Can Xi tackle China's vested interests?

China's next president has climbed to the top by avoiding offence. But the task of rebalancing the economy implicitly involves curbing state-owned enterprises, and making enemies.

Everyone’s favourite party game in Beijing is to guess what sort of president Xi Jingping will be. Since it is hard to say precisely what kind of president Hu Jintao has been even after 10 years in office, that is easier said than done.

The road from Mao Zedong to the personality-free zone occupied, appropriately, by Hu has been one in which the Communist party has successively drained its leaders of charisma. Instead of a Mao, who could send the country lurching from one insane policy to the next, we now have a nine-member committee of engineers and technocrats. Mao collectivised land. His successors collectivised decision making instead.

Chinese leaders compete in what one diplomat describes as "the shark pool of shark pools”. Those who eventually swim to the bloodied surface are tough. Above all, they know how to avoid offence. Xi rose to the pinnacle of the 83 million member Communist party by not stepping out of line.

Now that he is so close to the top, however, it is unclear how much power he will actually have. Around November 15 he will stroll on to the stage of the Great Hall of the People as general secretary of the party. He will have to wait until March to become president and possibly another year or more before he succeeds Hu as chairman of the Central Military Commission.

Even after this staggered transition, there will be constraints, as his predecessor found. Hu has been able to get some things done. He has repaired relations with Taiwan. He and Wen Jiabao, the premier, have built the foundations of a rudimentary social security system and brought development to rural China. But there have been big setbacks. Income disparities have widened and social discontent deepened. In some areas, Hu has been all but impotent. The aim of rebalancing the economy towards domestic consumption implies curbing the power of state-owned enterprises. But these have grown in influence and have been massive beneficiaries of the post-2008 stimulus. The economy is more investment-led and less consumption-driven than when Hu took over.

China’s vested interests are a roadblock to change. When leaders sought to improve labour rights, exporters cried bloody murder. So entangled is power and money that the incumbents resisting change and the party supposedly fostering it are one and the same thing.

In short, collectivist leadership will curb any lurking Chairman Mao tendencies Xi may have and vested interests will seek to squash his inner Deng Xiaoping. That is, of course, assuming Xi wants to push through change.

So who is Xi and is it sensible to think he has a progressive agenda? This is where the party games begin. Most people agree that Xi has more personality than Hu. That is not a high bar. Diplomats say he is engaging, with a strong command of issues and the confidence to eschew prepared notes.

Many look to his father, Xi Zhongxun, a political moderate. In the 1930s, he helped establish the guerrilla base where Mao ended the Long March. Nearly half a century later he set up special economic zones in Guangdong. Rather than shooting people fleeing to Hong Kong, he sought to implement economic liberalisation so they would be encouraged to stay.

These and other stories have persuaded some that Xi Jinping could be a closet liberal bent on both political and economic reform. That is plausible but not probable. "People had high hopes for Hu,” cautions one academic. "But the last 10 years were a lost opportunity.”

Although Messrs Hu and Wen have drifted, the groundwork for bolder policies may have been laid. Xi and Li Keqiang, slated for premier, have implicitly signed up to the World Bank’s China 2030 report conducted in conjunction with the State Council Development Research Center. The report recommends more space for the private sector, more rule of law, more equality and more environmental protection.

These changes are vital if China is to escape the "middle income trap”. Such an agenda, however, cannot be implemented without creating losers. If Xi is to enact change he will have to do what he has hitherto so studiously avoided: start making enemies.

Copyright the Financial Times Limited 2012.

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