Integrated Reporting: Corporate Disclosure for China’s “New Normal”

In the 2014 Government Report delivered on March 5, 2015 at the Third Session of the 12th National People’s Congress, Premier of the State Council Li Keqiang noted that “China’s economic development has entered a new normal, meaning we must adopt a new attitude.” The content of Premier Li’s speech clearly identifies the contours of what “new normal” means: Economic growth that makes more judicious use of limited resources, and protecting the country’s vast natural capital from degradation while reducing negative impacts on the environment such as carbon emissions and air pollution.

“New normal” has strong social and governance dimensions as well. For China’s 1.3 billion people to have happy lives in a just society, reforms will be necessary. Corruption in the public sector, for example, will need to be eliminated to ensure that public servants are truly looking after the needs of the public, not simply their own. The idea of the “new normal” is so important to China that it will be the basis of the Party’s upcoming 13th Five-Year Plan, the official guideline for China’s national economic development.

The “new attitude” that will support China’s transition to sustainable development means revamping the six forms of capital that comprise its economic system: financial capital, natural capital, manufactured capital, human capital, social and relationship capital, and intellectual capital, including:

• Focusing on innovation and knowledge creation since the country can no longer rely upon low-cost, resource-intensive manufacturing jobs to provide employment opportunities and spur economic growth.
• Advancing national ecological security as the basis of economic development and social prosperity.
• Enhancing social and relationship capital among its people in order to, as Li put it, “improve our ability to communicate effectively with international audiences.”

Accomplishing this is a tall order. Under the leadership of General Secretary Xi Jinping, China’s government has made great strides in improving its own performance along these six types of capital. It has produced 7.7% GDP growth and created 13 million new jobs, resulting in higher average household incomes and increased food production. But the government cannot do it alone. The business community — beyond the big state-owned enterprises that are controlled by the government — has an equal responsibility in this area.