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New leaders, old problems

The world is watching closely as China`s 12th National People`s Congress prepares to confirm the appointment of Xi Jinping and Li Keqiang as the country`s president and premier respectively.

China`s new leaders face old problems. Little movement is expected on political reform in the coming decade but the new president and premier will have to tackle an array of social and economic challenges.

China`s rise, its success in delivering growth and development to millions of people and its increased confidence in global affairs continues to mesmerise a closely watching world.

There is consensus, however that the current economic model is no longer able to ensure future development. Three decades of impressive, non-stop growth have also come at a huge price.

China`s new leaders have vowed to fight corruption, narrow the urban-rural income divide, improve the lives of China`s `urban billion` and tackle environmental problems. They will also focus on meeting the aspirations of China`s growing middle class which wants quality-of-life improvements such as a cleaner environment, higher food-safety standards, water security, and social protection.

`We should unwaveringly combat corruption, strengthen political integrity, establish institutions to end the excessive concentration of power and lack of checks on power and ensure that officials are honest, government is clean and political affairs are handled with integrity,` said outgoing premier Wen Jiabao at the National People`s Congress.

Wen has enumerated major domestic challenges that have caused public discontent in recent years. His speech was a tacit admission that quality of life had been sidelined by a focus on breakneck economic growth.

While the Chinese leadership also announced a boost in defence spending, the focus of this year`s Congress appeared to be decidedly domestic. A big challenge for the government,and a possible impediment to addressing environmental concerns, will be the need to maintain high rates of economic growth.

Seeking to counter public anger over corruption, Xi Jinping has also declared a ban on official extravagance and banished some of the usual pomp from this year`s gathering of the National People`sCongress. The lavish lifestyles of officials who often drive luxury cars, own multiple villas and send their children to elite foreign universities are a stark reminder of the unfairness of a system that`s enabled a small fraction of people with highlevel political connections to accrue massive wealth.

A major source of concern is that China`s economic future looks uncertain. As the world economy slows, the once turbocharged Chinese growth machine is under strain, putting the new team under pressure to rebalance the economy by shifting from exports and labour-intensive manufacturing to growth based on domestic demand and innovation.

The Asian Development Bank has warned that China risks being caught in the middle-income trap, an economic situation where a developing country attains a certain income but remains stuck at that level, usually because of rising wages and falling cost competitiveness.

The Asian Development Bank advises investing in technology, promoting innovation by the private sector and loosening the state`s control over the financial sector. In addition, it says, China should expand its service sector, speed up urbanisation, and try to reduce income inequality so that ordinary people benefit more from economic growth.

China used to focus on constructing factories, roads and bridges; it must now devote as much time, money and attention on improving its education system and encouraging innovation.

Urbanisation is a key driver of China`s modernisation. More than half of China`s total population now lives in cities, compared to less than one-fifth in 1980. The urban economy will continue to be a `huge engine` of China`s economic growth, spurring domestic consumption, says Li who is known as a `champion` of urbanisation.

`Urbanisation is not about simply increasing the number of urban residents or expanding the area of cities,` Li said in a recent article in People`s Daily. `More importantly, it`s about a complete change from rural to urban style in terms of industry structure, employment, living environment and social security.

However, China`s `urban billion` pose a number of urgent challenges to the new leaders who must take action to integrate migrant workers into urban life, ensure sufficient public funding for social services, work for a pollution-free environment and improve water and waste management. Regulation of the real estate sector is also urgently needed. A key and divisive challenge facing the new leaders is to give rural migrants and their families the same opportunities in cities as other urban inhabitants.

As a result of advances in healthcare and nutrition, combined with the one child policy and very low fertility rates, China is one of a small number of countries in which the population has aged before it has gotten rich. An estimated 14 per cent of the Chinese population is aged 60 or above and the country is expected to count some 400 million people (about one-third of the population) over 60 years by 2050.

Foreign policy poses another headache: China`s new leaders will have to contend with an increasingly fraught relationship with the US and their Asian neighbours. Beijing is also under pressure to take on `international responsibilities` by joining the Western consensus on tougher action against North Korea, Iran and Syria.

Both the new president and premier are experienced party officials who can be expected to play by the rules and keep to the party line. But the scale of China`s domestic challenges will require that the new leaders are also nimble enough to adapt to emergencies and ease public discontent on quality-of-life issues, with special emphasis on the environment. •

The writer is Dawn`s correspondent in Brussels.

Shada Islam, "New leaders, old problems," Dawn. 2013-03-09.