China's New Leaders

The change in leadership in China has come at a critical moment in the country’s development as it has become clear that the economy’s dependence on exports and investment needs to change.

The country’s senior new leadership was announced on 15 November 2012.  Xi Jinping is set to take over as the President of China in March this year.  In addition, six other members of the Standing Committee were announced.

Given the lack of progress in economic reforms in recent years, expectations were low as to how the new leaders will handle the country’s economic challenges.  Will they continue to procrastinate on important and difficult decisions or will they take constructive steps to set China upon a bold and sustainable path of economic  reform and development?  It is encouraging that media reports of the new leaders conveyed a sense of urgency for structural change.  Clear emphasis is on tackling corruption, reducing the income divide, upholding and promoting rule of law, and to be a government for the people.  For the first time in many years, there is positive energy in the air.  Beyond and above most pundits’ pessimistic expectations, visible reforms are already underway merely a month into the job.  The capital account is gradually getting pried open, and rural land and natural resource prices are moving towards market mechanisms.  Further, the much delayed reforms for more equitable income distribution are being set in place and relaxation of the hukou system (which restricts movement of the individual) are now firmly on the policy agenda.

Worth noting also is the new leaders’ unconventional style that initially raised eyebrows across China, but did wonders for them in regaining the trust of the Chinese people.  The new leader, Xi Jinping, set out eight rules of frugality (mostly pertaining to cutting down on lavish spending and ceremonies at official functions) for the previously invulnerable Politburo members to follow.  Officials were asked to speak their mind and not read off script.  The expectation is for this counter-cultural style to be propagated throughout the government agencies.  Importantly, Xi coined the new catch phrase of the “China Dream” representing the great revival of the Chinese nation to be achieved by opening up and reform.

There was no red carpet, no red communist banners, no road blockades as the newly minted leader of China visited the city of Shenzhen in his first official outing.  This trip symbolically retraced Deng Xiaoping's visit 20 years ago that ushered in China's economic prosperity.  And on a cold Wintery day on 31 December, he visited unsuspecting farmers in impoverished Hebei villages (average per person incomes less than USD150/yr).  He was used to talking to ordinary folks directly in his previous roles and he was not about to change that now that he is the head of the country.  These endearing gestures set an example for other government officials and have consolidated his credential as a leader of the people.  Nowhere was the sense of optimism better felt than in China’s cyberspace, in which the new leaders seemed more confident.  Sina Weibo (China’s Twitter) was abuzz with excitement following the new leaders’ visits and speeches blow by blow, with renewed hope and palpable anticipation.

Despite a strong start, manoeuvring through the complex political labyrinth of the Chinese Communist Party will not be easy.  It is therefore encouraging that the senior leadership, the Central Politburo Standing Committee, appears to have the right background and ambition to fulfil the difficult job ahead.  The Standing Committee is the top leadership of the Communist Party of China and the number of people in this elite group has been reduced from nine to seven which some claim will allow the Committee to make policy decisions more expediently.  Out of the seven members of the Committee, four would be classified colloquially as “princelings” which is generally defined as a person from families of senior Party revolutionaries.  Nowadays, princelings occupy powerful positions in government and businesses.  Having this network within the government and outside perhaps can get things done a bit easier.

Outside of this privileged group, Li Keqiang, who is not a princeling, is set to succeed Wen Jiabao to assume the key role as China’s next Premier in March.  He was a student in Economics and the Law at the highly regarded Peking University, and played a vital role in formulating economic policies for China over recent years.  He sponsored the World Bank report, China 2030, jointly published by the World Bank and China’s Development Research Centre.  The report highlighted immense risks from the lack of reform and outlined key steps to move forward.  Li recently reiterated that reform is China’s biggest dividend and that "those who refuse to reform may not make mistakes, but they will be blamed for not assuming their historical responsibility”.

Xi Jinping, the incoming Chinese President, is son of Xi Zhongxun, who was one of the first generation of leaders in the PRC.  The elder Xi was perhaps best known favourably for his economic reform credentials.  He played a leading role in the creation of the Special Economic Zone in Shenzhen which grew from a fishing village near Hong Kong to a world-class manufacturing hub and metropolis.  This paved the way for economic liberalisations for the rest of China.  Sadly, a reformer at heart, he was sidelined for his staunch support of the Party General Secretary Hu Yaobang, who was purged for his policies of more rapid political liberalisation and whose death triggered  the Tiananmen Square tragedy in 1989.

Born in a privileged family of party revolutionaries, Xi Jinping’s childhood life fluctuated with his father’s tumultuous political career.  During his teenage years, Xi Jinping’s father had a fall out with Chairman Mao, and was demoted from Vice-Premier of China to become Deputy Manager of a tractor factory.  During the Cultural Revolution, Xi Jinping was sent to an impoverished village situated in Shaanxi Province, where he endured seven years of hardship.  Eventually his family was rehabilitated by the government at the end of the cultural revolution, when the elder Xi assumed a senior government role in Guangdong Province.  Upon completion of his studies in Beijing’s prestigious Tsinghua University, he served as secretary for his father's former subordinate, the then vice premier and Secretary-General of the Central Military Commission from 1979 to 1982.  Subsequently he worked in the Hebei Government, and then took various senior roles in the government in the economically vibrant coastal Fujian and then Zhejiang provinces.  His successful stewardship of these thriving provinces demonstrates adeptness in economic management.

Xi is viewed positively by foreign dignitaries.  Described as “the kind of guy who knows how to get things over the goal line” by former US Treasury Secretary Paulson, and “a thoughtful man who has gone through many trials and tribulations.  A person with enormous emotional stability who does not allow his personal misfortunes or sufferings to affect judgement.  In other words, he is impressive” by Former Prime Minister of Singapore Lee Kuan Yew.  Significantly for this leadership transition, Xi was given the role of the Head of the Military Commission immediately, in contrast to his predecessor Hu Jintao who had to wait two years to assume this strategically vital position.  Xi enjoys strong connections with the military thanks to his previous roles and his family.  His wife is a famous singer, currently serving in the People's Liberation Army at the rank of major general.  With ties to the military and successful track record of pro-market economic reforms, the new leadership has all the qualities one might want at this challenging time.  In a short space of time the new leadership are making the right moves, reform momentum is quietly gathering pace, and we would expect to hear a lot more concrete policies in the near future.

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