CHINAwatch

Could this be the political reform Xi would kick-start?

The Communist Party has reiterated that China will chart its own path of development and will not copy the Western model of rival multi-party politics. Political reform, however, is getting more pressing as mounting social discontent is posing an existential threat to the Party. Given China’s entrenched vested interests, most pundits have grave doubts whether Xi Jinping, albeit more powerful than his predecessor, would be able to deliver during his presidency.

On the other hand, there are some who harbour patriotic hopes of grandeur. For example, Yau Lop Poon, chief editor of Yazhou Zuoukan, an Asian weekly, opines (1) that drawing from reform experiences of Myanmar, Singapore, and South African, China should embark on a “creative transformation”, through a peaceful and systemic process, to build its unique political system of checks and balance that manages to resist the temptations of elite capitalism. The vision is to develop a Chinese model that delivers administrative efficiency, clean government, social justice and sustained, high economic growth. Such a model, if realized, would be the pride of the Chinese people and a marvel to the rest of the world.

High hopes, however, often fail to accord with reality. At any rate, a tall tower needs to be built from the ground, as the Chinese saying goes.

So it is refreshing, and extremely timely, that Professor Yu Jianrong of the Chinese Academy of Social Science circulated a succinct, down-to-earth, 10-year outline for China’s social and political development. First promulgated in April this year, it went viral on Sina Weibo amongst his 1.5 million followers on the popular micro-blogging site (2).

Professor Yu’s roadmap is divided into two distinct phases. Phase One, from 2012.10 – 2015.12, contains four categories.

First, people’s livelihood policies. Rural land rights are to be legally recognised. Welfare provisions for lower-income groups are to be expanded. The “hukou” (household registration) system which marginalizes migrant workers is to be reformed.

Second, judicial checks and balance and judiciary authority. The staff, finance, and properties of primary and intermediate courts are to be separated from county and municipal governments and to be managed at the provincial level. A system of life appointment of judges with high salaries is to be introduced, subject to mandatory mobility and strict accountability for miscarriage of justice. A few retrograde and obsolete state organs are to be abolished, such as “political-legal committees” below the provincial level (as they often tend to take the law into their own hands), the State Bureau for Letters and Calls for petitions to Beijing (outstanding grievance cases to be resolved through judicial processes), and the labour re-education system (thereby safeguarding citizens’ personal rights).

Third, press freedom and freedom of expression. This extends to transparency of administrative information, declaration by officials of their private assets, and prohibition of punishment for expression.

Four, social development and civil society. This covers the improvement of neighbourhood management, promotion of charitable organizations, and protection of religious organisations.

Phase Two, from 2016.01 – 2022.09, contains two categories.

First, reform of county-level government. This proposes the “de administrativization”  and professionalization of county-level deputies elected to the National People’s Congress; scrapping the system of appointing county-level officials from the outside; introducing “differential-quota” competitive elections for the top county leader;  and turning county and township levels of government into subordinate outposts of higher authorities.

Second, open society. This comprises the formulation of laws for press freedom and laws for political parties. The management of the media and political organizations is to be liberalized.

Professor Yu’s reform agenda tallies with a much more voluminous, wide-ranging and officially recognized reform blueprint - a 468-page World Bank report jointly undertaken with the Development Research Centre of the State Council. This is similarly well-timed, coming out on 27 February, and is entitled “China 2030: Building a Modern, Harmonious, and Creative High-Income Society."(3)

In line with the latest Five Year Plan, the World Bank report focuses on efficiency, equity, and sustainability. Its prescriptions include -

(a) re-defining sources of revenue and scope of responsibilities between the central and local governments. This is designed to minimize local government land grabs as their main source of revenue;

(b) reform of state-owned enterprises and promotion of the private sector;

(c) guaranteeing a decent standard of living for the people by providing full access to public services including healthcare, education and housing by 2020;

(d) unblocking the "hukou"  system to enhance social mobility;

(e) using the rising middle class as a catalyst for improved governance, standards of services, and empowerment of civil society;

(f) liberalizing the financial system to achieve higher total factor productivity;

(g) pushing ahead with the internationalization and eventual capital-account convertibility of the RMB (the Chinese yuan) with a view to its becoming an international reserve currency;

(h) delivering a comprehensive economic, social and environmental agenda to achieve a green economy by 2030 (e.g. capitalizing on a voluntary "cap-and-trade" scheme and introducing green standards in government procurement); and

(i) playing a more proactive role as a responsible stakeholder in helping to shape the global order, commensurate with China’s growing size and influence.

At the 18^th Party Congress, the two primary targets for the next decade are fighting corruption and achieving a middle-class society by nearly doubling income per capita from $5,530 in 2011 to $10,000 by 2020.

Provided China continues to grow at an average annual rate of just 7%, which doesn’t seem impossible, the objective of achieving per capita income of $10,000 by 2020 is by no means unrealistic. The above reform blueprints are likely to enhance accountability, transparency and the rule of law, which should help the new Politburo Standing Committee graft-buster Wang Qishan, who is known for his toughness, to turn the table on corruption.

Contrary to popular thinking, Xi's team of six in a more compact Politburo Standing Committee, the country's nerve centre, could well be "China's Dream Team", according to Stephen Roach, Chairman of Morgan Stanley Asia and senior fellow at Yale University’s Jackson Institute of Global Affairs. Click here

Xi is by no means a "conservative" in a traditional sense and Li Keqiang, now elevated to No.2 unlike previous adminstrations, is an avid reformer. Both hold doctorates in law and economics respectively. Virtually all the others hold degrees in the humanities rather then engineering. The other most senior leaders, Yu Zhengsheng, Zhang Dejiang and Zhang Gaolic come from senior roles in three of China’s most powerful and dynamic urban centers – Shanghai, Chongqing, and Tianjin. They bring together a vast pool of political and administrative leadership which is extremely relevant in the coming decades as China is growing a more balanced, consumer-oriented economy. China's urbanization exceeded 50% in January 2012.  According to the Brookings Institution, the consuming middle-class will grow from 12% to 70% of China's population by 2030. Click here

If under a one-party system, Xi manages to achieve all of the above reforms and targets during his expected 10-year presidency, he would have kick-started a political transformation that may well marvel the world. If so, perhaps the chief editor of Yazhou Zuoukan is prescient with his vision of grandeur.

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(1)   “Three Models for China’s political reform”, Yau Lop Poon, in Cover Note, Yazhou Zhoukan, The International Chinese Newsweekly, 25 November, 2012 (p.4)

(2)    Professor Yu Jianrong is listed as No.54 of “100 Top Global Thinkers” by Foreign Policy, 28 November, 2012, “For daring to be specific about how to change China”. Click here  His succinct 10-year outline (in Chinese) is here   

(3)   “China 2030: Building a Modern, Harmonious, and Creative High-Income Society” with a Foreword by Robert Zoellick, President, The World Bank Group and Li Wei, President, Development Research Centre of the State Council, P.R.C., Conference Edition, 2012 Click here  

  

Creative thinking, not Passports, may diffuse mounting conflicts in the South China Sea

"China has once again gotten under the skin of its neighbors — this time with a few offending strokes on a map here, printed on its revised passports, that show Beijing staking its claim on the entire South China Sea, Taiwan and regions of contention between India and China," according to an article on 24 November in the Global Business Times, a digital global news publication here

Passports don't change the realities on the ground as rival claims have become more assertive following the recent U.S. Pivot to Asia. Let's not forget these disputes have been around and lying reasonably dormant for a long time.

China's neigbours welcome a free ride on the U.S. Pivot to hedge against a 800-pound panda, even if it is arguably benign as nearly all of China's neighbours, including Japan, depend on the Middle Kingdom as their largest trading partner.

The Pivot, however, means only that the U.S primarily wants to re-balance the dynamics in the Asia Pacific. America doesn't necessarily want to go to war with China over these tiny islands or outcrops.

So while not taking sides on territorial disputes, America is boosting up Asian Pacific allies' military comfort zone to stand up to China. However, the United States doesn't want these allies, especially Japan, to push the envelop too far so as to precipate an actual war, which would then force the U.S to side with its allies in a frontal conflict against China.

So the ideal situation for the U.S. is that China is kept in check by her neigbours under a U.S. umbrella, in the form of closer military ties rather than stationing massive hardware or boots on the ground.

The danger is that while things are hotting up in the South China Sea, the absence of an agreed code of conduct in these waters may well spin things out of control with unintended, unwelcomed and uncontrollable military escalations for the entire region.

In a recent Op-ed article in the South China Morning Post here I argued for such a code of conduct, setting aside territorial disputes for the future and re-focussing on econcomic cooperation.

Absent such a code of conduct, against more and more strident rival territorial claimants, China is being handed a golden opportunity to assert more proactively her own long-held territorial claims, something she would be hard-pressed to do without the Pivot.

So now China has succeeded in establishing a military garrison (though tiny) right in the heart of the South China Sea between the Paracels and the Spratlys. And China is deploping un-armed civilian marine adminstration surveillance vessels in a "political exercise of sea power". Click here

Naturally the South China Sea is more than just territorial integrity. It constains vital sea lanes for China's economic survival. A further attraction is of course the known energy and other resources in these vital waters.

But even more than these is that the South and East China Seas have become the main theatre for U.S.-China geopolitical rivalry as America is pivoting towards the region and China is developing her blue-water navy.

Amidst the discord, it may be opportune to re-think a possible new Asian Order. Click here

Despite such geopolitical rivarly, there is more that China can deliver as a partner and stakeholder than as a U.S adversary. For example, China can help the U.S. achieve its desired re-balancing in the Asia Pacific theatre as seen by Zbigniew Brzezinski’s "Strategic Vision: America and the Crisis of Global Power” without being pushed into a corner in a Cold War mentality. Click here

These geopolitical considerations are very much on the minds of China's new leaders even as they grapple with the Middle Kingdom's critical domestic challenges.

Watch a TV panel discussion on PressTV here 

“Is China Up to the Task?”

Doubt , if not pessimism, is expressed by by David Shambaugh on the ability of China’s new leadership to power China's Rise in an article of 21 November, 2012 here in YaleGlobal Online, a platform of the Yale Centre for the Study of Globalisation.

Shambaugh is professor and director of the China Policy Program Elliott School of International Affairs at George Washington University, and Senior Fellow in the Foreign Policy Studies Program at the Brookings Institution. The article heralds his forthcoming book “China Goes Global: The Partial Power (2013)” Click here

Shambaugh recognizes “a surprising strong consensus” both inside and outside China on the following critical domestic reform areas  –

“ – reorienting the economic growth model away from investments into physical infrastructure and subsidized exports to one driven by domestic consumption and innovation, emphasizing the knowledge economy and service industries;

 – breaking the government’s monopoly over several sectors, while empowering civil society and loosening controls over the media, so as to facilitate the free flow of information needed in a real market economy and innovation society;

– adequately resourcing “public goods” for the populace – including healthcare, environmental protection, improved quality of education, pensions, old age care – while seriously addressing social stratification and inequity;

 – instituting the real rule of law – so as to counter rampant corruption, rising crime, systemic abuse of privilege and power, and facilitate the predictable functioning of a market economy;

 – addressing seething discontent among ethnic groups in Tibet and Xinjiang in positive ways instead of relying on intimidation and repression

 – permitting greater political pluralism, even within a one-party system”.

“In the foreign-policy arena”, Shambaugh thinks that “China’s neighbours hope it will adopt a more accommodating and less confrontational posture, particularly over maritime territorial disputes. Beijing also needs to work with the United States to stem the strategic competition and mistrust now pervasive in the relationship. Its relations elsewhere in the world are increasingly afflicted by the growing perception of China as a mercantilist state soaking up natural resources and investing in strategic assets. China also needs to play a greater role in global governance commensurate with its power and position in the international community”.    

However, the eminent professor thinks that China’s new generation of leaders is hamstrung by four inherent constraints -

• A “path dependency”

“The growth model has not only produced impressive national development – it has also employed a huge relatively unskilled workforce. To transition away from this model risks widespread unemployment and labour unrest, which would threaten social stability and party rule”. 

Shambaugh explains that “The composition of (China’s ) exports needs to move up the value chain – and this is linked to shifting investment from “hard” to “soft” infrastructure: education, science, cutting-edge technologies, innovation and cultural creativity. For China to make these transitions requires more than a shift in financial allocations, though, as it requires loosening of the political system, media censorship and civil society. A “knowledge economy” cannot easily be built in an authoritarian system.”

• The “Soviet shadow” 

Shambaugh argues that with the spectre of the collapse of the former USSR, together with the lingering threats of the Eurasian “colour revolutions” and the “Arab spring”, there is a gripping fear that “opening the political system to genuine pluralism, empowering civil society, loosening media censorship, permitting free inquiry and critical thinking in education and research, or making the legislative and judicial systems autonomous of party control, would inevitable cascade out of control and spell the demise of party rule”. 

• “Institutionalized” or vested interests

“The core problem is the state sector of the economy, which still accounts for roughly 30 percent of GDP. This includes state monopolies of the banking, energy, finance, defense, heavy industrial, aerospace, telecommunications, and much of the transportation sectors, as well as enormous swaths of land and property owned by the party, state and military. Lenin warned of “state-monopoly capitalism” in 1917 – China has it in spades today. These vested interests, particularly the 145,000 state enterprises and 120 “national champion” corporations, are not about to divest their interests voluntarily”. In addition, “three other entrenched interest groups inhibit reforms: the military, the sprawling internal security apparatus and the arch-conservative wing of the Communist Party”. 

•  “Aggrieved nationalism”

There is an “entrenched national narrative of victimization. This narrative, assiduously developed over six decades through the propaganda and educational systems, underpins the political raison d’etre of the Communist Party – but it is a core source of the frictions with China’s neighbours and the West. China needs to shed this psychological baggage to truly normalize relations with Asia and the West – but to do so is to undercut the party’s legitimacy”.

To be fair, Professor Shambaugh is to be agreed as his prognosis is much more balanced and analytical compared with most China studies characterized by sectoral or pre-judgemental bias, hyping either the “China threat” or “China collapse” at one end of the spectrum to “China rules the world” at the other. According to his description of his forthcoming book, his conclusions are based on “six distinct dimensions of China’s global emergence (perceptual, diplomatic, global governance, economic, cultural, and security) and multiple manifestations of each”.

While Shambaugh’s scepticism is well-placed, it must nevertheless be seen in the following context –

On “path dependence”-

Ever since China started to reform and open up in 1978, the country’s development has been a continuous work-in-progress, to stay above waters of a continually changing tide. This perennial status of flux, of adaptation and change, has been at the core of China’s economic miracle, compressing over a century’s economic progress into a few decades. However, this has been breeding existential threats in unbalanced growth, rampant corruption, social inequity and ecological degradation and a hotbed of other social ills.

As early as the beginning of China’s 11^th Five Year Plan (2006-2010), the leadership has been highlighting the so-called five imbalances (between rural versus urban, human versus  environmental, economic versus social, national versus local, and inward versus outward investments). Ever since, the leadership has ushered in a swath of initiatives to hone “ a nation of innovation” including a battle for talent. Click here and the promotion of the kind of “soft” infrastructure highlighted by Shambaugh: education, science, cutting-edge technologies, innovation and cultural creativity, though the outcome is not yet inconclusive.

There has thus been a clear sense of changed direction since 2006 – now reinforced by the 12^th Five Year Plan (2011-15) – towards a dramatically different path based on slower but more balanced, higher-quality, more equitable and more sustainable growth. There is a broad-based awareness that the cheap labour pool is dwindling and China must redouble efforts to respond to the so-called Lewis Curve Turning Point Click here and the challenges of the Middle Income Trap. Click here

So the point here is that “path dependence” is not immutable.

On the “Soviet shadow” –

True, the Communist Party is caught in a quandary.  But what Daron Acemoglu and James Robinson describe as “extractive institutions” (“Why Nations Fail”, Profile Books, 2012) have generated growing social unrests that threaten to undermine the stability of the whole regime. It is no coincidence that from Wukan, Shifang to Ningbo, a recent series of uncharacteristic, high-profile, government about-turns have begun to happen, overturning local projects approved in Beijing in response to public protests against land grabs and pollution. In particular, the so-called “Wukan model” of open and fair village elections was daringly promoted by Wang Yang, one of China’s rising, if recently checked but no means “disabled”, pro-reform “stars”.

It is also instructive that a host of reform proposals in a new 468-page World Bank report were given the rare  imprimatur of the State Council (Development Research Centre). These include the promotion of civil society, including the role of the media to monitor governance (if initially only at the local level), and the strengthening of the rule of law, although, admittedly, there is still a long and winding road towards greater legislative oversight and judiciary independence.

But if the story is to be believed, Alexis de Tocqueville’s “French Revolution” is doing the rounds amongst China’s top leadership, including Li Keqiang, the Premier-in-waiting and Wang Qishan, the new anti-graft czar. And fighting corruption has been termed a matter of “”life or death” for the Party and the nation, according to both out-going President Hu Jinatao and President-in-waiting Xi Jinping at the 18^th Party Congress.

The point here is that the “”Soviet shadow” also means that “not managing change” in tune with the times will only threaten the whole regime’s survial.

On “vested interests”

The reason why the 18^th Party Congress was unexpectedly delayed was the shock of the Bo Xilai affair. Regardless of factional vested interests, nothing concentrated the minds of the collective leadership better than when the whole apple chart was about to be overturned by the overarching ambition of a scheming, if charismatic, individual. This was also an epiphany that vested interests must be curved, if not eradicated, particularly those represented by the monopolistic state-owned enterprises which sapped the vitality of the private sector. Indeed, this is one of the major reform areas highlighted in the World Bank/Development Research Centre report.

As for the military, a series of top military promotions and reshuffling took place during the mysterious disappearance of then Vice President Xi Jinping. It is probable that he took French leave to boost the loyalty of the military leadership in preparation for his taking over the Military Commision chairmanship in a first-of-its-kind complete power transfer at the Party Congress. As it is now confirmed, the Party’s top leadership has been reduced from nine to seven members, downgrading the security and propaganda apparatus below the level of the Politburo Standing Committee.

All these changes are of course not enough to break the so-called “iron quadrangle” of the military, the security apparatus, state-owned enterprises and arch-conservatives. This is not totally unlike the American example of the military-industrial complex forewarned at the time of President Einsenhower plus its modern adjuncts of big business and Wall Street.

The point here is that vested interests, when push comes to shove, can also trigger reform in order to maintain overall regime stability.

On Aggrieved nationalism

The nation’s psychological baggage is a reality borne of centuries of foreign oppression. Some of the remaining territorial disputes are in fact their outcome. Such disputes are unlikely to be resolved anytime soon. So territorial integrity is likely to remain a sore point in the national psyche for a long time to come. 

Nevertheless, China has now become more proactive in the global commons, for example in international peace-keeping, as the largest contributor of peace-keeping forces amongst Permanent Members of the Security Council. The country is also instrumental in brokering the six-party talks on North Korea and is taking a keener interest in addressing conflicts in the Middle East. But such a role cannot be equated to acquiescence with one-sided demands or abrogation of China’s own national interests. Indeed, no self-respecting nation would do this.

Meanwhile, China is now embarking on a mission to promote the country’s soft-power, including Confucianism and other aspects of China’s culture and heritage. But notwithstanding the gravitas of China’s economy, debates about the merits of the so-called Beijing Consensus and growing world-wide interests in the Chinese language, China is unlikely to have many genuine followers until the country succeeds in showcasing a new attractive civilization with a heart and soul that appeal to the spirit of the times.("China's Economic Success and Its Implications for the World Order" Click here

In the final anaysis, despite many negative connotations, “in the past ten years under the current leader, Hu Jintao, the economy has quadrupled in size in dollar terms. A new (though rudimentary) social safety net provides 95% of all Chinese with some kind of health coverage, up from just 15% in 2000. Across the world, China is seen as second in status and influence only to America,” according to The Economist front cover article of 27 October 2012.

An article here  for the South China Morning Post dated 19 September 2012, China's Economy and Policy, the flagship publication of Gateway International, a global China consultancy firm, postulates that brighter days are ahead for China’s economy.

The latest OECD report “Looking to 2060: Long-Term Global Growth Prospects” dated November 2012 here suggests that “China will overtake the eurozone in 2012 and the US within the next four years to become the largest economy in the world.  By 2060 …… the combined GDP of China (27.8%) and India (18.2%) will be larger than that of the OECD – and the total output of China, India and the rest of the developing world (57.7%) will be greater than that of developed OECD and non-OECD countries (42.3%)”.

Notwithstanding competition and rivalry, which are common to all political systems, the different factions, power-centres, and vested interests of the Party polity all embrace and continue to benefit from China’s continuing reform and progress. The question is not whether to reform but where, how much, and how fast, and of course, how to apportion their respective power and influence.

Depending on the time horizon and a host of imponderables, brighter prospects may or may not materialize. Nevertheless, I am more inclined to the view that the bottle is at worse half full. There is serious leakage that needs to be fixed but more water is coming in. At any rate, the jury is still out.

If one is to believe that in reply to Richard Nixon, Zhou Enlai said it’s still too early to tell the impact of the French revolution, perhaps it is still too early to be pessimistic about China, especially at such an epochal watershed when no change is no option.

China will remain a work in progress for years to come. So, until China manages to address all of the above challenges, Professor Shambaugh is accurate - China remains a "Partial Power".

China seeks more sustainable growth - CNBC interview

My appearance on Worldwide Exchchange with CNBC on 22 November 2012. Click here

Why the old guard still predominates at a time of critical change?

After months of endless speculation, China's new leaders have been unveiled. An informative parade of bios here is provided by The Diplomat, an international current-affairs magazine for the Asia-Pacific region.

Why are five about-to-retire leaders in a seven-member top leadership and why are they still considered up to the task ? This is explained in my Op-ed article in the South China Morning Post of 14 November, 2012 entiled “Old guard can still reform China”. A PDF version, with a somewhat different title, is here.

Let there be no mistake that the task ahead is anything less than Herculean.

Premier Wen Jiabao has forewarned many times that China’s development is “unbalanced, uncoordinated and unsustainable”. But the problems are getting more and more acute – rampant corruption, tightly-knitted vested interests, market dominance and inefficient capital allocation of state-owned enterprises, slower growth, aging demographics, and environmental and resource constraints.

Chairman Mao once said that “even the Communist Party can get old”. Now turning over 90 years, the Communist Party is struggling to keep up with the times. China is adding over six million university graduates a year and over 500 million citizens use the internet, all with new hopes and aspirations. The old style of repressive governance is past its sell-by date.

Over three decades of reform have miraculously changed China’s economy, now within sight to be the world’s largest in a decade or so. But over the decades, no leadership has dared to dismantle the ticking time-bomb of political reform. Premier Wen has alluded to the urgency of political reform but his has been a lone and ineffectual voice in the leadership. Absent this reform, the system remains as “extractive” as ever, as most wealth accrues to the small elite group of “princelings” and their allied vested interests. The historical lessons in “Why Nations Fail” (Acemoglu and Robinson, 2012) are sobering. Click here

According to President Hu Jintao, the country is facing Four Trials and Four Threats.

The Four Trials are in the areas of Governance, Reform, Market Economy, and External Environment The Four Threats are Mental Laxity, Inadequate Competence, Detachment from the People, and Negativism and Corruption.

From Egypt to Myanmar dictatorial regimes are making way for democracy and freedom. China is finding herself increasingly surrounded by democracies of different shapes and sizes. No wonder, it is said that Alexis de Tocqueville’s seminal work - “French Revolution” - has been doing the rounds in bedside reading of Wang Qishan, now to take charge of the Central Commission for Disciplinary Inspection (CCDI), China’s anti-graft organ, and Li Keqiang, the new Premier-in-waiting

It is instructive that not long before the 18^th Party Congress, Li has signed a foreward in a 468-page World Bank Report jointly undertaken with the Development Research Centre of the State Council (a rare occurrence), which contains a series of measured yet significant reform proposals on state-owned enterprises, local authorities’ powers, access to healthcare and social security, migrant labour’s entitlements (the hukou system), green economy, and the role of civil society. ("China 2030: Building a Modern, Harmonious, and Creative High-Income Society"- Click here)

It is also instructive that at the 18^th Party Congress, out-going President Hu reiterated the Party’s consensus aim of realizing a middle-income society by 2020, doubling per capita income from $5,530 in 2011to $10,000 in the process.

While the inclusion of the old guard in the latest top leadership line-up is a political compromise between factions and vested interests, it is perhaps unavoidable in order not to deny the hard-earned last-chance of making it to the top of able, well-tried, and certainly well-connected, if un-colourful, performers.

At an uncertain juncture of China’s critical cross-roads, the current line-up could at least ensure stability while meaningful changes are taking place under Xi and Li’s leadership.

Out-going President Hu used the words of “life or death” to describe the urgency of reforms, in particular, in tackling corruption. Such warnings are broadly echoed by in-coming President Xi, who openly expressed praise for President Hu's seizing the moment by taking the initiative of setting an example of complete power transfer at one go, including chairmanship of the Military Commission.

Together with the reduction in size of the Politburo Standing Committee from nine to seven Members, this should greatly enhance the power of the new leadership to take on the difficult reforms ahead.

When the survival of the whole Party is at stake, there is perhaps nothing more cogent to concentrate the minds, even those who have only five more years to serve before retirement. This is particularly so as a clear blueprint for the immediate future is already in place, under the lead of a strong and confident President and a reform-minded Premier.

Is the 18th Party Congress stalling for change?

“Are we obsessing about (China’s) rise when we should be worried about its fall?”, asks Minxin Pei, professor of government at Claremont McKenna College and senior fellow at the German Marshall Fund of the United States, in his article “Everything You Think You Know About China Is Wrong” dated 29 August 2012 in Foreign Policy. Click here

Professor Pei thinks that rather than worrying about how to contain a stronger China, it would be at least equally sensible to think about China’s possible collapse or self-inflicted regime change in the light of the country’s recent economic slowdown, bursting property bubbles, power struggles and political scandals.

This seems to echo the perennial theme of China’s doubters. Amongst them a leading light is Gordon Chang who has been serially predicting “China’s Coming Collapse” since 2001. His latest version here dated 29 December 2011 asks people to bet on the country’s collapse or beginning of a multi-decade decline from 2012.

Chang’s arguments are that China seems to turn xenophobic, pushing foreign investments away by insisting on “indigenous innovation”. China is heavily dependent on trade but there are now more exporting competitors amongst the emerging economies. China’s economy is contracting as her demographics are getting older. Moreover, the leadership is failing to respond to a rising tide of social change signified by increasing popular protests against official corruption and inequalities, the likes of which are sweeping across other parts of the world.

The problems highlighted are by no means exaggerated. Indeed, at the opening session of the latest 18th Party Congress, President Hu Jintao announced that reform, particularly fighting corruption, is a matter of life or death for the Party and the nation.

But China’s problems must be put in context. Consider the following –

(a)    The latest OECD report here “Looking to 2060: Long-Term Global Growth Prospects” dated November 2012 suggests that “China will overtake the eurozone in 2012 and the US within the next four years to become the largest economy in the world.  By 2060 …… the combined GDP of China (27.8%) and India (18.2%) will be larger than that of the OECD – and the total output of China, India and the rest of the developing world (57.7%) will be greater than that of developed OECD and non-OECD countries (42.3%)”.

(b)    According to The Economist front cover article of 27 October 2012, notwithstanding rising levels of social discontent, “In the past ten years under the current leader, Hu Jintao, the economy has quadrupled in size in dollar terms. A new (though rudimentary) social safety net provides 95% of all Chinese with some kind of health coverage, up from just 15% in 2000. Across the world, China is seen as second in status and influence only to America”.

(c)     Successive PEW public attitude surveys show that a vast majority of the population (exceeding 80%) remains broadly supportive of where the country is heading, in stark contrast to the surveys’ findings on many Western nations. Of course, the flip side of the coin is that 20% dissatisfied means a lot of people amongst China’s 1.3-billion-strong population. Nevertheless, there is no support for regime change and the rising cynicism and disgruntlement are against corruption and power abuse, albeit widespread, by individuals.

(d)      Pei and Chang seem to disregard the fact that China’s leadership has long realized that the country has to reform and change to stay relevant with the times. Hence the dramatic change in direction in the current Five Year Plan (2011-15) towards slower and more balanced, more equitable and more sustainable growth.

(e)      Notwithstanding competition and rivalry, which are common to all political systems, the different factions, power-centres, and vested interests of the Party polity all embrace and continue to benefit from China’s continuing reform and progress. The question is not whether to reform but where, how much, and how fast, and of course, how to apportion their respective power and influence.

(f)      A large body of relatively moderate but yet significant reform measures have already been proposed in a 468-page World Bank report jointly undertaken with the Development Research Centre of the State Council (a rare occurrence). These include reforming the state-owned enterprises to allow more room for private enterprises, liberalizing the financial sector, defining the powers and obligations of local authorities to minimize the chances of improper “”land grabs”, changing the “hukou” system which marginalizes migrant workers, growing a green economy, and promoting the role of civil society. It is said that Li Keqiang, China’s likely Premier-in-waiting is the report’s staunch supporter. Click here

(g)      It must be remembered that even Democracy is not a dirty word in China’s politics. In fact the D-word was mentioned 61 times by President Hu at the last Party Congress in 2007 and has been voiced many times since also by Premier Wen Jiabao. The difference is that China, including most of the population, remains unconvinced that copying the West’s increasingly dysfunctional model of confrontational multi-party politics is the best answer. China will therefore continue to find her own path towards effective, meritocratic, representative government of the people, for the people, though not directly by the people, at least not at this stage.

(h)       Yes, China’s international environment is becoming more hostile. Notwithstanding China’s efforts in managing her “peaceful” rise or development, China’s neighbours are growing more restless with an 800-pound panda. But most of these worries translate into hedging their bets. There is no mileage towards an anti-China block as China remains their largest trading partner at the centre of a regional and global supply and production chain.

So, looking at the near-final list of contenders for China’s top leadership, the Standing Committee of the Politburo, why does it seem to be populated largely by “Old Brooms” (The Economist, 10-16 November, 2012) here who are not known for their reformist credentials?

The reasons are a little hidden beneath the surface –

• Quite near the eleven hour, the Bo Xilai affair unexpectedly derailed the leadership transition process, which was fiercely competitive in the first place. The political crisis and what it meant for the future stability of the Party required a re-think of the role and status of politically-powerful portfolios in the Standing Committee i.e. public security and propaganda. These were nearly high-jacked by politically-ambitious individuals like Bo and must not be allowed to happen again at the centre of China’s power.  So a smaller Standing Committee of seven instead of nine members was mooted, throwing open an even more fractious battle amongst various factions, vested interests  and power-brokers to get their preferred choices into the even narrower door.

•  A number of very senior, well-tried and well-connected Politburo members are getting near the retiring age limit of over 67 for entry into the Standing Committee. This is their very last chance to make it. These include Yu Zhengsheng (67), Zhang Dejian (66), Zhang Gaoli (66), Liu Yunshan (65), and Wang Qishan (64). Their claims to a seat in the Standing Committee perhaps for just one term are difficult to brush aside, particularly when some are backed by influential power-brokers like ex-President Jiang Zemin. The younger and perhaps more dynamic hopefuls, e.g. Li Yuanchao (62) and Wang Yang (57) may have to bide their time for the shoes of retirees at the next 19th Party Congress in 2017, which is still expected to be under the leadership of Xi Jinping (59) as President and Li Keqiang (57) as Premier, if all goes well.

• Bearing in mind the need to root out any remnants of the “Bo Xilai gang”, stability of the Party remains paramount at this stage. So, while domestic and external pressures remain broadly manageable, the Party may have reached a compromise to allow more old guards in the Standing Committee just for one term before younger, more dynamic substitutes waiting in the wings take centre stage in the next term.   

There is broad-based consensus that not tackling problems like corruption and a host of other reforms highlighted in the World Bank report could undermine the stability of the Party. This is borne out by the strong words of out-going President Hu in his opening address at the Congress and the imprimatur of an official organ of the State Council on the World Bank report. At a Washington think-tank seminar on China’s leadership transition, Henry Kissinger expected to see transformations in the Chinese economy and society as well as foreign policy in the coming decade. Click here

In any case, regardless of the final choice for the Standing Committee at the 18th Party Congress, President Hu has emphasized that the Party’s objective is to achieve a Middle-Income Society by 2020, doubling the 2010 per capita income in the process. By that time, China is expected to achieve a per capita income of $10,000, up from $5,530 in 2011. Click here

This is set to be followed during 2021-25 by further jumps over the so-called Middle-Income Trap on the road to attain a higher-income society in the future. Click here

As the Standing Committee of the Politburo is tasked to carry out China’s collective decisions, including the current Five Year Plan (2011-15) and the goal of attaining a Middle Income Society by 2020, the new line-up of well-tried old timers does not mean that China is stalling for reform. In fact they are well-qualified for these tasks, which should concentrate their minds and keep their hands very full indeed during their tenure.

Defusing China's demographic time-bomb

TV panel discussion on Inside Story on 11 November 2012 with Aljazeera English Channel here

State capitalism existential threat to Chinese Communist Party - Interview on PressTV

Live interview on skype with PressTV on 10 November 2102 together with Professor Donald Hellmann of the Jackson School of International Studies from Seattle, and Paul James, host of China Radio International, from Beijing.

The TV discussion also touched on the South China Sea and other aspects of China's foreign policy including Syria in relation to the United States.

Click here

India-U.S.-China equation in Obama's Second Term

TV panel debate on Times NOW of India on 7 November 2012 with Chidanand Rajghatta, Foreign Editor, Times of India; Mahroof Raza, Strategic Affairs Analyst; and Raymond Vickery, Former Assistant Secy of Commerce, USA.

Part I - Click here

Part II - Click here