A Party for China’s princelings

16 Nov 2012 – Linda Jakobson –

Looking at the line-up of China’s new leaders, two things stand out. First, Jiang Zemin, the 86-year old who was China’s leader from 1989-2002, ought to be a very content man. Of the new seven-member Politburo Standing Committee, three owe political allegiance to Jiang, who almost literally returned from his grave to wield authority as Party elder in the selection of PSC members behind the scenes. (A year ago Jiang was reported to be dead or dying but obviously someone was jumping the gun.)

Outgoing leader Hu Jintao has only two allies in the new all-powerful group, the most important one being Li Keqiang, who will be the new Premier, and Liu Yunshan, who will presumably be in charge of propaganda. The new top leader, Xi Jinping (pictured), is neither directly a Jiang or Hu protégé but acceptable to both.

The remaining PSC member, Wang Qishan, who has been given the task of tackling corruption, is closer to Jiang than Hu, but reputed to be very much his own man. He could prove to be a key figure in the new leadership. Though Li Keqiang will formally be in charge of the economy, Wang can be expected to weigh in on major economic decisions. Wang is a historian by training but has been a influential economic leader in recent years.

The second observation is that China has been taken over by princelings. ‘Princelings’ is a colloquial Chinese political term for the sons and daughters of revolutionary Communist leaders. They are strongly resented by many Chinese because they are looked upon as having advanced their careers and amassed fortunes because of their privileged backgrounds. The fall of princeling Bo Xilai exposed the extent of corruption which surrounds the offspring of those who founded the People’s Republic of China.

In addition to Xi Jinping, two of the PSC members are princelings, and Wang Qishan is reportedly the son of a high-level official and married to a princeling. Regardless of whether princelings are competent leaders, they do not evoke respect or confidence, especially among the younger generation of Chinese, who yearn to see their country reform into a more just and equitable society.

Both the opaque way in which the leaders of China were (yet again) selected behind closed doors and the outcome reflect how estranged the leadership of the Chinese Communist Party has become from the country’s populace.

China leadership transition edges forward

12 Nov 2012 – AAP –

China’s leadership transition has formally edged ahead, with the executive body of the Communist Party Congress forwarding a list of names to congress delegates for review.

State media reported that the congress’s administrative committee, 41 current and former members of the leadership, approved the candidate list for the Central Committee and sent it to the delegates on Saturday.

The delegates will cast votes before the congress closes on Wednesday to choose the Central Committee, a roughly 350-member body.

The Central Committee, in turn, will select the top leadership.

The move is largely a formality, as is the congress itself. Deciding the line-up of leading bodies falls to a small group of power brokers.

Vice President Xi Jinping has been all but formally announced to replace President Hu Jintao as party chief and president.

China Central Television showed Hu addressing the meeting of the presidium, which was presided over by Xi.

Candidates for the Central Committee outnumber seats by only a small portion, giving the 2268 congress delegates little choice except on the margins.

In addition to the name list for Central Committee members, the meeting also forwarded candidate lists for the party’s internal watchdog agency, state media reported.

New guard, new broom in China?

8 Nov 2012 – Peter Drysdale – East Asia Forum –

No sooner has the dust settled on the US presidential election than China begins its Party Congress on Thursday to produce its new leadership team. Xi Jinping is widely tipped to be China’s new president and Li Keqiang its new premier.

But the selection of the new leadership team in China has been accompanied by the extraordinary trial of former party chief of Chongqing, Bo Xilai, and his expulsion from the Communist Party, amid revelations of high level corruption, his wife’s conviction of the murder of a family confidant, Englishman Neil Heywood, and the arrest and trial of former police chief, political refugee turned informant, Wang Lijun.

More recently, there have been revelations of the wealth of China’s current leaders, such as Premier Wen Jiabao and soon-to-be-president Xi Jinping. There is nothing that should automatically be construed as sinister about Wen’s or Xi’s wealth, a register of which appears to have been put together by foreign and Chinese journalists from publicly available sources, except of course the failure to have been routinely transparent about it for reasons that impact on political trust in the relationship between political power and using the instruments of the state for personal or family gain.

The significance of these developments is in what they reveal about transition in the Chinese political system. In a new book on the Bo affair, Australian journalist, John Garnaut, describes the Party’s 18th National Congress as ‘the biggest leadership transition in decades’ and observes that ‘China’s rulers are finding it increasingly difficult to keep their poisonous internal divisions behind closed doors’.

Like it or not — and the suppression of the New York Times website due to its report of the Wen fortunes suggests that there is some discomfort in Beijing with these new circumstances — the highest political games in China are unlikely to be played in quite the same way again because it will be less and less easy to keep the players and their stakes as tightly under wraps as they have been in the past. ‘Bo Xilai’s breathtaking fall from grace is an extraordinary tale of excess, murder, defection, political purges and ideological clashes going back to Mao himself, as the princeling sons of the revolutionary heroes ascend to control of the Party’, Garnaut’s book suggests. ‘Bo’s stellar rise through the ranks troubled his more reformist peers, as he revived “anti-capitalist roader” sentiment, even while his family and associates enjoyed the more open economy’s opportunities’.

His wife’s conviction for murder exposed the corruption and brutality of Bo’s outwardly successful administration of the massive city of Chongqing and ultimately led to his downfall. This glimpse into the very personal power struggles within the Chinese Communist Party exposes the myth of the unified one-party state, Garnaut suggests.

But is the Bo affair a one-off episode, that can be air-brushed from the history of China’s development, or will it have more profound significance for the future structure of the Chinese political system? Will it set the stage for a new political order, one that is more open and in which there is more contestability, as Premier Wen Jiabao and others have advocated?

Maybe it is too soon to answer these questions with confidence. But Cheng Li from Brookings is in no doubt that putting Bo Xilai through the public legal process rather than handling the matter internally is ‘an outstanding result for political reform in China’. The decision to bring the criminal conduct of this charismatic and demagogic leader at least partially out into the open he also sees as a testament to unity among the Chinese leadership — not evidence of a split and ‘an important step toward gaining public confidence in political reforms and the rule of law’.

As Li points out, the ‘Bo Xilai case has revealed many of the flaws in the Chinese political system. It has also served as a wake-up call for the party: more systematic institutional measures are needed to deal with corruption, introduce intra-party democracy and demonstrate a real commitment to the rule of law’. The leadership also needs to eventually allow for an open and independent media although there is clearly resistance to accepting inevitable weakening of control over the new media. As wild commentary in and outside China about the recent absence of Xi Jinping from public view underscored, ‘the more the state restricts the media, the more sensationalist the rumour-mill becomes’.

The big questions of political reform involve choices that are clearly more urgent than many have been prepared to acknowledge publicly until now. Li believes that the party’s handling of Bo’s case gives hope that things are moving in the right direction. Hopefully they will not be thrown off course by exposure to wider scrutiny of the personal circumstances and assets of the leadership that is already in train. Indeed, one of the first reform initiatives that Xi Jinping might usefully and simply take on assumption of office would be to open a register of assets of the leadership team and other senior officials (and their families) and establish a code that governs the management of those assets by political leaders while in office. This would be a huge and confidence-building step forward, perhaps hard to embrace for some, but a profoundly important reform.

As Li concludes, time will tell whether Bo’s landmark trial can provide the Chinese Communist Party leadership with the confidence to pursue bold and genuine political reforms and arrest the ebb in the confidence of the Chinese public in the current political system. But now is the moment.

China’s new leaders jump into the fire

7 Nov 2012 – Stratfor –

Chinese President Hu Jintao and Prime Minister Wen Jiabao, the core of China’s ‘fourth generation of leaders’, will transfer control of the Communist Party of China tomorrow to Xi Jinping, Li Keqiang and five other members of the incoming fifth generation. The China that they will hand over is in some ways different from but in many ways remarkably similar to the one they inherited, in part because many of the Hu-Wen administration’s core mandates remain unfulfilled.

The gaps between rich and poor, town and countryside and, in many cases, between coast and interior are starker than ever before and still growing. Domestic consumption is rising but not fast enough to offset the rapid – and probably terminal – decline in external demand that set in after successive financial crises rocked US and European consumers. Worse for Beijing, the proxy economy it created through two years of intensive, state-led investment is now crumbling under its own weight, dogged by overcapacity, waste and trenchant corruption at almost every level of governance. Despite Wen’s persistent calls for “reform,” the pillars of political and economic control in China have not kept pace with social change. Internationally, a more confident and assertive military, along with China’s ballooning appetite for foreign natural resources, is steadily undermining Beijing’s long-held foreign policy of cooperation and inoffensiveness.

Recent anecdotes and rumours suggest there is mounting anger within the Communist Party over the Hu-Wen administration’s failure to uphold its mandate – handed down indirectly from Deng Xiaoping – to rebalance the economy away from over-reliance on exports and investment and toward domestic consumption and greater equity between China’s diverse regions.

Certainly, when the fourth generation leaders assumed power in 2002, they did not intend to leave so many fundamental problems unfixed. Nor could they have anticipated the ways in which 9/11, two US-led wars in the Middle East and financial crises in the United States and Europe would fundamentally alter the international system and China’s place in it.

The view from 2002

In 2002, China had a gross domestic product of $1.45 trillion, smaller than that of the United Kingdom, and an average per capita GDP of just over $1,100. It produced almost three-quarters of the oil it consumed domestically and was a small natural gas exporter. The country had undergone a period of political, social and economic uncertainty in the late 1990s, but by the early 2000s it looked stronger than ever, with booming stock markets in Shenzhen and Shanghai, a reformed and recapitalised state-owned sector and incredible urbanisation and economic growth rates, especially along the industrialised coast. China’s military, which former President Jiang Zemin had brought back firmly under the Party’s wing in 1998, was just beginning a modernisation drive that continues today. China was growing quickly, but it was not yet the global economic, diplomatic and resource giant it is today.

The China that Hu and Wen inherited was starting to shift out of the first phase of a process that began in earnest in 1992, when Deng made his famous “Southern Tour” to the boom towns of the Pearl River Delta. That tour ended the decade of political and economic transition that had culminated in the 1989 Tiananmen incident and set the country on a new path guided by three core principles: economic pragmatism, international cooperation and the absolute primacy of the Party.

The first phase, lasting until 2002 and presided over by Jiang and Premier Zhu Rongji, was essentially one of capital accumulation. In post-Mao China, where the promise of economic prosperity (rather than political ideology) formed the basis of Party legitimacy, ensuring long-term social stability required better integrating the country’s vast, poor hinterland into a modern, internationally oriented economy. But as Deng saw, size, geography and distance made linking inland China to the coast difficult.

Developing the interior meant laying entirely new road, rail and waterway infrastructure. That, in turn, meant amassing capital – which Beijing did by transforming coastal provinces, with their direct access to global shipping lanes and enormous pools of cheap labour, into “workshops of the world” – and channelling that capital into the state’s main organs of economic policy, state-owned banks and enterprises. Jiang and Zhu oversaw this process as well as its consequences: a growing wealth gap between the relatively urban coast and mostly rural interior, multifaceted social discontent and mounting pressure from outside China’s borders to comply with the interests of a US-led international system.

In many ways, the mid-2000s appeared to be a high time for the Party and China as a whole. Anxiety and social discontent over rising inequality by no means disappeared, but public sentiment was boosted by the sense – at home and internationally – that China had finally arrived on the world stage. This was embodied in preparations for high-profile events such as the 2008 Beijing Olympics and the 2010 Shanghai World Expo, but it was also apparent in Beijing’s rising diplomatic clout and rapidly improving military – especially naval – capabilities. Throughout this period, Beijing benefited enormously from Washington’s focus on the Middle East. Tensions between the two countries had risen sharply following the United States’ 1999 bombing of a Chinese Embassy in Belgrade and the 2001 EP-3 incident over Hainan Island. But after 9/11, with the United States suddenly distracted elsewhere, the People’s Liberation Army and Navy gained enough room to expand without risking international backlash.

However, under the surface of rising headline growth rates loomed a number of problems. Increasingly entrenched coastal business interests constrained the Party’s ability to shift focus and funding toward developing the interior, while the Party leadership’s half-hearted calls for reform to weed out corruption, constrained at every turn by extensive bureaucratic patronage networks, had little practical impact. And despite the Hu-Wen administration’s goal of rebalancing the economy, low value-added exports and state-led investment continued to overshadow domestic consumption as drivers of growth. The 2008-09 financial crisis did not create China’s fundamental problems; it exposed them. It exposed how uneven the country’s growth patterns had become, how heavily economic growth depended on the state’s ability to channel the savings of ordinary Chinese into sustaining the manufacturing and construction booms that sucked up resources and employment, and ultimately how unprepared China’s economic structure was to absorb even a fraction of the goods and materials it produced.

New scale

When the 2008-09 financial crisis struck, China was the world’s third-largest economy. A year later, riding the wave of Beijing’s multitrillion-yuan stimulus package, it overtook Japan to become the second largest. In seven years, China’s GDP had nearly quadrupled to more than $5 trillion, while the average worker’s salary more than doubled. (In some major cities, per capita GDP rose fourfold between 2002 and 2008.) In 2009, the country imported well over half its daily oil consumption and had begun importing natural gas and coal. Two years later, when Beijing put the brakes on stimulus to avoid overheating, China was the world’s largest energy producer and consumer, and Chinese demand drove global markets for minerals and raw materials.

The fifth generation leaders inherit a country whose problems, while qualitatively similar to those faced by their predecessors, are – like the economy itself – of a vastly different scale. In 2002, corruption, graft, inefficiency and inequality were pervasive. But they were manageable so long as the fundamentals of China’s economy – and its role as unobtrusive supplier of low-cost goods to the world – remained intact.

Back then, low wages and input costs in coastal Chinese manufacturing boom towns made them natural complements to global, especially Western, consumers. Moreover, when Hu and Wen took office, they did not have to contend with a 300 million-strong and globally connected urban middle class (social media such as Weibo did not exist until 2009). And in 2002, with the world’s attention settled on the Middle East, China’s naval modernisation and moves in the South and East China seas drew minimal attention at best.

By contrast, Xi Jinping, Li Keqiang and the incoming Politburo Standing Committee face not only a slowing economy but also the end of an economic cycle built on low-cost, export-oriented coastal manufacturing. At home, they will be challenged by new levels of social unrest both in the Han core and in China’s peripheral buffer regions, while abroad they must navigate rising tensions over territorial disputes and resource acquisition. On the eve of the leadership transition, at the tail end of a year rocked by political scandal and intrigue, the pressure to reform is enormous. But as with so many other problems left unaddressed by the fourth generation, China’s new leaders will inherit a political system that is, in many ways, structurally incapable of changing itself.

China to implement new labour force rights: analyst

1 Nov 2012 – AAP –

The Chinese labour force is expected to benefit from a raft of new collective-bargaining rights with the transition of China’s leadership, The Australian Financial Review reports.

According to the newspaper, state-sponsored think-tanks have been asked by the government to formulate policies covering wage negotiations and a rise in the tax-free threshold in an effort to improve income inequality.

China Centre for International Economic Exchanges spokesperson Xu Hongcai said the nation’s wealth gap was identified as the most pressing issues facing the central government.

“China’s economy is at a turning point and there needs to be long-term reform,” he said.

“We need to increase the income of workers and reduce the return for investors.”

According to the newspaper, the labour policies are expected to be announced around March next year by prospective president Xi Jinping.

Mr Xi is widely tipped to replace current Chinese President Hu Jintao after the nation’s official Communist Party Congress to be held in two week’s time.