The following is my summary of the webinar put on by the Economist Intelligence Unit on Tuesday, November 20th. For more detailed information, go to the Economist Intelligence Unit website and register for a download of the report on which the webinar was based. Most of the presentation was done by Victoria Lai. I apologize in advance for any errors I may have made in compressing what was a very information-defense presentation into my brief summary.
1. Introduction
In China, the Central Committee of the Communist party changes its leadership of the Politburo every 10 years. On November 8th, the 18th National Congress of the Communist Party of China met, chose delegates and on November 15th the Central Committee chose the 7 members of the Politburo Standing Committee. This webinar was given to discuss the implications of who was chosen and who was not on the future direction of Chinese domestic and foreign policy. This decision comes at a pivotal time in China’s development.
2. The Chinese Communist Party and the State apparatus
In China, the Communist Party and the State are parallel structures that are connected through the PLA (People’s Liberation Army) or the military. Here are the levels of the Communist party, with the Politburo Standing Committee or PSC (currently 7 members, used to be 9) at the top, followed by the Politburo, the Central Committee, and the local and provincial (grassroots) members.
and here are the levels of the State, from the State Council or Cabinet, the Ministries and Department (the equivalent of the executive branch) the National People’s Congress (the equivalent of the legislature), and the provincial authorities.
The military or People’s Liberation Army (PLA) is the link between these two structures.
3. The Politburo Standing Committee (PSC)
The 7 members of the Politburo Standing committee are the top rank of the Chinese Communist Party or CCP. They are the ones that will set the general direction for the country in the years to come.
The following is a list of the 7 members of the Politburo Standing Committee. They were ranked by the EIU in terms of their political leaning, from most conservative to most liberal. Then their ranking within the power structure, with Xi Jinping being 1st as President, going all the way down to the 7th ranking member, Zhang Gaoli. Victoria Lai gave some details regarding the members background or interests.
Fig. 1. 7 Members of 18th Central Committee PSC
|
Political Ranking * |
Power Ranking |
Notes |
|
| Zhang Dejiang |
1 |
3 |
Newcomer to PSC; supports state-run enterprises |
| Liu Yunshan |
2 |
5 |
Newcomer to PSC; fairly conservative in outlook/ |
| Yu Zhengsheng |
3 |
4 |
Newcomer to PSC; propaganda and media chief; champion of state-led development. |
| Zhang Gaoli |
4 |
7 |
Newcomer to PSC; champion of state-led development. |
| Xi Jinping |
5 |
1 |
Was in 17th Central Committee; China’s new President; princeling**. Affable, but controversial (wife is famous singer in PLA). Good at balancing factions, associated with economic liberalism. |
| Li Keqiang |
6 |
2 |
Was in 17th Central Committee; relatively liberal economically, backs World Bank report on China. Focused on wealth distribution, climate change. |
| Wang Qishan |
7 |
6 |
Newcomer to PSC; supports liberalization of financial sector/ |
* Political ranking means from most conservative or supporting status quo to most liberal or supporting reform.
**A “princeling” is considered someone who is a descendant of prominent or influential senior Communist party officials.
4. Economic Agenda
On the domestic side, urbanization, increasing consumption by the middle class, and wealth distribution issues are important. Promotion of high tech is a priority, but there is pressure from grass roots regarding environmental issues related to local air and water pollution.
There is a consensus regarding interest rate, exchange rate and capital account liberalization. This will cause a lot of volatility in the economy and inflation will be far more of a problem than it was before. In addition, the “demographic dividends” that China has enjoyed in the past 3 decades will be coming to an end as its average population ages.
5. Foreign Policy Agenda
China’s moves in the South China Sea and the Senkakus/Diaoyutai Islands are upsetting the regional status quo. Xi Jinping is a nationalist and this trend will most likely continue.
However, one of the main challenges of the PSC will be to create a foreign policy that positively furthers China’s interests and is not just trying to counter whatever the US is trying to do at the moment.
6. Upside and downside risks of PSC
According to the Economist Intelligence Unit, here are the three negative risks and three positive opportunities that the PSC will face in the next few years. The risks are in orange, and the opportunities are in green.
| Risks/ Opportunities |
Item | Explanation |
| Opportunities | 1. Judicial reform | Increasing accountability for party officials
|
| 2. Civil society liberalization | Growth of NGOs
|
|
| 3. Local fiscal reforms | Control of abuse by corrupt local officials favoring developers and industrialists and ignoring popular concern about pollution
|
|
| Risks | 1.Conservative balance | Heavily weighted towards those supporting state-run enterprises, which will slow pace of financial reform. Two potential members of PSC that didn’t make the cut were more liberal or reformist.
|
| 2. Reform | Major financial reforms will face strong opposition from entrenched interests.
|
|
| 3. Political volatility | Inequality between provinces and experiments with relative local autonomy will cause increasing political volatility. |
The PSC will be steering China through an increasing complex landscape of financial and political changes not only within the country, but throughout the world. I appreciate the Economist Intelligence Unit giving their opinion on the future of China’s leadership and how it will affect the future of China.
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