China’s last chance for reform

TAIPEI, Taiwan — Unless presumed incoming leader Xi Jinping can push through long-awaited reforms, the world’s second largest economy will falter, and civil unrest is likely to derail the Communist Party’s 65-year reign.

That's according to observers both inside China and abroad. Sound familiar?

China-watchers took a similar line before the last power transition, when outgoing President Hu Jintao took the reins of the most populous nation.

Analysts say Hu failed to deliver.

“Hu was undone by the vested interests — the military, princelings and state-owned companies. He was too indecisive," said Parris Chang, a former chair of Penn State’s East Asia program.

"His legacy has been severely damaged by his failure to enact economic and civil reforms. This will be a huge challenge for Xi, but he knows change has to come. There is just so much corruption, and so much inequality that if he doesn’t make changes he will be out.”

Reformers in Beijing are jockeying for position before next month’s National Party Congress, where Xi is expected to be ushered in as paramount leader and a new policy course will be set in motion for the Asian superpower.

Beijing-based think tank Strategy and Reform delivered a research paper to party heavyweights last week, warning of a “potential crisis in China's model of economic growth.”

"The next decade might be the last opportunity for actively pursuing reform, and we should treasure this last chance. China is confronting a perilous jump, one that it can neither hide from nor avoid,” said the group, comprised of academics, business leaders, officials and policy wonks.

Some say Xi isn't likely to fail in the same manner as Hu, who struggled to step out from under the shadow of his predecessor, Jiang Zemin, and win the backing of the military and revolutionary royalty.

While Hu is from more humble beginnings, coming up through the Communist Youth League, Xi, 59, is a princeling who has much stronger ties to the military and Jiang Zemin.

“You have to remember he is his own man. Both Hu and Jiang before him were anointed by Deng Xiaoping. [Xi] is the first leader to not be anointed, and the first to have the mandate of the party,” said Chang. “Xi is not Hu’s guy. He is supported by Jiang, who didn’t get along with Hu, the princelings and the military.”

Chang called Xi a “pragmatist of the new ruling class” who understands that without change the party could find itself out in the cold.

However, Wang Dan, the soft-spoken bespectacled student leader with a bullhorn, who captured the imagination of the world during the Tiananmen Protests, doesn't agree.

"It's true that its probably the CCP's last chance because they can't stem the corruption, but Hu's only concern was maintaining stability. That's why he didn't enact real reforms. I think maintaining stability will also be the main concern of Xi. Therefore we don't have enough confidence to expect political reforms in the future," said Wang, whose time at the helm of the 1989 protests also captured the attention of the state security apparatus, signalling him out as China's most wanted man and earning him the first of two prison terms before being exiled to the US in 1998.

"The real chance for China relies solely on the awareness of Chinese people. That's the most important point. Chinese people need to stand up and speak up. They need to pressure the CCP," said Wang.

Earlier this year, outgoing premier Wen Jiabao told a press briefing that "Reform has reached a critical stage. Without successful political structural reform, it is impossible for us to fully institute economic structural reform and the gains we have made in this area may be lost.”

But back in 2010, during a speech to the United Nations General Assembly in New York, similar statements made by Wen were quickly deleted from state-run media websites, which had run excerpts of his speech. At the time, analysts predicted that Hu and Wen were being stymied by more hawkish elements of the leadership.

However, Chang, a former deputy secretary general of Taiwan’s National Security Council, says Xi is in a much stronger position to right the ship than his predecessors.

“If I was a betting man, I would say reforms under Xi will come. There is so much dissatisfaction in the country. In 2011, there were over 70,000 protests, sit-ins and mass petitions. The government budget for ‘maintaining stability’ is higher than it is for defense. The sheer expense of maintaining armies of internet police, secret police, propaganda and controlled media is astronomical,” he said.

And as with everything in China, costs are always at the top of the list.

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Economists have also chimed in, saying that the world’s most robust economy, which just recorded its lowest annual growth rate in 13 years, could stall further still if corruption, land use and labor problems continue to gain pace.

Justin Lin, a Taiwanese defector to China who stepped down as the World Bank’s top economist this year, said the Middle Kingdom would record annual growth rates topping 8 percent for the next two decades if reforms are pushed through.

The World Bank recently revised China’s GDP growth forecast from 8.2 percent to 7.7 percent.

While China is expected to avoid a hard-landing even if problems continue in the euro zone and the US and Japanese economies remain stagnant, economists say the country won’t be able to spend its way out of problems like it did in 2009.

“I think they will unveil deferential elections the same way Gorbachev did when he came into power in the USSR. There might be some form of intraparty democracy, where proper elections for worthy officials are held. The cutting of the Central Committee from nine to seven is the first step,” said Chang.