi jinping at the time was busy fighting off this threat with the close political and had to take, more or policy wasanted that set up with not all of his own ducks lined up. it was after he been carried out the anticorruption campaign and

started to learn of his him forces that we have seen these movements away from the high water mark. the use of inspection teams and small groups that are mentioned before. that seems to us to be what he really wants to do, so it's not the case that he has been held up until now from carrying out some high-minded, high-level reform. he merely wants to do what he is doing now, which is bolstering market.y over the the market is still there. he still needs the market. he wants international foreign investment. concessions are being made. they are using free trade zones. they are using list which allow foreign investment to do more or less something with a kind of rule of law. he uses the term rule of law over and over again, but we're certain of this is with chinese

characteristics, not the rule of law in which you could hope to win a case against a state. you pretty much cannot. in the commercial realm, you could win a case against a chinese company or even against another foreign company. we are seeing struggles between chipmakers and apple and so forth. intellectual property is thereng strengthened, and is more chinese intellectual property that needs protection, so that is moving forward, but it's not rule of law and a fully fledged sense. it is ruled by law, the party using law to expand its authority downwards on its subordinates. the big tension in the economy is not so much between the state and the market. you have successful market actors like jack ma and alibaba,

but it's the tension between the center and the local governments who still run their own show, who still have their own playbook and can easily sidestep central instruction. >> there's plenty attention the state and the private sector, too. these global companies almost think to be brought into the fold in terms of coming under greater state control as they take these stakes in these companies. is that a glimpse of what we will see in the future? >> correct. the private sector is not really an independent private sector. it cannot lobby on its own behalf. it does not have its own powerful spokespeople. there are some media which are more private-sector oriented, but the private sector has been

given firm suggestions this year a client sector. we saw that in the restrictions , really clipping their wings in terms of independent use of their capital. it's well understood throughout the whole private sector. >> stick around with us. we are to get to our chief asia economics correspondent. talked a little bit about this speech. people looking for reform, some headlines coming through at the moment saying he just said that china wanted to boost the .trength of state companies has state owned enterprise reform gone out the window? not then much by

in terms of message economic reform. if anything, it reads like a reinforcement of the role of the party in the state. time and time again, he's , playing to the gallery. it is a party congress, but nonetheless, the message to be taking away -- >> the world is watching here. >> the world is watching. business is really reinforcing central role. >> reinforcing some other interest, he is saying rate reform looking also to build up fiscal, monetary, business policies. you have to walk the walk as well as talk the talk here. it has been repeating policy pledges that we already know, but the point for some of that progress has been slow.

is another saying they should defend against systemic risk -- well, of course they should. stating the obvious, isn't it. should expand -- again, not new. we will see in china does open up markets, what sectors it opens and where it allows foreign competition, but the central message being that the party and associated system -- and socialist system will be the center of everything going forward. timing of the speech and the report we had yesterday also quite interesting. saying at the moment about yuan reform, you just mentioned , and it rate reform seems as though the u.s. has backed off. >> big change of tune. that is part of

the wider jigsaw, which of course includes north korea. a weaker dollar has helped the yuan, so they do not have to manipulate currency the way they have in the past. >> great stuff. >> we want to stick with fx, being the theme. he kind of started to wrap up talking about pursuing deepening reforms. let's bring in the global head of fx strategy at national australia bank, joining us from sydney. we were not expecting details and all of this. i would be curious to know, do you think this is rhetoric? is there a expectation that once the political pageantry is done and dusted, there will be more appetite for reform, loosening

their control over the currency? >> am not sure i would agree with that. some of the commentary that has been come out from chinese officials while the speech has been going on talks about stability. the message this year has been that the currency has been pretty stable. if you look at what the u.s. dollar is doing against the chinese currency, the chinese yuan has strengthened about 7.5 or since the beginning of this year in the context of broad-based u.s. dollar weakness . liberalization is occurring in the sense that the u.s. dollar side of the equation is being allowed to drive day to day movements. reforms currently are not finding any way, and the bigger scheme of things, we're talking about capital account liberalization.

theory, we if not in have seen a rolling back against capital account liberalization because the chinese have tried to create a balance between inflows and outflows, and that has been reflected in a relatively stable currency in index terms, at least. today is not really about signaling a change of regime when it comes to capital account liberalization, so i do not think anyone -- anything will really change in terms of the way the yuan is formed in global markets. >> the u.s. has backed off crawling china a currency manipulator. but i will looking at a basis for nothing end of the day? >> again, looking at the move we have seen so far this year, if they were not going to label china a currency manipulator six months ago, it is pretty hard to then find evidence you could use

to tie that currency manipulator noel on the, so it's surprise to see the treasury report has not labeled them a currency manipulator. the trump administration has dangled this kind of caret, if you like, of saying help us contain the north korea threat and we will go easier with you on trade, but again, nothing happened there and we have seen what has happened to the risks with nafta, for example. i do think that risks with specific trade actions against china and the other countries mentioned in the treasury report that are running big surpluses with the united date and broadly -- i do not think that threat has in any shape or form go away -- gone away. depending on how the nafta thing goes, it could be important for broader trade protection actions in the u.s. administration. >> if you would please, stay with us. we're going to take you back to the speech.

we just got headlines coming saying chinaxi will be innovative on foreign investment. getting you back to the great hall of the people and xi jinping. >> people's right to know, , ande's right to express perfect management systems based .n law different levels of party must serve better as people servants. based on democracy. strengthen a legal guarantee

of people as master. we should develop the leading toction of people's congress make the people's congress of to be thelevels representative organization for the people.

personal composition of people's congress at different levels. democratic framework must promote consultation between ,ifferent social sectors consultation on the grassroot to guarantee people's

, toy political life guarantee their right of participation. people's political conservative consultation is the basis of people's purchase a andent a national issues strengthens people's consolidated party function