{"id":625,"date":"2012-11-07T10:57:16","date_gmt":"2012-11-07T09:57:16","guid":{"rendered":"http:\/\/blogg.lnu.se\/china-research\/?p=625"},"modified":"2012-11-08T10:07:36","modified_gmt":"2012-11-08T09:07:36","slug":"winds-of-change-in-china","status":"publish","type":"post","link":"https:\/\/blogg.lnu.se\/china-research\/?p=625","title":{"rendered":"Winds of Change in China?"},"content":{"rendered":"

On November 8, the National Congress of the Communist Party with more than 2000 delegates will start its convention in Beijing and some days later select its next political leadership for – probably – the next decade – a decade that will be much more difficult to surmount than the previous one.<\/p>\n

The powerful politburo will almost completely be replaced by new faces, and probably seven\/five out of nine\/seven individuals of the even much more powerful inner circle Politburo Standing Committee will have the same change, i.e. that only the – most probably – forthcoming Party\u00a0 Leader\u00a0 Xi Jinping and future Prime Minister Li Keqiang will keep their seats in this forum of all important decisions (currently considered as number six and seven).<\/p>\n

A lot is currently discussed about the future political, social and economic course of Xi Jinping. But this discussion is too simple-minded since the Party Leader is not making decisions on his own. He has to find consensus himself within the Standing Committee which mostly urges for a “middle-of- the-road position”. This line can only be left in extraordinary cases,\u00a0 like the opening-up policy by Deng Xiaoping almost 35 years ago. Currently, such moves cannot be seen. I still cannot see Xi as a major reformer, neither in political nor in economic terms. But nobody knows what will happen in the next, very challenging 10 years. Not many scenarios can be ruled out completely.<\/p>\n

Political challenges<\/strong><\/p>\n

Discussions about future policy and strategic issues were not taken up in the past months\u00a0 by\u00a0 the leading candidates for China’s new leadership. However, it seems to be completely clear that domestic issues will have to \/should dominate politics in the future. This may concern amoung other areas<\/p>\n

–\u00a0 institutions\u00a0 (including the fight against corruption and more application of the rule of law)<\/p>\n

–\u00a0 transparency (also an institutional factor)<\/p>\n

–\u00a0 better environment in all respects (quality of food and water included)<\/p>\n

–\u00a0 acceptable minimum social security standards for the whole nation<\/p>\n

–\u00a0 acceptable health care for the whole nation<\/p>\n

–\u00a0 better income distribution.<\/p>\n

All post-war leaders had so far their political legitimacy, lately particularly high economic growth and internationalization. In my feeling, the new Chinese leaders will have to look mainly for acceptable<\/em> growth – which may be closer to 8-9 percent than maximum growth around <\/em>10 percent as seen in the past two decades. But such a development will assume that the above-mentioned political challenges will be taken seriously by the new leaders.<\/p>\n

Economic challenges<\/strong><\/p>\n

Many of the future economic challenges have a nexus with politics or globalization. Some of them are mentioned below (but have been described more thoroughly by me in earlier pieces).<\/p>\n

They are, for example (without ranking):<\/p>\n

–\u00a0 generally<\/em>: more marketization and transparency (vs political control)<\/p>\n

–\u00a0 modernization of financial markets (institutions such as the stock exchanges and bond markets, instruments, products for savers, supervision, etc)<\/p>\n

–\u00a0 cleaning up the state-owned banks (and make them more transparent)<\/p>\n

–\u00a0 financial deregulation (domestically, cross-border, sequencing)<\/p>\n

–\u00a0 transparency and the creation of sustainable real total government debt (central and local)<\/p>\n

–\u00a0 modernization of monetary policy<\/p>\n

–\u00a0 modernization of exchange rate policy<\/p>\n

–\u00a0 new growth model (higher share of private consumption in relation to GDP)<\/p>\n

–\u00a0 creation of conditions for improvements of corporate productivity and industrial value chain<\/p>\n

–\u00a0 creation of improved conditions for product quality and services<\/p>\n

–\u00a0 decrease of the state-owned corporate sector<\/p>\n

–\u00a0 decline of regional disparities<\/p>\n

–\u00a0 creation of strategies for gradually worsening demographic conditions.<\/p>\n

 <\/p>\n

This leads us finally to three crucial questions (which cannot be elaborated in this little blog contribution):<\/p>\n

–\u00a0 Can the new Chinese leaders achieve an appropriate way of combining state intervention and marketization?<\/em><\/p>\n

–\u00a0 How sustainable are Chinese current account surpluses in the long run?<\/em><\/p>\n

–\u00a0 What happens the day when China’s yuan finally achieves the status of a convertible currency (probably not within the next decade – but serious preparations may start during Xi’s leadership)? How will the U.S. and the U.S.dollar react on such a change?<\/em><\/p>\n

We stay here for today – predicting no\u00a0 major changes of wind in the foreseeable future. Gradual and smaller steps forward, however, should continue in the next years. Political, social and institutional strategy considerations should gain political momentum in the next decade – maybe somewhat at the expense of economic growth.<\/em><\/strong><\/p>\n

 <\/p>\n

\"\"<\/p>\n

Hubert Fromlet<\/em><\/strong>
\n<\/em>Professor of International Economics
\nEditorial board<\/a><\/p>\n

Back to Start Page<\/a>
\n<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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