Tue, Oct 30, 2012 - Page 8 News List

Challenges for China’s new leaders

By Sushil Seth

This is not the first time that the CCP has faced purges as part of a power struggle at the top, going back to the time when Mao was the supreme leader.

His Great Cultural Revolution (1966-1976) was a period of great disorder and large-scale political purges in China. The 1989 student-led democracy movement, crushed by the People’s Liberation Army at the behest of the CCP under Deng’s direction, was another watershed moment. Zhao Jiang (趙紫陽), the then-general secretary of the CCP and a Deng appointee was also purged because he was sympathetic to the students’ aspirations and, for that, spent the rest of his life under house arrest.

Be that as it may, China has gone on to make rapid economic progress, started by Deng in 1979 to 1980, and resumed in 1992 after a couple of years of interruption caused by the democracy movement of 1989. Indeed, in terms of its economic growth, China has sprinted over the past three decades at an average rate of 10 percent growth.

After the global financial crisis of 2008-2009, China suffered from economic sluggishness, with millions of jobs lost due to recessions in the US and Europe. China’s economic growth had been largely fueled by cheap exports to the US, Europe and other countries, making it the “factory of the world,” and when the global economy nosedived, China suffered.

However, with a large stimulus package of about US$600 billion being invested in construction work across the board — infrastructure, housing, local-level projects, all with banks asked to lend generously to local and regional governments — China has been able to keep up its economic momentum.

However, this has caused some serious problems, such as inflationary pressures, mounting internal debt (according to some estimates, it is now close to 100 percent of GDP), excess housing and production stocks causing bubbles in sectors of the economy. In turn, this led the government to curb unwarranted spending to control the situation.

China’s economic growth has slowed to about 7.5 percent, still quite healthy, but not the 10 percent to 12 percent of previous years.

The government is now initiating a less ambitious stimulus program to maintain economic momentum. In other words, the authorities are trying to engineer a soft landing for the economy to contain any major social unrest.

China’s economy is at a critical point, requiring “structural reforms” as Wen told China’s National People’s Congress in March, and for that, political reforms are a prerequisite.

According to Wen, “without political restructuring, economic restructuring will not succeed and the achievements we have made … may be lost.”

What this means is that China’s new leadership has a hard task ahead to create new pathways. That will not be easy because of the vested interests of the country’s ruling class in maintaining the status quo.

However, to avoid a spontaneous outbreak of social unrest, as happened during the Arab Spring, the government needs to address large-scale corruption in the country, as well as the widening gap between rich and poor, and between urban and rural areas.

The migration of millions of rural workers into the urban industrial economy has created its own problems, with urban crime increasingly blamed on rural immigrants.

On the positive side, China’s rapid economic development has lifted millions of its citizens out of poverty and made China the world’s second-largest economy and, at times, the envy of the world for its economic growth.

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