Wed, Mar 14, 2012 - Page 5 News List

Chinese leadership politics delay reforms

AP, BEIJING

Vegetable vendors chat beside their wares in Beijing on Monday.

Photo: EPA

As China faces growing calls for major reforms to prevent its slowing economy from derailing and keep its living standards rising, the response from Chinese leaders appears to be: “Not yet.”

In speeches, news conferences and meetings in the past 11 days during the annual session of the national legislature, Cabinet ministers have promised only gradual steps to help entrepreneurs and curtail the state companies that crowd out private business.

The response seems far below the challenge that even some senior Chinese leaders say the country faces: an urgent need to build a productive, self-sustaining economy or risk seeing growth stall, trapping China at middle-income levels. The World Bank, Chinese economists and the government’s own researchers have urged a drastic restructuring to curb the dominance of state industries, overhaul a wasteful banking system and promote consumer spending to reduce reliance on slowing exports.

“Given the amount of pressure from the weak external environment and internal pressure to rebalance, they don’t have much choice,” Societe Generale economist Wei Yao (姚煒) said. “They don’t have room to delay much more.”

Behind the foot-dragging lies politics.

The Communist Party leadership is in the midst of a transition to a younger generation of leaders and there was little talk during the past week’s ceremonial events of any political reforms that might erode the party’s monopoly on power.

However, it also remained unclear how committed the new leaders are to economic reform, whether they can agree on its future course and, if they do, whether they will summon the will to overcome vested interests from party factions to local leaders who get patronage by cosseting state industries.

It’s China’s version of the gridlock that hits Washington every four years as parties gear up for presidential elections.

Chinese leaders are not elected, but their political calendar — with once-a-decade handovers of power instituted in the 1990s to avoid Soviet-style stagnation — leads to similar distraction.

Chinese Vice President Xi Jinping (習近平) is in line to become the top leader, but the leadership has many other posts. As politicians move up, spots open at key ministries and important provinces. Factions are distracted by the haggling.

Even after the transition is complete, major reforms could take still longer, analysts say.

“Anyone with any political capital will spend it on positioning themselves, rather than arguing for some disruptive change in policy that could make enemies,” said Patrick Chovanec, an associate professor at Tsinghua University’s School of Economics and Management in Beijing.

Xi, former party boss of the export-driven Zhejiang Province, is known for nurturing private business, a possible plus for reform. Other possible leadership candidates have ties to banks and state industries that might hamper reforms.

That means policy is drifting and the government is continuing unsustainable strategies, such as relying on investment to drive growth, possibly making the transition to a consumer-led economy more difficult, Chovanec said.

“There is a real risk of a hard landing,” he said.

Already, the ruling party faces public anger and frequent protests throughout the country over strains ranging from unemployment and seizures of farmland for redevelopment, to chronic corruption and a yawning wealth gap between a tiny elite and the poor majority.

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