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China's next leaders aim to launch new economic era (+video)

As the National People's Congress gets under way, expectations are high that China's new leaders will promote economic reform and tackle corruption. But entrenched interests pose a serious obstacle. 

China's outgoing premier Wen Jiabao spoke Tuesday on what the government hopes the economy will do in the coming year.
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China’s parliament opened its annual meeting here on Tuesday amid high hopes that the new government it will choose will tackle long-awaited economic reforms and rampant official corruption.

But Xi Jinping, the ruling Communist Party leader who is due to be elected as China’s president next week, and Li Keqiang, who will become prime minister, will face daunting obstacles as they seek to launch a new economic era at home and meet their citizens’ increasingly vocal demands for improved livelihoods.

“Expectations are high that the new leaders are for real when they talk about clean government and reforms,” says Wang Zhengxu, an analyst at Nottingham University’s China Policy Institute, in Britain. “But resistance from those who want to block reform will be very serious.”

 
 The 2,987 delegates to the National People’s Congress will play a largely ceremonial role as they listen to speeches, reports, and deliberations over the next 12 days at the flag-bedecked Great Hall of the People on Tiananmen Square.

No National People’s Congress vote has ever gone against a government proposal, and no candidate for high office put forward by the Communist Party has ever been turned down.

Though Mr. Xi and Mr. Li are shoo-ins for their new jobs, their elevation is not without significance. It marks the smooth culmination of a once-in-a-decade transfer of power – only the second time in modern Chinese history that such an institutional transition has been achieved.

Reorienting the economy

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Xi and Li will take the helm of a country that has enjoyed average annual gross domestic product growth of 10.5 percent for a decade, which has transformed the Chinese economy into the second largest in the world.  But “raw growth is not enough anymore and is anyway bound to slow down,” says Kerry Brown, head of China Studies at Sydney University.

As the economy cools (in his opening speech to the People’s Congress Tuesday, outgoing Prime Minister Wen Jiabao predicted 7.5 percent growth this year,) the new government will have to reorient it away from dependence on heavy state investment and exports and toward the more sustainable foundation of domestic consumption.

At the same time, Chinese economic reformers have been insisting for some time that for the sake of efficiency the government has to stop coddling the giant state-owned enterprises that enjoy monopolies over the “commanding heights” of the economy, and start giving private companies a greater chance to compete.

“The rise of state capitalism has been strangling private enterprise, which is the real source of long-term economic growth,” says Zhang Jian, who teaches politics at Peking University.

Cutting state-owned firms down to size, though, would be more than an economic challenge. The development in recent years of a “crony capitalist” system, in which senior Communist officials have used their political power to channel control over economic resources – and great wealth – to their relatives, means that reforming the state sector would directly challenge the interests of powerful political figures.

“The major difficulty that the government faces if it wants to do something is the establishment, the entrenched interests in government and in the political-business alliance,” says Professor Zhang.

 'Smashing vested interests'

“The difficulty of effecting reform and the difficulty of fighting corruption are two aspects of the same problem,” adds Nottingham’s Professor Wang. Since being made head of the Communist Party last November, Xi has spoken often of his determination to root out corruption, which he has warned threatens to destroy the party. In recent months there has been a rash of officially sanctioned citizen reports on social media that have brought down some dishonest and womanizing local officials.
 
 Xi’s words “have raised expectations, so there must be a policy response,” says Dr. Brown. It is still unclear, however, whether the incoming president plans a traditional “strike hard” campaign targeting individual officials, such as previous governments have waged, or whether he intends to launch “a broader effort to rein in vested interests within the party,” Brown adds.

“Smashing vested interests … will be a critical battle for the next government,” he adds. “The question is whether they have the political capital to fight their own party” which harbors so much corruption.

High ambitions, hard goals

“The new government has high ambitions but its goals will be hard to fulfill because the crony group is such a big obstacle,” argues Hu Xingdou, a well-known political and social commentator. “I am not optimistic.”

Key political decisions in China are made not by the government, but by the seven-man Standing Committee of the Communist Party’s Politburo, of which Xi and Li are the two most senior leaders.

The Standing Committee “may be better educated and closer to the people” than its predecessors, suggests Jiang Wenran, a China-watcher at the University of Alberta in Edmonton. “But its members were chosen for continuity rather than radical change.”

At the same time, Xi finds himself in the unprecedented position of having not one but two of his predecessors in presidential office still alive. Both outgoing President Hu Jintao and Jiang Zemin will be seeking to wield influence behind the scenes, predicts Zhang, meaning that Xi will have to win understanding for his policies from them. 

“Neither of them is Pope Benedict XVI,” who has pledged that in retirement he will stay out of Vatican business, Zhang jokes.
 
 No major policy decisions are expected at this parliamentary session; instead, analysts are waiting for the next plenary session of the Communist Party’s Central Committee next autumn, giving the new government several months to draw up its key policies.

“They have seen the problems … and they are quite serious about reforms,” says Wang. “The key is how skillful they will be in pushing them through.”   

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