Looking Beyond the Horse Race: Can China’s New Leaders Reform?

November 1, 2012

After much anticipation, and one of the more difficult years in its recent history, the Chinese Communist Party (CCP) in a few weeks’ time finally will unveil the new leadership team that will guide the world’s most dynamic nation over the course of the next decade. The fact that China watchers, as well as influential political insiders, still cannot say with certainty which leaders—or even how many—will comprise the new lineup is a testament to how opaque and anachronistic the selection process is for the rulers of a rapidly modernizing nation playing an increasingly important role in the global marketplace. In that sense, no matter who walks out onto the rostrum at the Great Hall of the People when the next Politburo Standing Committee (PBSC) is introduced to the world, attention will quickly shift from the identity of the new leaders to whether they can successfully manage the many challenges facing the regime.

How severe are those challenges, and what is the likelihood that the new leadership will see bold action on reform as the best—and perhaps the only—means for addressing them? A first step in answering these questions is to put the issues confronting the CCP, as well as the ferment over how best to address them, in their proper context. Chinese elites, and especially the intelligentsia, have a storied tradition of trying to shape the thinking of an incoming administration. Against this backdrop, the effervescence of the debate in recent weeks over reform and the CCP’s future is consistent with the atmosphere that always precedes a leadership turnover.

China’s serving president, Hu Jintao, faced similar calls for fundamental change before taking power during the last generational handover in 2002, amid initial signs that he was open to loosening the party’s grip on key institutions and promoting the rule of law. Instead, Hu and Premier Wen Jiabao have presided over what many influential Chinese view as a “lost decade,” in which the CCP’s role in the economy and society has grown more ubiquitous under the banner of safeguarding social stability. Moreover, a decade ago the Chinese economy was still just taking off, breeding an optimism that made it easier to overlook the leadership’s seeming lack of political imagination in tackling the unintended consequences of two decades of breakneck growth. But now the economy is heading for its slowest annual growth rate in at least 13 years, and social conflicts and divisions are seen as much sharper than when Hu and Wen took charge.

Underscoring the seemingly greater sense of urgency, a vice president of the party school last week caused a stir by saying in an online discussion with the party’s official mouthpiece that the CCP can no longer “dodge the obstacles, but must push forward” with political reform. Both his and the other recent calls for change have been decidedly vague on details. Still, by explicitly framing their arguments in terms of political reform, they seem to be acknowledging that economic reform alone—at least as practiced in the current context where the structural impediments to more fundamental reform are left unaddressed—cannot provide lasting solutions to the current challenges. There seems, in other words, a growing recognition that the principal hindrance to reform is not a revanchist band of neoleftists akin to those who supported the social leveling battle cry of disgraced Politburo member Bo Xilai. Instead, it is the inertia generated by powerful vested interests that distort the outcome of the existing reforms to their benefit and block more sweeping reforms that would threaten their privileged position.

The various reformist missives have tended to focus their ire on two such interests in particular—local officials and state-owned enterprises (SOEs)—and the seemingly nefarious nexus between them. The tracts argue that local officialdom has contributed markedly to worsening social tensions through the maintenance of a fiscal system that, in the wake of tax reforms, incentivizes them to live off land seizures and corrupt relationships with land developers and speculators. This practice was further entrenched in the wake of the government’s 4 trillion yuan stimulus program in response to the 2008–2009 global financial crisis, whereby local governments and the SOEs collaborated in taking massive capital injections from the state banks and directing them into infrastructure and real estate projects of often questionable necessity. Of course, one cannot then expect the local governments or the SOEs to willingly accept reforms that might challenge their current role as the channel of choice for the government to pump money into the economy. No, the party will have to dramatically strengthen central control over the reform agenda and its implementation to ensure that it is not hijacked by these vested interests.

As if this task wasn’t daunting enough, the other mantra of the reform debate, the battle to advance the rule of law, arguably presents even greater challenges. Here the Bo Xilai scandal seems central to the argument. The CCP has expelled Bo from its ranks and is moving toward orchestrating his final legal disposition through a formal trial that, just like those of Bo’s wife and his erstwhile security chief, will undoubtedly be touted by the party as underscoring that all people are equal before the law. But some opinion makers in the party elite clearly aren’t buying it. Their anger is perhaps best reflected in the series of editorials on the case by Hu Shuli of the reformist-leaning financial news outlet Caixin. In essence, they argue that, in its management of the Bo affair, the leadership has chosen the path of expediency rooted in a desire to avoid soul-searching that might threaten its efforts to maintain the public facade of unity going into the 18th Party Congress. As such, the CCP is squandering an opportunity to show that the rule of law in China “must be more than just a slogan.”

So, if the Bo scandal—the largest political earthquake to hit the senior leadership in decades—was an insufficiently existential shock to the system to jolt the leadership into action, is there any reason to be optimistic that the incoming leadership team will be more willing to reform? The undertone of the reformist writings would seem to suggest that an even more exceptional set of circumstances, if not a serious crisis, may be needed to break the logjam. The fundamental dilemma confronting the Politburo, of course, is that it will have to be willing to circumscribe its own power—especially in the economy and in society—if reform is to advance. But this is generally anathema to a regime whose overriding priority will always be the maintenance of its overall ruling position.

And therein may lie a glimmer of optimism. As the new leadership team prepares to assume authority, it will be preoccupied with ensuring that its positions will be secure. Influential insiders, and even trusted foreign interlocutors, may be able to use that period of vulnerability as a window of opportunity. By underscoring to the leadership the tremendous disconnect between social expectations after a decade of perceived inactivity and what the political structure as currently configured can actually deliver, they may be persuaded that change—or, more realistically in the near term, hints of a new approach—is the only way to guarantee continued CCP rule. Talk of streamlined decisionmaking through a slimmed-down PBSC and other rumored personnel appointments with structural implications suggest the leadership may already be sending such signals. Carrying through on the promise in a way that avoids even deeper disappointment will be the fundamental test of the new leadership’s political skills in the decade ahead.

(This Commentary originally appeared in the October 2012 issue of Thoughts from the Chairman.)

Christopher Johnson holds the Freeman Chair in China Studies at the Center for Strategic and International Studies in Washington, D.C.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

© 2012 by the Center for Strategic and International Studies. All rights reserved.