China Greets Gloomy New Year

Analysis by Antoaneta Becker

LONDON, Jan 9 (IPS) – For much of last year world politicians and market watchers dreamed of China coming to the rescue of a stumbling global economy while Beijing mandarins sat on the fence fretting about high inflation and social instability inside their country. As China prepares to greet the Year of the Dragon later this month, many predict more gloom and doom, and some are expecting that the battle to stave off recession will be fought closer to home.

“It is entirely possible that 2012-2013 will see the third chapter of the world economic crisis after the U.S. sub-prime mortgage crisis in 2008 and the EU sovereign debt crisis in 2010-2011,” Mei Xinyu, a well-respected adviser to the Chinese government on trade issues, said at a recent briefing in Beijing.

“The emerging economies could well become the centre of it. They are vulnerable because of their inherent instability but also because in the wake of the recent crisis the economic powers of the day are attempting to contain their growth.”

These fears come as China itself enters a period of slowing growth, with weakening exports (due to depressed demand in the euro area), plunging property prices, heavy debt in local government and widespread public fears over inflation.

Chinese leaders have warned that the world’s second-largest economy will face an “extremely grim and complicated” global outlook in 2012, with the world economy heading towards a “double-dip” recession and the widening euro-zone sovereign crisis making the fate of China’s biggest trade partner uncertain.

Adding to the uncertainty is the change of leadership due over this year and next as China prepares to change control of the Communist party, the organs of government and the People’s Liberation Army. The last leadership change, which took place in 2002-2003, was the first time the communist country managed to stage a peaceful handover of power.

What complicates the current one is the fact that 2012 is a politically sensitive year, which will see transfer of power over the whole of Greater China – on the mainland, Taiwan and Hong Kong. By the whim of fate the United States will have a presidential election this year too, which could potentially alter one of China’s most important relationships.

The year 2012 is also not void of political superstition stemming from Chinese people’s belief that the Year of the Dragon, though generally auspicious, could also sometimes be calamitous. The year 1976 for instance, witnessed China’s most disastrous earthquake in modern history killing over 250,000 in the city of Tangshan. That Year of the Dragon brought the death of China’s paramount leader Mao Zedong too, unlocking the potential for China’s rapid economic change that followed.

Unlike the time of Mao’s rule when the country was controlled by a powerful individual and successions were decided by the incumbent leader, the China of today is run by a team of party apparatchiks, often rivals, and the ruling process relies on consensus-building among those powerful interests groups.

“The next generation of Chinese leaders will be very different,” says Prof. Su Chi, China observer at the Institute of China Studies at Tamkang University in Taiwan. “The power dispersion process is continuing and where in the past power was concentrated in the hands of few strong leaders, now there are up to 400 people in the party elite making the decisions. Taiwan and the whole world will have to prepare for this.”

If President Ma Ying-jeou of Taiwan – who has overseen four years of rapprochement with Beijing, loses to Tsai Ing-wen from the Democratic Progressive Party which is favouring independence from mainland China,
that will present a real problem for Beijing.

Similarly, if the presidential elections in the U.S. hand victory to the Republican Party, this could mean a change in climate between the two big countries, with Washington taking a much tougher line with China over trade and currency issues.

But the main challenge for Beijing remains the country’s internal situation. Economic problems such as stubborn inflation and a deflating property market are mounting, and the government is trying to subdue social unrest ahead of the party leadership change scheduled to begin in October.

President and party chief Hu Jintao – who promoted social harmony but stifled political reform – is set to retire along with Wen Jiabao, the premier, a populist leader who has himself described the country’s current economic situation as “unsustainable”.

Both leaders are seen as wary and cautious, lacking both the charisma and the boldness of some of China’s former political figures like premier Zhu Rongji. When Zhu, who in 2001 cajoled China’s entry into the World Trade Organisation through marathon gruelling negotiations, published his memoirs late last year, they became an instant bestseller.

Much of his blunt talk about corruption eating away China’s money and public trust and the lack of change over the last ten years were interpreted as an oblique criticism of the country’s current leaders.

But the new leaders tipped to succeed Hu and Wen are likely to be equally cautious and watchful to eliminate any potential threats to the communist party retaining political control.

Vice-President Xi Jinping – regarded as the anointed successor to party chief Hu Jintao – has just called for tougher measures for ideological control of students and young lecturers. This is the social group that in 1989 led peaceful pro-democracy demonstrations against the communist party rule and suffered
recriminations after the armed assault on protesters in Tiananmen Square.

Xi’s call came only days after Hu Jintao published a speech warning that the West is trying to dominate China by spreading its culture and ideology and the party must remain vigilant about the “international hostile forces”.