Is China Heading For the Rocks? The Leadership Would Like To Know

Xi Jinping and Li Keqiang© Stirring Trouble Internationally Google+ Xi JinPig li Keqiang.

Gu Suhua writes from Beijing. Manufacturing indices down. Growth down. A revolt in Hong Kong about attempts to introduce patriotic lectures in schools – meaning that the Mandarin speaking north is more important than the Cantonese speaking Hong Kong. Floods and earthquakes to cope with. Is the Middle Kingdom in crisis as it prepares for the once in a decade changing of the guard in Beijing?

So many problems are piling up that Li Keqiang, soon to become Prime Minister, has warned that China suffers from ‘serious imbalances, failures of coordination and sustainability in its development’. There are also ‘important structural weaknesses’.

Taking this at face value, the implication is that the present model of economic and political development cannot take the country much farther. Fundamental changes are necessary if the Middle Kingdom is to become the world’s leading economic power.

Strong language but will they remain simply words? Wen Jiabao, the outgoing Prime Minister, has repeated the above mantra on numerous occasions. Only he insists that economic reform has to be accompanied by political reforms.

What did he get for his pains? He was slapped down by Hu Jintao and other leaders every time he uttered such sentiments.

Putting a positive gloss on this, one can say that the time for introducing political and economic reform was certainly not in the year leading to the 18th Party Congress in October.

Stability was the order of the day as the horse trading for top positions got under way. Once the new team is in place, reform can begin. After all, Xi Jinping, who is expected to succeed Hu Jintao as party leader and national President, has said that the country must seek ‘progress and change’.

However this must not destabilise China. Here is the rub. How does one reform without some interest groups losing and other interest groups winning?

Xi Jinping, once in power, will need time to consolidate his position. He will have to build up a pro-reform group.

This will consist of those who believe they and their constituents will gain from such reform. The losers will have to be outmanoeuvred but not humiliated. Otherwise they will work to undermine the reform.

Protests in Hong Kong Protests in Hong Kong

So what are the main problems facing Xi as he takes over? Take the steel industry, for example. There are over 200 companies producing over a million tonnes of steel annually. This is inefficient. Attempts to consolidate the industry have been under way since the mid-1990s with little effect.

A major barrier is that every region wants to retain its steel making capacity. Prices for water and energy are artificially low. This means they are wasted.

The amount of energy per unit of output in hina is over double that of the United States. Room for improvement. China is facing a water shortage. It should cost more but this would affect the poorest most. So this hot potato has been left alone.

Much effort has gone into caring for the environment but the improvement has been limited. And then there is corruption.

This has led to embarrassing holes in motorways and bridges falling down.

Too much money was creamed off by greedy bureaucrats. Swinging fines, even imprisonment, are needed to rectify this disgraceful state of affairs. China’s future infrastructure depends on it. The Hong Kong protests, which forced Beijing to backtrack, underline the power of the crowd.

The public is no longer docile. Social media have circumvented state sponsorship. Top-down rule will have to gradually cede to a dialogue with the population.

The legitimacy of the communist regime is based on successfully developing capitalism. Deng Xiaoping began this revolution. In 1994, ideology was downgraded and capitalism put in its place.

Xi and his colleagues must prove themselves competent managers. Otherwise they face a public backlash which could undermine the regime which has been in power since 1949.

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