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China’s leaders aim for “greater political courage and wisdom”

Economic growth
By Paul Hodges on 18-Dec-2012

China lendDec12.pngChina’s new leaders have made a good start. Its too early to say whether they will really tackle the key issues, but the change in style is noteworthy in itself:

• New premier Li Keqiang made his first official trip to Shenzhen, visiting the statue of Deng Xiaoping along with new president Xi Jinping
• Shenzhen was the city where Deng started his famous Southern Tour in 1992, that marked China’s opening of its economy
• To reinforce the symbolism, Li and Xi were accompanied by 4 elder statesmen from that time, who had met Deng on the tour
• And unlike previous ‘inspection tours’, security was relaxed and traffic was allowed to continue normally, with no road closures

The blog remembers that period well, from its regular visits to the region, and the sense of excitement that it created. Shenzhen, bordering Hong Kong, became China’s first special economic zone and the showcase for reform. Jiang Zemin, the power-broker behind the new leadership line-up, was then China’s President.

We now have to see whether Xi and Li are able to make a clean break with the failed policies of the past. Certainly corruption seems to be being tackled with new vigour. In Guangdong, for example, a number of senior officials have been arrested. Potentially of even greater importance is the proposal that officials will have to publish details of all their assets – to allow the public to become whistleblowers.

Substance takes longer to change than style. But here again, the signs are positive, with the weekend’s economic policy meeting confirming the stress on ‘healthy and sustainable development (with) increasing support to agriculture, the rural economy and innovation’. Capital supply to SMEs seems also to be a priority.

In the meantime, China’s bank lending (red) stabilised in November as the chart shows, as did electricity consumption (green). For the moment, talk of a repeat of 2008/9’s stimulus package seems misplaced. Instead, it seems that the new leadership has set itself the task of “mustering up greater political courage and wisdom” to tackle the problems it has inherited.