China Policy Institute: Analysis


WEN Jiabao

The Significance of Three Bows: Wen Jiabao’s final stand

By Jun Zhang.

The first session of the 12th National People’s Congress opened in the Great Hall of the People in Beijing on March 5, 2013, with Premier Wen Jiabao delivering the government Work Report. It was the 10th and final time he had made such an address. The two-hour long report ended with prolonged applause from the 3,000 representatives. When Wen turned around and bowed to the presidium of the Congress, applause broke out again. Appearing emotional, he bowed to the audience three times and again to his colleagues on the presidium. The ovation that ensued reverberated throughout the hall and was again prolonged.

The representatives had every reason to applaud. In the days that followed, representatives deliberated on the Work Report and they would judge the work of the government last year. That would present no problem, but how will they grade the government for its work over the past 10 years? This is certain to be a matter of contention outside and inside the hall. The truth is, since the beginning of last year, people from all walks of life have been talking about Premier Wen and have come to different conclusions.

Wen’s supporters say that deep down he is democratic, and when he said that “no force can hold back this move towards democracy”, he meant that free and just elections should be held in China. History will judge him generously. “I think he really wanted to step up political reform, and yet he could not overcome the opposition inside the institution,” says He Weifang, Professor of Law at Peking University. “Even if it was just an oral promise, it was still highly significant.”

Still, there are the detractors, who depict Wen as someone who made promises but did not honour them, and someone with few achievements during his tenure. There are those who say that in political and economic terms his achievements as Premier were negligible. Furthermore, they say, his noisy democratic appeal simply lacked weight.

In the economic sphere, his most contentious policy was the 4 trillion yuan stimulus plan of 2008. Many mainstream Chinese economists criticized this, saying it was a typical overreaction, one that caused the serious over-issuance of currency. According to statistics, the M2-GDP ratio has risen sharply, to 1.9 percent, since 2008.

But Wen did not yield. On September 11 last year, in the opening speech of the Summer Davos Forum in Tianjin, he first responded to the criticism of the stimulus package China adopted in 2008 in the midst of the international financial crisis, and defended the 4 trillion yuan plan. In the Work Report this time he reiterated that the decision was correct.

More critical commentators say that his down-at-home image has simply been a cover for his wife and children to amass a huge fortune. In autumn last year The New York Times published a report detailing the assets of Wen Jiabao’s family, insinuating that they had used their position to accumulate wealth. Willy Lam, a Hong Kong based expert on Chinese politics, says: “He is a tragic figure, and will popularly be remembered as a man doing his best to protect the shoots of political reform and liberalization – or at least orally.”

A few days ago, the Southern Weekly published a long story headlined “Special edition for the two Congresses on Premier Wen’s final bow—looking back at Wen Jiabao’s career”. At the end of the article it says “Wen Jiabao affirmed his ambition in his childhood to follow in the steps of his idol Zhou Enlai and studied at Nankai Middle School. In 1968 he left campus and threw himself into front-line geological work in Gansu province. From being a mineral technician he made his way up the ladder to eventually become Premier. After 10 years’ service when the 2013 Congresses close, Wen Jiabao will finally put down his heavy load. Acting on a promise to his mother, Wen did many things for his country, of which there can be no doubt; but it will be the future that is his ultimate judge.”

Let it be remembered that in the Great Hall of the People when the fifth session of the 11th National People’s Congress closed in March last year, Wen told reporters: “Because of the limits of my capability, and various factors including the institution, there is much to desire in terms of my work. As the head of the highest national administration, I bear responsibility for all economic and social problems during my service. For that I am sorry. I always feel that many things are not finished and many things could have been better. I have many regrets.” He was apparently referring to economic and political reform. The phrase “A decade without reform” has become popular, and the urge to carry on reform seems to be widely held. It is an arduous task, but one that Li Keqiang and his government will take on.

Professor Jun ZHANG is the Director of the China Center for Economic Studies at Fudan University.

Political reform an urgent task for the incoming leadership

by Anastas Vangeli

Political reform has a very righteous, even a Confucian purpose in the Party’s discourse. The Party often conceptualizes the need for political reform as an answer to the growing “plagues” in governance.
One of the most important of these plagues is corruption. The definition of corruption in China stretches far beyond only bribery and financial crime – it refers to abuses of power that due to the dynamics of the society, opacity of politics, the sheer size of the country and the remoteness of the periphery from the center, take on frightening proportions and erode the legitimacy of the system.

Corruption is in fact a very active problem of China’s leaders. The Bo Xilai scandal has deeply shaken the Party lines. Earlier, one saw a sneak preview of local revolt in Wukan (with small-level protests against corrupt officials being held elsewhere). Netizens have publicized and criticized the decadent lifestyle of some of the relatives of Party seniors.

These and many others are all cases that are constantly used as a pretext to discuss political reform. Some analysts talk of a crisis of legitimacy. Wen Jiabao used the Bo Xilai case to wage war on a potential relapse into a new Cultural Revolution. The incoming leadership will have no choice but to address them before they spiral out of control.

A second function of political reform would be to stabilize and facilitate the policy process in China – process driven by a myriad of stake-holders, agencies, and diverging agendas. Political reform in this sense is patching up the cracks in the “fragmented authoritarianism” and strengthening the consensus between different elites.

The divergence is not only seen between the big political factions, but it is increasingly seen across different sectors and at different levels in Chinese policy-making. The burning example is of course the South China sea, where about a dozen governmental bodies help as the International Crisis Group puts it, “stirring the sea.” Structural deficiencies and internal divisions are the major reason for the uncoordinated maritime policy process; which has already become security concern.

The incoming leadership will need to act early on this issue, and put the house “in order.” Negotiation and mediation between different government branches, political bodies and/or increasingly the private sector could be institutionalized and regulated by political reform. Political reform in this sense would be a counter-balance to an overly entrepreneurial policy making attitude.

Finally, the developments outside China in the last few years have greatly affected the thinking of leaders in Beijing as well.

The Jasmine Revolutions and the fall of regimes in Northern Africa and the Middle East (the most important cases for China being Libya and Syria), as well as the change in Myanmar, are bad news for the CCP.

To a great extent, China’s authoritarian friends abroad were used as an example to further legitimize a concept of paternalistic-eudemonic but non-democratic leadership; now, with the fall of these regimes, there are ever-fewer examples to be pointed out as close to China.

Moreover, in the age of new media and globalized communication, there are growing fears that popular unrest abroad might be exported to China. One must also not dismiss the constant support by the West for pro-democracy and pro-human rights activists in China.

While China has responded to the changes in the global landscape by boosting its domestic security apparatus, it has yet to act on the obvious problems that might lead to a popular unrest.

At the end of the day, the new leaders might interpret these issues, the problem of corruption and legitimacy crisis, diverging interests within the political elite, and external pressure, as a threat to the Party’s stability or as a chance for advancing political reform. While political reform is certainly easier said than done, and is in no way a panacea (even if done thoroughly), it seems a very possible task the Xi Jinping leadership will take up.

Anastas Vangelis is a freelance writer on Chinese politics and Sino-EU relations based in Beijing.

Opinions expressed in the CPI blog do not represent the views of the China Policy Institute or the School of Contemporary Chinese Studies at the University of Nottingham. They are the personal views of the bloggers/authors.

Premier Wen Tells Leaders in South West China to Be Prepared for a Hard Time Ahead

by Shujie Yao.

Slow GDP growth in the second quarter of 2012 has attracted serious debates in and outside China. Premier WEN Jiabao visited the south western provinces of the country, telling local officials that they have to be prepared for a hard time in the second half of the year and beyond.

In fact, the rest of the world is also slowing down. The phrase ‘hard time’ may not be an appropriate description of the real situation in China today. Slow growth is an inevitable reality, not a hard time. If it were a hard time, it would imply that after a while, break-neck high growth would come back again.

However, the chance that China will go back to its past level of near two-digit level of growth is close to zero. In other words, slow growth is not temporal; it is permanent because a structural break has taken place.

People in China have been used to a near or even over two-digit level of growth for more than 30 years under economic reforms, particularly after its accession to the WTO, when China expanded its world trade volume, foreign exchange reserves and trade surplus at a phenomenal pace.

No country, including China, can be expected to continue such a break-neck growth without a pause, or a recession. Whether it is Europe, the US, or Japan, economic booms have always been accompanied with busts. The current financial crisis is no exception. It has merely followed a prolonged period of economic prosperity in virtually all parts of the world.

Economic boom and bust cycles are inevitable outcomes of a market economic system. Even though China has been capable of using a strong government hand to guide its socialist-style market economy, it is not unreasonable for China to experience a boom-bust cycle as well.

In fact, China has been very lucky compared to any other country in the world over the last three decades. The Chinese economy appears to have grown strongly and positively in every single quarter since economic reforms began in 1978, led by the late leader, Deng Xiaoping. This unbroken and rapid economic growth is termed as the China economic miracle in the literature, a miracle that no other country can match with such a large population.

Now that the world financial crisis is deepening and China’s domestic growth constraints have emerged, it is not unreasonable for a slowdown of growth. This slowing down process is probably a structural break, implying that once coming down from 10% to less than 8% per annum, it may not come back to its original level again. This structural break, in my view, is permanent. The Chinese government and people have to be prepared for the harsh reality and come up with a new development strategy, instead of trying to do short-term fixing activities that may lead to more long term complication and difficulty.

Heavy environmental pollution and extensive consumption of oil, coal and iron ores implies that China should not really continue with its past growth trajectory. Moreover, rising labour costs and structural shortage, relocation of manufacturing facilities westward from the coastal areas, all call for a slower growth of the economy.

Most people in China have not come to terms with this harsh reality and still dream in the world of 2-digit level of growth. Consequently, once they see the economy growing at less than 8% per year, they think it is a disaster for the country.

Slow growth can be a disaster only if it causes a rapid rise in unemployment. However, slow growth needs not be a disaster if every single new project can be re-designed to attract more labour and become more resource efficient. In that way, China can still manage a high level of employment with a much lower level of growth.

The biggest challenge that China faces is not slow growth, but its ability to improve income distribution, to reduce pollution, to eradicate poverty and to control corruption. If the government is fully aware of all these problems and take appropriate actions, people will become happier without rapid economic expansion.

Technology upgrading is important, too, but innovation and new products require time and patience to take place. As a result, more efforts should be focused on improving the country’s research and education systems so that industries will be equipped with better human resources and technologies to become more competitive in the world.

Japan, South Korea and Taiwan are excellent examples for China’s future development and growth. Japan’s population is one-tenth of China’s. Korea’s population is less than one-twentieth of China’s. However, Japan and Korea have some of the world’s most admirable brand names such as Toyota, Sony, Sharp, Hyundai and Samsung.

What does China have? It has Petro-China and ICBC, which are two of the world’s largest companies by market value, but both of them have a Chinese nick-name called Wan Ren Keng, a tomb that buries tens of thousands of people. This nick-name implies that large Chinese firms have benefited from powerful natural monopoly at the expenses of shareholders, non-state-owned small and medium sized enterprises, savers and consumers.

To create world-class brand names, China has to break down the monopoly power of its largest state-owned enterprises, subjecting them to tougher market competition and enabling other enterprises for easier market access with fair competition.

In the short term, China may still try to slow down the declining rate of growth through further cutting interest rate and reducing the bank deposit/reserves ratio. However, this kind of looser monetary policy can only have a limited short term effect at a price of creating more long term troubles.

Gradually, the government will realise that patience and better policies are needed to prevent China from a large crisis by accepting a much lower level of economic growth. Attention will then be focused on social justice and creation of a knowledge and technology-based economy.

Shujie Yao is Senior Fellow in the China Policy Institute, and professor and head of the School of Contemporary Chinese Studies at the University of Nottingham.

Opinions expressed in the CPI blog do not represent the views of the China Policy Institute or the School of Contemporary Chinese Studies at the University of Nottingham. They are the personal views of the bloggers/authors.

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