Changes at the top: China shakes up leaders

As China prepares for November’s leadership transition, UBC Asia expert Yves Tiberghien discusses the likely new leaders, the challenges ahead, and implications for Canada and the world

How important is this change of leaders?

This will be one of China’s most significant leadership changes since the 1949 Chinese Revolution. The biggest spotlight is on two major positions, the general secretary and prime minister, which have only changed at the same time once before, 10 years ago. But China will also choose up to seven new members for its top decision-making body—the Politburo Standing Committee—and renew more than 200 Politburo and Central Committee positions. These changes will impact every ministry and department. This is the moment when China will choose a new direction—and it will impact everything, from foreign policy, their economy, energy, education, everything.

Who will be the next General Secretary?

The most powerful position in China is the General Secretary of the Community Party, and that is expected to be Xi Jinping. He is 59, a member of the Standing Committee and a former governor and secretary general of the Fujian and Zhejiang provinces. He is from China’s “princeling” class, the son of veteran Communist guerrilla leader who led social and economic reforms in Guangdong. This, along with his military experience, has given him powerful connections. We know surprisingly little about his position on major topics, although does bring his father’s reformist pedigree. He has been groomed carefully for leadership, is very careful, and has not made any major mistakes.

What about the position of Prime Minister?

The man expected to become Prime Minister, the head of the Chinese government, is Li Keqiang. He rose through the Chinese Communist Youth League, has held top positions in Henan and Liaoning, and is a protégé of outgoing president Hu Jintao. His areas of expertise and interest include employment, health reforms, housing, and the development of clean energy: social-economic agendas. He is 57 and the only knocks against him are his lack of military links and powerful father, and some have questioned whether he has the strength and charisma to be Prime Minister, which has previously been held by tough leaders.

What are the big economic issues?

The huge levels of inequality in China will be one the greatest issues facing the new leaders—before it becomes socially explosive. Last year, China started to rebalance their economy—partly to address inequality, but also to create a more sustainable economy—and this will continue. China has accepted a lower rate of growth—7.5 per cent instead of eight—and reined in their real estate, export surplus and banking. They have also significantly increased wages—by up to 20 per cent annually in some regions—to increase wealth and consumer spending, while addressing labor demand. It is an incredibly complex process, but so far so good. The challenge will be to take more action on inequality—perhaps expanding the real estate tax being tested in Shanghai and Chongqing—without causing the wealthy to revolt.

How will China balance growth and climate change?

According to 2011 data, China produces nearly 30 per cent of global carbon emissions, more than any other country. There is pollution and droughts, and crops are being impacted. The outgoing leaders have identified climate change as an issue, but were unwilling, or unable, to sacrifice growth for sustainability. China still burns coal for electricity, for example. The climate issue is unavoidable, in many ways, because it is interconnected with their energy needs. China is heading towards a wall on both energy and climate, and they need new clean energies fast. Climate change is a time-bomb ticking over all our heads.

What are Canada’s interests in China?

Stephen Harper’s spring visit was a turning point in Canada-China relations. There has been strong interest in deepening economic ties since then. What does that mean? In the short term, China needs oil, and that is where a new Canadian pipeline may come in. Behind that is uranium and potash, and Canada is also a player in both. China is also investing heavily in wind, solar and other clean energy—another big opportunity for Canada. Longer term, China will become a capital exporter and wants to invest in Canada and elsewhere. As Asia increasingly becomes the centre of the global economy—the trends clearly support this—major new trade infrastructure becomes increasingly likely on our coast.

What about tensions between China and the U.S.?

China will soon pass the U.S. to be the world’s #1 economy—as early as 2018, according to some forecasts. Historically, when a challenger surpasses a dominant superpower, is when we have wars. There’s way too much at stake for war, but the next few years will be extremely volatile between China and the U.S. America doesn’t want to be #2 and China doesn’t want to be stopped. So this is a historic time that requires savvy leadership on both sides. China and the U.S. need to work together or it could be very ugly. One of the best ways to navigate this, in my opinion, is through common institutions, such as G20.

How will the U.S. election impact relations?

If Mitt Romney gets elected, he has said he would declare China a currency manipulator. Basically, we are looking at potential financial Armageddon, if he doesn’t back down. If Romney triggers a process that sees Congress slapping automatic duties on Chinese exports, it would almost certainly produce a trade war. If this escalates, China would threaten to stop buying U.S. bonds, which would create a U.S. deficit crisis, and a massive global financial crisis everywhere else—imagine the Eurozone crisis on steroids. So if Romney becomes president, his advisors need to find a way out of this.

Prof. Yves Tiberghien, an expert on the political economy of Asia and Europe, is the new director of UBC’s Institute of Asian Research, a leading global centre for interdisciplinary research, teaching and learning on Asia. Learn more at www.iar.ubc.ca.

For more experts on China’s 18th National Congress, visit: http://www.publicaffairs.ubc.ca/2012/11/05/ubc-experts-comment-on-chinas-leadership-changes/.

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