China Leadership Challenges

Xi Jinping, China’s likely new president

JiXinping.jpgKeystoneUSA-ZUMA/Rex Features

By John Richardson

The make-up of China’s new politburo will be announced during the 18th Party Congress, which starts on 8 November.

But don’t expect confirmation of the new leadership team to do anything to address doubts over the country’s long-term economic direction. China will remain in what political and economic experts say is a policy vacuum, following failure to agree on the country’s direction during meetings between senior politicians in July and August at the Chinese seaside resource of Beidaihe.

“How can you have a major change of leadership and not once have any discussion of policy, not one sniff?” said Kerry Brown, executive director of Sydney University’s China Studies Centre, in The Australian.

“This seems to me to be the fundamental trick. We are going to change all these people but have no change of policy. It’s all very generic and very abstract. There is none of the grit that makes elections in the West. Where are they going to be putting resources? What will they be spending on? Will there be any change in areas that may damage others?”

It could be well into next year, possibly even later, until the new leadership settles in and makes its intentions clear.

But at least we know the challenges, which, in a series of blog posts up until  and including 8 November, we will examine in detail. These include:

*The excessive role of the state-owned enterprises (SOEs) in economic activity. This has led to manufacturing overcapacity, and thus rising bad-debt problems – and has also stifled private business. This has made the push for greater innovation – the key to China’s economic rebalancing – a lot harder. As the state has advanced, the private sector is commonly said to have retreated. “Vested interests” are likely to fight hard to protect the interests of the SOEs.

*A large proportion of the population remains very poor. There are still an estimated 500 million Chinese living on less than $2 a day. This is the result of most of the wealth from China’s economic boom falling into the hands of a small elite at the top of Chinese society, made up largely of the politicians and SOE executives – often one and the same thing.  

*Lack of intellectual property right protection that is further hampering innovation.

*The legacy of the one-child policy. This includes an imbalance between the sexes that, along with an increase in income inequality, threatens social stability. There will be 30 million more men than women by 2020, according to China’s National Population and Fertility Commission. 

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