Nov 16, 2012

China - Xi raises hopes, but China's reform outlook cloudy

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BEIJING: China's new Communist Party boss Xi Jinping has raised hopes with a straight-talking debut, but observers say he may struggle to pull off a crucial revamp of the economy and satisfy growing calls for reform.

Xi's ascent comes at a crucial time, with the global economy increasingly reliant on the Asian giant and its ability to accelerate out of its own growth slowdown -- which could also imperil the party's legitimacy.

Xi took the reins of the all-powerful party Thursday as head of its elite seven-strong decision-making body, after intense speculation over how years of factional wrangling would shape the selection.

In an assured performance after striding into the Great Hall of the People, he told China's citizens that he understood their aspirations and leaders should no longer be "divorced from the people."

"To meet their desire for a happy life is our mission," he said, in plain language free of the usual Communist jargon which many saw as a refreshing departure from the wooden performances of other political leaders.

"Our responsibility now is to rally ... in making continued efforts to achieve the great renewal of the Chinese nation," he said.

But Xi takes command of the world's number two economy at a difficult time, with calls to revolutionise a growth model that is too reliant on exports, and demands for transparency growing louder in the Internet era.

While Xi's sentiments and style were generally well received, analysts said that the lack of figures with reform credentials on the new Politburo Standing Committee took some of the shine off the rhetoric.

"The consensus is that the composition of the standing committee initially appears more conservative than was hoped for," said Andrew Polk from the Conference Board China Center for Economics and Business.

He added that the failure of Wang Yang -- seen as a leading reform figure from southern China's freewheeling Guangdong province -- to win promotion was "particularly disappointing".

Xi, who is due to be formally appointed president in March, takes control with significant authority after promptly taking charge of the military on Thursday, unlike previous transitions which were more staggered.

However, he is seen as a compromise candidate who must balance pressures from competing factions in the consensus-based world of Chinese politics.

Steve Tsang, professor of contemporary Chinese studies at the University of Nottingham, said it is unclear whether Xi's emergence as a consensus choice will ultimately constrain or bolster reform.

"Perhaps it means he can persuade more to follow him," Tsang said. "But this takes time and means continuous compromise and horse-trading."

Mark Williams, chief Asia Economist for Capital Economics, said that "success is not certain" for a power grouping which may not be able to agree on the pace and focus of reforms, and overcome any opposition.

"Disagreement remains on the role the state should play in the economy and on how quickly China needs to change. Vested interests stand in the way," he said.

After a decade-long economic miracle that has lifted hundreds of millions out of poverty, China's expansion has slowed and there is wide agreement it must move away from a high-growth model relying on sales to overseas markets fuelled by cheap labour.

However, the revamp could have serious human costs in terms of job losses which could in turn fuel social unrest -- outcomes which would undermine the party's claim to legitimacy.

In a farewell speech to the party last week, Xi's predecessor, President Hu Jintao, called for more focus on private enterprise and consumer demand.

But in a sign of the difficulties in achieving that goal, he also emphasised the seemingly contradictory need for a continued strong role for the state and said China should make its exports more competitive.

Political infighting for influence within the upper echelons of the party could also be a distraction for reform efforts.

Even though Xi has barely begun his decade-long tenure there is already speculation over his eventual successor, who will likely be known in 2017.

"The new group must fairly soon deal with who is to be anointed, raising the possibility that the next five years will see more political jockeying than serious policy initiatives," Derek Scissors and Dean Cheng of the Heritage Foundation said in a report.

"For those expecting major policy initiatives, and certainly those hoping for economic or political liberalisation, it is likely to be a frustrating period."

- AFP/sf

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