NYT
Chinese Leader Gets More Sway on the Economy and Security
President Xi Jinping, center, and other Chinese Communist Party leaders voted on policy measures as the Central Committee met on Tuesday in Beijing.
By CHRIS BUCKLEY
Published: November 12, 2013
HONG KONG — President Xi Jinping of China emerged from a Communist Party leadership conference on Tuesday with a mandate to give the market a “decisive role” in the world’s second-largest economy and to consolidate new decision-making authority in his own hands.
Mr. Xi has defied expectations that a new Chinese leader must tiptoe politically in his first years.
After a closed-door meeting of party leaders, officials announced that Mr. Xi would establish a new national security committee — which experts said took inspiration from the National Security Council that serves American presidents — as well as a leadership group that would push through a raft of economic overhauls. The two new agencies suggest that Mr. Xi aims to circumvent the ruling party’s cumbersome bureaucracies and overcome resistance that deeper economic changes are likely to bring.
Mr. Xi has signaled that he intends to overhaul a wide range of long-entrenched policies, including restrictions on land ownership in rural areas and state control of interest rates charged by banks. He and Prime Minister Li Keqiang have also vowed to wean China’s economy from its dependence on highly polluting industries and extravagant government spending. A full list of overhauls discussed at the party meeting is expected to be made public in the coming days, though many are expected to be phased in only gradually.
A year since assuming party leadership, Mr. Xi is also showing that he intends to govern in a more assertive, authoritarian style than his predecessor, Hu Jintao, who presided over a decade of rapid growth but failed to push through changes that many economists argue are needed to modernize the economy.
“He’s demonstrating that he’s really in charge,” said Christopher K. Johnson, an expert on China at the Center for Strategic and International Studies in Washington, in a telephone interview from Beijing. “It’s the clearest statement we’ve seen so far of his power inside the system.”
The new party leadership group on economic policy will oversee the introduction of market-oriented changes, and officials said there would be “decisive outcomes” in major policy areas by 2020. Yet they also emphasized that party control must remain paramount even as China embraces more market forces in the economic sphere.
“Most important is maintaining the party’s leadership,” said a communiqué. “We must be bold and our steps steady.”
Mr. Xi, 60, has defied expectations that a new Chinese leader must tiptoe politically in his first years. Instead, he has moved quickly to reshape many policies and consolidate his control of the party’s levers of power: the military forces, ideology and propaganda, the domestic security apparatus and anticorruption agency — and now economic policy making.
Many analysts say Mr. Xi’s background, as the son of a Communist revolutionary who served under Mao Zedong and Deng Xiaoping, has made him more confident than recent party leaders in wielding power.
By establishing the leadership group, Mr. Xi has wagered his credibility on his ability to push through changes that are likely to face resistance from government ministries, local governments and big state firms, said Chen Ziming, a commentator in Beijing who closely follows party affairs. Mr. Xi is almost certain to lead the group, which economists have long called for to help accelerate economic restructuring, Mr. Chen said.
“This is placing responsibility on his own shoulders,” he said. “It’s concentrating power in one person, so the responsibility will also be his.”
At the meeting, Mr. Xi and the other leaders vowed a more determined and concerted effort to act on promises of a bigger role for markets after a decade in which state power has swollen. The 204 central and provincial officials who attended as voting members of the Central Committee endorsed broad proposals for overhauling taxation, better integrating urban and rural society, and improving government services.
China’s main evening news broadcast showed delegates to the conference seated in long rows of desks, listening attentively and taking notes as Mr. Xi and other officials spoke from a dais.
“We must establish fair, open and transparent market rules,” said the communiqué from the meeting, which was issued by the official Xinhua news agency. “The core issue is properly handling the relationship between the government and markets, giving markets a decisive role in the allocation of resources while better applying the role of government.”
The party leaders emphasized, however, that the party-state, as well as state-run firms, would continue to play an important role in economic life. The communiqué said that both the public and private sectors were “important foundations” for economic growth.
“The key point for me is that the market has a clearly defined role — resource allocation — where it is to be promoted, but the role of the party and government in managing everything else in society is primary,” said Arthur Kroeber, the managing director at GaveKal Dragonomics, an economic research firm. Those resources could include land, minerals and fossil fuels. “It represents a pretty ambitious agenda, although of course the details won’t come for a while.”
Mr. Xi’s immediate predecessor, Mr. Hu, also started his 10 years in office with a Central Committee Third Plenum that promised to drastically alter China’s economy. But for all the changes under Mr. Hu, many analysts said he failed to defuse growing problems with pollution, local government debt and a recipe for growth too dependent on state-mandated lending and land confiscations. Some analysts said that the momentum for change could falter again, as it did under Mr. Hu, with even more risky consequences.
“Xi’s main concern will be that there have been promises of major reform before, but promises without action,” said Deng Yuwen, a Chinese current affairs commentator who formerly worked for a newspaper published by the Central Party School. “I think the communiqué makes clear that China will probably lean to liberalization and relaxation in the economy, but will remain quite conservative politically — not unchanging, but conservative.”
Mr. Xi has accompanied his vows of economic rejuvenation with a drive to stifle political opposition to one-party rule at home and a tougher position on foreign policy issues, particularly in maritime territorial disputes with Japan, Vietnam and the Philippines. In what appeared to be an effort to impose greater control over those areas, the conference approved establishing the new security committee.
The formal English name of the new body was unclear, but state news media used the same Chinese name for it as it uses for the National Security Council in the United States. For many years Chinese officials have studied the workings of that body and other foreign security councils.
The new committee would be a “Chinese version” of the National Security Council in Washington that serves as the coordinating body on foreign policy for American presidents, said Jin Canrong, a professor of international relations at Renmin University in Beijing. “The situation needs that — the external strategy is becoming more complicated,” he said.
The creation of the new committee is likely to magnify Mr. Xi’s influence in foreign policy, Mr. Jin said. The committee is also likely to have a major say in domestic security issues, and Mr. Xi’s ability to win approval for it — after his predecessors had explored the idea and set it aside — showed Mr. Xi’s influence, said Mr. Johnson, the expert on China.
The initial reports about the new security body did not explain how it would either coordinate with, or possibly replace, other party committees that steer policy on foreign affairs and domestic security.
Mr. Xi and Mr. Li have said they want to encourage more confident consumer spending, and break down barriers excluding millions of rural migrants from access to schools, welfare and housing in urban society. Many experts have said that those changes will not be feasible unless the Chinese government gives farmers a firmer and more lucrative stake in their land, so they can sublease the land more easily, use it to raise loans and perhaps sell their leasehold rights if they decide to move permanently to towns and cities.
The party leaders hinted that they were exploring how to give rural residents more control over and income from their land, which mostly remains under “collective” — effectively, state — ownership. “Grant farmers more property rights,” said the communiqué.
EIU
November 13th 2013
PrintShare
Post-plenum blues?
The third plenum of the ruling Chinese Communist Party (CCP) central committee, which concluded on November 12th, has left many observers disappointed. After months of efforts by the senior leadership to promote the meeting as a major reform landmark, its final report came as something of a let-down. However, it was broadly in line with The Economist Intelligence Unit's very modest expectations. We continue to believe that the government's proposals are too tame and that its approach, especially its refusal to contemplate political reform, remains too conservative.
The plenum confirmed that the CCP leadership is moving towards a new approach when it comes to the government's management of the economy. The main element of this strategy seems to be a shift away from direct state intervention in the economy towards more indirect forms of influence—but without substantial loss of control over economic affairs. The communiqué released at the close of the meeting spotlighted this shift by calling for the market to play a "decisive" role in governing the allocation of resources, a significant upgrade from the CCP's previous line that the market should play a "basic" role in doing so.
State ownership: here to stay
Despite this theoretical gain for economic liberals, there was no apparent shift in the way the CCP is talking about the state sector itself. The report backs the "dominant role of the public-ownership system" and the "leading role of the state-owned economy". This would suggest that hopes that the government is about to downscale the role or power of the main state-owned enterprises (SOEs) are wide of the mark. It is becoming clearer that the leadership would prefer instead to improve the efficiency of SOEs through reforms that liberalise prices for factor inputs (including utilities), reduce distortions in the financial sector (notably through interest-rate reform) and increase competition from private-sector firms.
Although there is probably room for some marginal improvement through such measures, we remain very dubious that these moves represent a credible long-term approach. In the end, the productivity of the powerful state sector is likely to remain hobbled by politics, making it a significant drag on the economy's growth potential.
On other important economic topics there was little clarity. Land reform, realignment of local government financing, financial reforms, urbanisation and environmental issues were all touched on briefly in the end-of-plenum communiqué, but in such a vague and standardised fashion as to give little indication of any decisions that had been reached. This is not wholly surprising—plenums have not usually been a platform for publicly promoting major new policies. Nonetheless, these issues are likely to have been discussed, and over the coming months the approach backed by the central committee will probably be fleshed out with new policies.
A new powerbase
The most intriguing announcement contained in the plenum's report was the establishment of a new leading small group (LSG) to promote comprehensive reform. The implications of this are obscure, but could be far-reaching. The comprehensive remit of the LSG suggests that its authority will extend beyond economic reform, and LSGs are traditionally among the most powerful entities in policy setting.
There have been some suggestions in the press that the new body could be designed to circumvent opposition to reform in the National Development and Reform Commission (the economic planning body), but this is to underestimate its authority. Instead, it looks more likely to usurp the influence of the politburo standing committee (PSC, China's most powerful political body). It appears that the LSG could be used to circumvent conservatives on the PSC, but if that turns out to be the case there are likely to be some explosive factional battles within the ruling party. Much will depend on the make-up of the body, but China does not usually publish membership of LSGs, which will make it tough to work out who dominates.
Social justice
One thing that did emerge clearly from the plenum was the CCP leadership's focus on social issues. This gives confirmation, if more was needed, that they view maintaining social stability as their main challenge in the next few years. The establishment of a State Security Commission was the most obvious of the policies linked to this goal. Although this will deal with external issues—its Chinese name bears similarities to the US National Security Council—the way it is referred to in the communiqué suggests that its main focus may be domestic. The recent suicide attack in Tiananmen Square, in the capital, Beijing, by militants from Xinjiang spotlighted the type of issue that the new commission will be expected to manage.
However, the plenum also addressed other topics that will need to be tackled if wider social stability is to be maintained. It noted in unusually forceful language that the "dual structure of town and country is the main obstacle restraining the integration of urban and rural development". This suggests that reform of the household registration (hukou) system will begin with dissolving the difference between rural and urban hukous. This will probably be tremendously difficult, given the vast disparity in the social welfare offered to the two types of hukou holder, but the CCP looks determined to move ahead.
More subtly, the communiqué also talked about improving the judicial system to make it more independent and fair. In a risky move, it re–aired the controversial topic of constitutionalism by noting that the authority of the law and constitution should be safeguarded—China's constitution contains many safeguards for individual rights and liberties that are often breached with impunity by the authorities. Improving the rule of law and making officials more accountable to the judiciary could help to alleviate many of the social problems facing China at present. However, the government's reluctance to make the judiciary independent, or to make the CCP accountable under law to the judiciary, has historically blocked progress on this front. Despite the communiqué's wording, it still seems unlikely that the party will bite that particular bullet.
Same old story
The staid language of the plenum communiqué may say as much about the meeting's outcome as any of the actual words. For all the government's efforts to spin its programme as a radical reform agenda, the proposals under consideration are relatively tame. The document calls for "decisive results" on its agenda by 2020—a date that is far away, for a policy programme that is so vague that one wonders why they bothered putting a deadline in at all.
The absence of any hint of political reform proposals shows that the CCP's thinking remains deeply conservative. Although we do not expect China to experience significant economic or political instability over the next five years, the government's entrenched approach suggests that the country's rigid political system would not deal well with an unexpected crisis.
At heart, the CCP still seems wedded to its existing model of state control and one-party leadership. To be fair, its communiqué makes clear that the party leadership is aware of the growing scale of the challenges facing the country. However, the agenda being contemplated does not present a credible set of policies for long-term economic growth. The best that can be said for it is that it may buy a few more extra years during which support within the CCP for other changes may gather momentum.
The Economist
The party plenum
Everybody who loves Mr Xi, say yes
The Communist Party calls for wide-ranging economic reforms and gives itself new tools to implement them
Nov 16th 2013 | BEIJING |From the print edition
COMMUNIST Party plenums are rituals of unchanging arcana. The closed-door, four-day conclave of some 370 senior party leaders that ended in Beijing on November 12th was a typical example, as usual summing up its decisions in a gnomic communiqué full of ambiguities. Yet a parsing of the document suggests President Xi Jinping (pictured above, centre) is tightening his grip on power, and with it his ability to achieve breakthroughs in economic and social reforms.