x Abu Dhabi, UAESaturday 20 January 2018

Risk-averse Party elite bring more of the same to Beijing

When future historians look at China's leadership transition last week, they will most likely conclude that the Communist Party threw away a golden opportunity for change.

It has now become a consensus, both inside China and abroad, that the departing leadership of President Hu Jintao lost a valuable decade of economic and political reforms. On the eve of the once-in-a-decade leadership transition, when Mr Hu was about to turn over his power to Xi Jinping, his anointed successor, the question on most people's minds was whether the new leadership would be different.

After the Chinese Communist Party unveiled the new Politburo Standing Committee on Thursday, they got their answer: the new top decision-making body, though downsized from nine to seven, is unlikely to be much different.

Of course, we do not know the policy preferences of Mr Xi, a tight-lipped individual. But the majority of his new colleagues, except for one, are mediocre conservative apparatchiks with no record of demonstrated competence, let alone reformist credentials. Two pro-reform candidates failed to get selected.

The only leader with a track record of economic management, Wang Qishan, made it into the Standing Committee. But the incoming premier, Li Keqiang, appeared to fear that Mr Wang's stellar reputation and strong personality would overshadow him. So Mr Wang was given a less relevant job. Instead of becoming the executive vice premier - Mr Li's right-hand man - Mr Wang gets to be the head of the Party's anti-corruption agency.

To be fair, there was some good news coming out of Beijing on Thursday. This was viewed as the cleanest transition to date: President Hu resigned his position as the commander-in-chief, a historic move that will enable Mr Xi to consolidate power more quickly.

There is no doubt, however, that Mr Hu will remain influential behind the scenes. Of the 15 new members of the Politburo, many are his supporters. Mr Hu apparently struck a hard bargain: trading his complete retirement for the promotion of his supporters into the Politburo, thus positioning him for picking Mr Xi's successor and staffing the next Standing Committee at the 19th Party Congress, in 2018.

None of this will matter, however, if the overall orientation of the leadership is conservative. If that is the case, the Party is clearly headed for big trouble.

The dominance of conservative, risk-averse men on the Standing Committee has obviously dashed hopes that the new leadership will adopt forward-looking political and economic policies to address the country's most urgent challenges - macroeconomic imbalances, a structural slowdown in growth, the Party's loss of credibility, record-high inequality, pervasive corruption and rising social tensions.

Rather, the new leadership line-up suggests that, economically, the Party does not have as strong a sense of crisis as the market believes. Such strategic miscalculation or overconfidence are likely to make things much worse before they get better. In practical terms, the new leadership may resist actions demanded by the market - so short-term prospects for reform are dim. The existing economic distortions in China are therefore likely to worsen before the new leadership takes action to correct them.

In other words, the potential for a bigger crisis has grown, and the potential for a serious economic crisis appears unavoidable in the next two to three years. With the rapid build-up of bad loans in the banking system, a real estate bubble, lack of new growth engines and massive excess capacity, China needs a miracle to escape a dangerous economic shock.

But the new leadership seems to lack the talent to manage such an inevitable crisis.

Politically, the composition of the new leadership quashed what optimism people had about the prospects of political reform. The two strong candidates viewed as likely reformers lost out because the conservatives feared that they could form the core of a reform coalition.

In fact, signs were never good for political reform. Even before the unveiling of the new leadership, the party sent out a strong signal that it had no intention to abandon one-party rule. Mr Hu declared in his opening speech to the party congress that the party would never take "the evil road of changing flags" - referring to giving up the Party's political monopoly.

For a society that has been under tight political control since the Tiananmen crackdown in 1989, loss of hope of gradual political change can mean only one thing: growing radicalism and political polarisation.

Such a scenario is more likely today because there was a revival of the pro-democracy debate just before the convening of the Party Congress. This debate, at the ideological level, severely damaged the legitimacy of the Party. Proponents of democratic reform, so disappointed with the transition, can be expected to advocate a more radical course of action in the future. If anything, state-society conflict, already intense, will certainly escalate in the coming years.

The international community will not be spared the consequences of the continuation of the status quo in Beijing. The dashed hopes that the leadership shift in Beijing will lead to a change of foreign policy towards a more internationalist and proactive direction will contribute to a hardening of policies towards China, especially in the West. Beijing's tense relations with its neighbours, fuelled by territorial disputes, will continue to be a major source of geopolitical instability in East Asia.

In short, when future historians look at this leadership transition, they will most likely conclude that the Communist Party threw away a golden opportunity for change.


Minxin Pei is a professor of government at Claremont McKenna College and a non-resident senior fellow at the German Marshall Fund