November 20, 2012, by China Policy Institute

The Last Party Congress?

by Gordon G. Chang.

The 18th Communist Party Congress is now in the history books.  Will it be the last?

For many observers, the People’s Republic looks secure.  Yet after a troubled year—and an especially disappointing Party meeting this week—we should not be so sure.

Xi Jinping and the other six members of the newly constituted Politburo Standing Committee face many challenges at the moment.  All of them will test the new leaders, but there is one they can never overcome: a lack of legitimacy.

Simply stated, they were chosen out of the view of the Chinese people.  And to make matters worse, they also lack credibility.  Why?  One man, the 86-year-old Jiang Zemin, was hugely influential in crafting the makeup of the Standing Committee.  As a result, so-called conservatives now occupy at least four and maybe as many as six seats on the seven-member select group, dashing widespread hopes for reform.  “The backlash against Jiang Zemin will be overwhelming,” predicts noted China watcher Cheng Li of the Brookings Institution.  “The public resentment will be very strong.” (link of this source)

And resentment will probably get worse.  For three decades, the primary basis of the legitimacy of the Communist Party has been the continual delivery of prosperity.  Yet China’s economy is stumbling.  It is not growing at the 7.4% rate that Beijing claims.  Electricity production statistics—historically the best indicator of Chinese economic activity—manufacturing surveys, and price indexes point to an economy growing in the low single digits, perhaps as low as one or two percent.

And this is not just a cyclical downturn.  The principal conditions that gave rise to China’s extraordinary boom—9.9% annual growth for three decades—no longer exist.  The country is no longer reforming, the international environment is not benign, and the “demographic dividend” has turned into a bust.  So the economy has entered into a new “supercycle,” except this time the direction of the trend is down.

In this context, the new Standing Committee assignments are downright mysterious.  The last-ranked member, Zhang Gaoli, is tipped to get the economics portfolio and eventually become executive vice premier.  If so, the prospects for reform look bleak.  If Zhang does not get this portfolio, it could go to another conservative, the No. 3-ranked Zhang Dejiang, a North Korea-trained economist.  “If anyone represents the old SOE industrial model, it’s Zhang,” says Beijing-based Robert Blohm to the Washington-insider Nelson Report.

The person who should be named executive vice premier is Wang Qishan, the famed economics troubleshooter.  Mr. Wang, however, is taking over the Central Commission for Discipline Inspection as the 6th-ranked member and becomes the country’s top anti-corruption official.  “This is going to be a huge waste of his strength in dealing with economic, financial matters, and foreign affairs,” noted Bo Zhiyue of the National University of Singapore (link of this source).

Some analysts believe Xi Jinping will tackle the economy with gusto, but that’s unlikely given the lineup of his fellow Standing Committee members and the rise of entrenched economic interests.  And even if General Secretary Xi pushes forward change, one has to wonder how effective he can be.  Political reform is difficult to envision in today’s Beijing, as Hu Jintao’s 18th Congress work report made clear.

There is growing recognition that the economy has gone just about as far as it can within the existing political framework.  If this perception is correct, then no political reform equals no long-term economic growth.

And we can all guess what no long-term growth means for an organization that has to prove its right to rule every day.

Gordon G. Chang is the author of The Coming Collapse of China and a columnist at Forbes.com.  Follow him on Twitter @GordonGChang (http://twitter.com/GordonGChang).

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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