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Saturday, March 17, 2012

EDITORIAL

More than meets the eye in Beijing

While many dismiss China's National People's Congress (NPC) as a "rubber stamp," its annual meeting provides valuable insight into the thinking in Beijing. This year's 10-day conclave, which concluded earlier this week, was scrutinized particularly closely since China is set for a leadership transition later this year. The NPC is considered a bellwether for the changes that transition will ring in.

The meeting itself is a dry, drawn-out affair, primarily filled with work reports — long recitations of goals reached and ambitions for the year to come — and punctuated (in recent years) by meetings with the press at which top leaders provide views on policy. Last week, for example, NPC spokesperson Li Zhaoxing provided the annual gloss on military spending when announcing that the People's Liberation Army budget would increase by 11.2 percent to reach 670.2 billion RMB ($106 billion, a figure considered low by almost every outside source); the PLA budget has recorded annual double-digit increases for two decades.

Mr. Li insists that China's military is for defensive purposes and that China poses no threat to any other country. Few of China's neighbors take comfort in this ritual reassurance.

The other figure that dominated the NPC this year was 7.5 percent: that is the target for economic growth in the coming year laid out by Prime Minister Wen Jiabao. Historically, China has sought 8 percent growth: Most economists believe that that is the minimum expansion required to provide jobs for migrants from rural communities, new college graduates and other entrants to the labor force. But China's explosive growth is generating problems of its own — pollution, corruption, inflation, income disparities — and the government now believes that a slowdown is required to keep the economy from spiraling out of control.

Unfortunately for Mr. Wen and like-minded economic planners, officials in cities and provincial governments prefer higher growth rates. They in turn generate higher standards of living, higher taxes (and, for the more larcenous, larger bribes). These competing aims are creating great tension in modern China.

Just as important — and created by the same process — is the widening income disparity in the country. China's growth has not been distributed equally; the ruling party in a one-party state tends to extract rents as the country prospers. China is no exception. According to a 2009 report, over 90 percent of China's wealthiest citizens are children of senior party officials. The result is an income gap that is as extreme as the worst cases in Africa. It is hard to be sure since the government has not published an official Gini coefficient — a measure of income disparities — for over a decade for fear of the resulting outcry.

A recent World Bank study called on China to make a "fundamental shift" in national priorities and shift away from state-sponsored and state-supported capitalism to a more market-oriented system, warning that China's current approach was unsustainable. Mr. Wen took that even further, insisting that political reform was "urgent," and saying that another Cultural Revolution could occur if the "new problems that have cropped up in China's society" are not "fundamentally resolved."

That warning is consistent with previous statements by the prime minister. Unfortunately, he appears to be a voice in the wilderness. No other top official has called for political reform like Mr. Wen and few are likely to take up the banner during the transition period that is underway as the fifth generation of leaders prepare to take office later this year and in 2013.

While political reform is too ambitious for China's leaders, an economic debate is not. And the prospect of that debate provided the real drama at this year's NPC. Of course, this would not have been played out in public; the subject is too sensitive and too much is at stake. But two currents are vying for supremacy in the Chinese Communist Party leadership: reformers (or at least those who would continue on the current path of increasing the role of market forces in the economy) and the proponents of state capitalism, who want to maintain the state's heavy hand.

If faces are to be attached to the two factions, the first group would be represented by Mr. Wang Yang, party boss in Guangdong province. It was thought that the latter group would be fronted by Chongqing strong man Bo Xilai. But he was removed from his post Thursday. Mr. Bo was considered one of the leading lights of his generation, a flamboyant official with a gift for getting attention and seen as a candidate for a seat on the Communist Party Central Committee. His star dimmed recently after his deputy fled to the U.S. consulate and reportedly requested asylum on the eve of Vice President Xi Jinping's visit to the United States.

The struggle for supremacy between the two factions will drive the fight for positions in the new leadership's hierarchy. While the "red" faction is much more than Mr. Bo's fan club, his particular fate will be important to the future of that group. The battles will not be played out in public, however. China watchers will be forced to read tea leaves to foretell the country's future.



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