China’s leaders face stark challenges

Global Newsnet

After years of being groomed, Xi Jinping, unsurprisingly, was named to succeed Hu Jintao as General Secretary of the Chinese Communist Party (CCP) last November, and is set to replace Hu as Chinese president in March. Many analysts have described the CCP’s Politburo Standing Committee as a “conservative line up”. In addition, the Politburo Standing Committee has shrunk from nine to seven members.

In theory, this smaller group will streamline the decision-making process, consolidate actions to promote economic development, and be able to act faster to both prevent and manage conflict as issues arise. China’s main priority is to bring stability within its boundary and to prevent civil protest against its government.
China’s population is reaching 1.4 billion people and its need for fossil fuel is constantly increasing. As experienced in the Middle East, North Africa region last year, if the basic needs of the population are not met, it could spark social unrest leading to the fall of the party. This is what China fears the most.

Therefore China must ensure the “healthiness” of its society by responding adequately to social issues that are threatening the government’s legitimacy and credibility to provide for and protect its people. There are six main domestic challenges that the new leadership will have to face in the next decade:

First, to secure access to natural resources: China’s development and prosperity depends on its access to natural resources. Even with a slowdown in the world economy, China is expected to grow about 9% in 2013. (A government think-tank, the National Academy of Economic Strategy under the Chinese Academy of Social Sciences, this week forecast 2013 growth of around 8.5%).

Fu Chengyu, chairman of top Asian oil refiner Sinopec Corp, told Reuters that he expected Chinese oil demand to hold steady. “Global oil demand is unlikely to grow strongly due to the economic outlook, but China will see sustainable growth next year, similar to this year.” [1]

Moreover, it is estimated that China’s compound annual aggregated oil growth will be 6.7% until 2015. [2] China’s oil demand this year thus far has amounted to more than half of the global incremental demand, according to the International Energy Agency. It is estimated that by 2025 China will import three-quarters of its oil needs. Guaranteeing access to natural resources is a basic requirement that has to be fulfilled both for the stability of its society and to maintain its economic growth.

Second, to reform the pension system: according to a 2010 census, the number of people over 60 grew to 13.26% of the population, up 2.98% from 2000, and the number of people under 14 declined to 16% of the population, down 6.29% from 2000. [3] Today, there are 180 million people who are over 60 years old, and that number is estimated to double to 365 million by 2030.

As a result of the one-child policy, there are 10 million fewer births a year, therefore making six workers per pensioner today. By 2030, there will only be two workers per pensioner. This imminent population crisis combined with a shrinking work force and the soaring number of elderly people will have a detrimental effect on the economy and domestic stability. [4]

Third, to close the gap between the rich and the poor: according to an NGO, China has reached “dangerous levels of wealth inequality”. China scored 0.438 in 2010 on the Gini Index by the Institute of Urban Development. The Gini Index measures inequality of income on a scale of zero to one (zero being totally equal and one being totally unequal); it suggests that a country with a figure higher than 0.4 has dangerous levels of wealth inequality.

The report explained that there are risks of instability such as the increasing gap between the rich and poor, which is associated with reform and liberalization. [5] In times of economic hardship, the poor are the most vulnerable socioeconomic group. The simple sight of the elite living in excess during these times could trigger immense resentment leading to riots.

Fourth, to fight corruption: this year’s Bo Xilai case is just one example in a long series of pointers to this serious problem in Chinese society. Corruption is present at various levels of society, including the education system, food industry, and government officials. Every year there are about 130,000 to 160,000 cases of corruption but only 6% of them end up with any kind of criminal prosecution and out of that 6% only half of those prosecuted go to jail. [6]

This year, according to Transparency International’s Corruption Perception Index, China slipped down to number 80 from 75 in 2011, to join the company of Serbia and Trinidad and Tobago. In addition, more than one-third of Chinese people said they thought the government was ineffective in the fight against corruption and 46% said corruption had increased in the previous 12-month period based on a survey in 2010/11. [7] Corruption delegitimizes the government’s authority, power, and image. The consequences of the loss of faith in the system or authority would symbolize the start of chaos.

Fifth, to respond to the long standing problems with China’s Tibetan and Uyghur minorities: only a few years ago in 2009, the deaths of two Uyghur factory workers in Xinjiang triggered a riot that left more than 150 dead, as Uyghur and Han Chinese mobs battled in the streets. More recently, on October 31, 2012, days before the 18th Party Congress, four Tibetans set themselves on fire to protest against Chinese rule. [8] Since 2009, dozens of Tibetans have set themselves on fire to call attention to the ongoing oppression of their people. [9] If the Chinese government does not come up with a suitable long-term solution, these long-standing conflicts could further segregate the Chinese population and lead to greater internal conflict within ethnic groups.

Sixth, to manage the conflict both in the East and South China Seas: the potentially resource-rich areas combined with the modernization of naval forces and internationalization of the conflict have limited the ability for parties to negotiate toward a peaceful resolution, especially with the presence of state-sponsored nationalist movement.

Last September, Japan and Taiwan fired water cannons over the disputed territory only days after another naval confrontation between China and Japan. Moreover, this Japan-Taiwan issue puts the United States in a difficult situation, as it is an ally of both countries. Also, at the last meeting of foreign ministers of the Association of Southeast Asian Nations (ASEAN), in July, the Philippines’ vocal stand against China in the maritime dispute combined with China’s close relationship with Cambodia led to a division within ASEAN members, as demonstrated by the inability to provide a joint communique. This was a first since the organization’s inception in 1967.

One issue that might need to be addressed rapidly is the question of fish stocks. The South China Sea is home to 300 million people who are dependent on this resource both in terms of nutritional needs and economy. Fish are the cheapest form of protein and it can be a large part of economies such as in Vietnam and the Philippines.

Moreover, most of the maritime altercations involve fishermen, coastguards, and navies. Food security is of the utmost importance and people will go to great lengths if they are unable to eat adequately or provide food for their families. More generally, the East and South China Seas are strategically located with high economic potential making it of the utmost priority not just for China but for the whole region.

Since the end of the Cultural Revolution, China has achieved great economic and social development. However, this fast economic growth has come with its own baggage of problems that if left uncheck will undermine the new leadership and delegitimize the party.

No one denies China’s past achievements, but in order to pursue its economic development and rise as a regional if not global power, China will have to first resolve its domestic and regional issues. These six issues will be crucial to the new administration, and consequently it is in China’s interest to prevent, manage, and resolve these conflicts because failure to do so could mark the start of its decline.

At the 18th Party Congress, the Chinese government seemingly demonstrated a strong will to tackle these issues. However, it is up to the newly named leader, Xi Jinping, to confront these issues during his term, thus demonstrating that China is not simply talking the talk but is walking the talk.

1. China’s oil demand set to lead world again in 2012, Reuters, Oct 12, 2012.
2. Ibid.
3. Population Statistics in China, Chinese Embassy in Guinea, Aug 24, 2012.
4. China seeks ways to manage ageing population crisis, BBC, Sep 21, 2012.
5. New Gini figures show instability risks, need for reform, People’s Daily, Sep 17, 2012.
6. China’s Power Transition: New and Old Leaders, NTD, Nov 15, 2012.
7. Fighting corruption in China, Transparency International, Nov 8, 2012.
8. 4 Tibetans burn themselves as Chinese leaders meet, CNN, Nov 8, 2012.
9. Tibet: Impact Of China Leadership Change, UNPO, Nov 16, 2012.