Big 18th

No matter who and how many rise to power in China, a pile of problems awaits

October 8, 2012
October 8, 2012

One month from today, 2,000 leaders of the Chinese Communist Party will gather behind closed doors in Beijing to endorse the country’s next slate of top leaders.

This 18th Party Congress–or shiba da, “Big 18th” in Chinese media shorthand–is set to begin on Nov. 8. That day was chosen because eight is the luckiest number in China, and the Party needs all the luck it can get.

Between now and the closing of this once-every-five-years Party conclave, China watchers will be breathlessly speculating about who will be elevated to the Politburo Central Standing Committee—the small group that runs China—and what that means for future policy. All but two of the current nine members will step down due to retirement rules. Those left standing will be Xi Jinping and Li Keqiang, who long ago were chosen through an unknown process to become, respectively, the president and premier of China next March.

That’s about all we really know. Or think we know.

This is because the Chinese Communist Party is a strange hybrid. It is part General Electric, part secret society. Like GE, the Party picks, grooms and trains very talented people and moves them to jobs of ever increasing responsibility based on accomplishing management objectives. Like a secret society, Party politics at the top are secretive, ruthless, feudal, riven by opposing ideologies, and exploited by opportunistic families.

Get ready for a month of chewing over whether the Standing Committee will be reduced from nine to seven members–and how that will signal forthcoming reforms, or ferocious infighting, or whatever some pundit conjures up after a couple of drinks. Get out your calculators to determine whether a faction said to be associated with current President and Party General Secretary Hu Jintao is getting more or fewer seats than a faction associated with former President and General Secretary Jiang Zemin, age 86, who retired a decade ago. Then try to figure out who is in what faction, the main causes of friction within and between the factions, or if these clear-cut factions are really only a convenient fiction to simplify things for those of us who are stupefied by all of this.

What you can know for sure is that nobody is all-knowing about the ongoing elbowing among Party power brokers. Even those on the inside likely don’t know much beyond the whispers within close personal and political circles. Whatever leadership lineup emerges from the “Big 18th,” predicting China’s future policy direction based on the records of the people in that lineup is largely guesswork.

If you doubt this, look back through the analysis when Hu Jintao was anointed a decade ago. He was viewed as a brainy technocrat who would bring forth a new wave of reform. That hasn’t been the case. But the reason may be that he was unable to, not that he didn’t want to. Who knows? Maybe only Hu.

In trying to divine the future direction of China, it may be best to focus on two big questions. One, can a collective leadership work in China? Two, what problems will be piled on the desks of the new leaders the day they take over?

To be fair to Hu Jintao, he is the first leader in Chinese history charged with running the country by committee. The emperors and their regents were succeeded by Mao Zedong and Deng Xiaoping, strongmen who took the country in very different directions.  The 1990s leadership duo of Jiang Zemin and Zhu Rongji morphed into a strongman tag-team. But President Hu and Premier Wen Jiabao are mere political mortals. Their mandate was to modernize the system through civilized leadership consensus. A wealthy Chinese friend of mine describes it this way: Mao at his peak had 100% decision-making market share. Deng in his best days had about 85%. Jiang and Zhu together garnered about 60%, while Hu and Wen combined had less than 20%.

Instead of tight consensus at the top, the past decade has seen the rise of multiple centers of power and an every-man-for-himself mentality. The darkest and most illuminating example is the scandal surrounding former Politburo member and Chongqing Party Secretary Bo Xilai, whose father was one of “eight immortals” of the Party. Bo Xilai’s wife, Gu Kailai, daughter of a revolutionary general, was recently convicted of killing a British businessman over a money dispute. Just 10 days ago, Bo was expelled from the Party and soon will face trial for taking “huge bribes,” having “improper sexual relationships with a number of women” and “other crimes” covering the past 20 years, including his 2004-07 stint as minister of commerce.

In not ring-fencing Bo’s crimes by time or scope, the Party has sidestepped its usual narrative that local officials are often corrupt but those at the top are incorruptible and selfless. As Xinhua said, Bo provides “a negative example” of how the Party needs to enhance its “capabilities of self-purification, self-improvement and self-innovation.” There’s a lot of work to be done. A 2011 study by Bloomberg estimated that the richest 70 members of China’s National People’s Congress have a combined worth of about $90 billion. In a perverse way, this mess may bode well for the Party’s transition to collective and consensus leadership. As the saying goes, those who don’t hang together could hang separately.

Finally, let’s look at a few of the problems piled on leadership desks. The economy is slowing as the current model is running out of gas. Unprofitable but powerful state-owned banks and companies are squeezing out the private sector, which the government says is responsible for 90% of new jobs, 65% of patented inventions and 80% of technological innovation. College graduates—who have risen to 6.5 million annually from 2 million annually a decade ago— can’t find jobs. Those who do are averaging $300 a month, the same as uneducated migrant workers. China is getting old before it gets rich. The worker-to-pension ratio is projected to fall from three to one now to one to two in 30 years.

China also must escape from “the middle-income trap,” which occurs when domestic consumption and innovation must replace export-led fast-growth through cheap labor and foreign technology adoption. Not an easy transition. The World Bank says that of 101 middle-income economies in 1960, only 13 had reached high income status by 2008. Chinese consumption is only 35% of GDP, compared to 71% in the US and 54% in India. Just over half of the Chinese population now lives in cities–the US ratio in 1920. By 2030, some two-thirds of China’s people are expected to be living in cities. This means that an average of 13 million to 15 million rural residents will move to cities each year. The good news, according to China’s top economic planners, is that if China can reform its urban residency requirements and transform these downtrodden migrants into the next wave of urban consumers, they will form a “potential new global market of unprecedented size.”

So, what’s the verdict on the next leadership? No matter who ends up on the Party’s Central Standing Committee—no matter if the final number is seven or nine—reform and regaining the Chinese people’s confidence will be job No. 1.

We welcome your comments at ideas@qz.com

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