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Kjennerud (2012-11-07) China's political system and new leadership
 

Kjennerud (2012-11-07) China's political system and new leadership

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DNB sin analyse av valet i Kina. God oversikt over leiinga i Kina og den endringa som skjer ved valet. Takk til Kjennerud (UiB) for DNB.

DNB sin analyse av valet i Kina. God oversikt over leiinga i Kina og den endringa som skjer ved valet. Takk til Kjennerud (UiB) for DNB.

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    Kjennerud (2012-11-07) China's political system and new leadership Kjennerud (2012-11-07) China's political system and new leadership Presentation Transcript

    • China’s political system and newleadershipMacro Focus, November 7 2012Analyst Ole André Kjennerud
    • Outline• How is the political system organized?• How large is the Party?• What happens this week?• What do we know about the new leaders?• How is economic policy expected to change?• Potential challenges for the Party?• Communism or capitalism?
    • Background and some facts• Full name is People’s Republic of China. Short form: China.• In Mandarin Zhongguo – “The Middle Empire”• Communist state, comprising 23 provinces (incl. Taiwan) (sheng), 5 autonomous regions (zizhiqu) and 4 municipalities (shi)• Current Chief of State: President Hu Jintao (Vice President Xi Jinping)• Current Head of Government: Premier Wen Jiabao (Vice Premier Li Keqiang)• Cabinet: State Council which is appointed by National People’s Congress• The Congress is with its roughly 3000 members, the world’s largest.• The Communist Party (CCP) is also the world’s largest party, with 80 mn members.• President and Vice-President elected by the NPC for a five-year period. Last election was held on 15-17 March 2008.
    • Structure of the political leadership Chinese Power Structure PRC Government Chinese Communist Party Military (HU) National Administrative Structure (CCP) Legislative Executive Executive Legislative State Council (WEN) President (HU) General Secretary (HU) Politburo Standing CommitteeFunctional center of state power Elected by the NPC Highest ranking official Top leadership of the CPC, mostOverseen by NPC but decision have 5 year term, maximum 2 De facto leader of PRC powerful decision making body inde facto force of law terms the PRCHeaded by Premier Wen Jiabao, Recently 7-9 memberswhich is appointed by NPC General Secretariat (XI) Permanent bureaucracy of the CPC Politburo NPC Standing Committee (WU) Manages the work of the About 25 leaders.Headed by Chairman Wu Bangguo politburo and its Standing Committee Leaders of the CPCAbout 160 members Central Committee National People’s Congress (NPC) Appoints the most powerful peopleLegislative body in the CPCMeets 2 weeks every year About 370 membersAbout 3000 members National Party Congress About 2000 delegates Held every 5 years In practice, decisions are pre-made
    • Power Triangle PRC Government Military CCP Legislative Executive Executive Legislative Three decades of leaders State Council President General Secretary General Politburo Standing Committee NPC Standing summed up Committee Secretariat Politburo National Central People’s Committee Congress National Party Congress 2nd Generation: 3rd Generation: 4th Generation: Deng Xiaoping Jiang Zemin Hu Jintao 1978-92 1993-2002 2003-12• Greater market reform • Broadened the power • Creating a and economic base of the CCP by “harmonious society” privatization recruiting sought to reduce• Continuing to entrepreneurs and economic disparities crackdown on political other new socio- and social tensions dissent economic players (a • Tightening censorship formulation known as over the media and the “three represents”) police control in society • Falun Gong
    • Power Triangle PRC Government Military CCP Legislative Executive Executive Legislative From one-man leader to collective State Council President General Secretary General Politburo Standing Committee NPC Standing leadership Committee Secretariat Politburo National Central People’s Committee Congress National Party Congress • Whereas Mao and Deng was known as strong and superior leaders, Jiang Zemin and Hu Jintao has to a larger extent been characterized as “first among equals” in their respective third and fourth generations of PRC leadership. • According to Chen Li at Brookings Institute, the Chinese Communist Party leadership is now structured around what can be called “one party, two coalitions” where the two balance each other’s power. • The Elitist Coalition emerged under Jiang Zemin’s era, currently led by Wu Bangguo, chairman of the legislature. • The Populist Coalition is led by Hu Jintao • Incoming leaders Xi Jinping and Li Keqiang belong to the elitist and the populist coalition, respectively. Emphasize on Stands for social economic efficiency justice and social and GDP growth cohesionPrincelings - Prevails in partyleaders who come Dominates the economic sectors, Former Chinese organizations,from high-ranking representing the Communist Youth claiming to voiceofficial family coastal region’s League officials concerns of thebackgrounds interests inland regionThe Shanghai gang The The Elitist Populist Coalition Coalition
    • Power Triangle PRC Government Military CCP Legislative Executive Executive Legislative General Politburo State Council President Secretary Standing Committee NPC Standing GeneralHigh turnover rate Committee Secretariat Politburo National Central People’s Committee Congress National Party• The turnover rate of the CPC Central Congress Committee (i.e. share of new members) has averaged at 62 percent over the past 25 years due to several rules, constraining cadres opportunity to stay in power for too long: - Officials aged 68 or older must retire from the Politburo and other top Party positions - Newly appointed members of the Politburo also need to be younger than 62 - All the top officials are limited to two five- year terms. - “Law of Avoidance”: Party secretaries, police chiefs etc. are often non-local. Among the 31 provinces/municipalities, only 2 party secretaries (Jiang in Shandong and Zhao in Shaanxi) work in the provinces in which they were born.
    • Power Triangle PRC Government Military CCP“Democracy” in the Central Legislative Executive Executive Legislative General Politburo State Council President Secretary Standing Committee NPC Standing GeneralCommittee Committee Secretariat Politburo National Central People’s Committee Congress National Party Congress• The CPC has adopted some election methods to choose the members of the Central Committee and other high-ranking leaders.• Since the 13th National Congress of the CPC in 1987, the Chinese authorities have adopted a method of multi-candidate election known as a “more candidates than seats election” (cha’e xuanju) for the election of Central Committee members. - For example, if the top leaders plan to have a 350-member Central Committee, they may place 370 names on the ballot. The 20 candidates who receive the fewest votes in the ballot are eliminated. - According to Chen (2012), the delegates of the Party Congresses have often used this limited mechanism of “intra-Party democracy” to block some candidates favored by top leaders or princelings.
    • Power Triangle PRC Government Military CCP Legislative Executive Executive Legislative General PolitburoThe 18th Party Congress State Council President Secretary Standing Committee NPC Standing GeneralWhat happens this week? Committee Secretariat Politburo National Central People’s Committee Congress National Party• The Congress – the Party’s 18th – begins on Congress November 8 but the new leadership team will probably be presented about a week later.• Different event from the National People’s Congress (NPC) which will meet in March next year to elect the country’s new President.• Even so, the role of the NPC is largely to rubber stamp the decisions taken at the Party Congress next week, where Xi Jinping will get the nod as the new General Secretary.• This position gives Xi leading rank on the Politburo’s Standing Committee, China’s most senior decision-making body.• There is a little more speculation as to whether Xi can also expect a promotion to the chairmanship of the Party’s Central Military Commission, in effect making him commander- in-chief of the Chinese military too (in the last leadership transition this was delayed for two years, with the outgoing boss Jiang Zemin retaining this crucial role).
    • Power Triangle PRC Government Military CCP Legislative Executive Executive Legislative General Politburo State Council President Secretary Standing Committee NPC Standing GeneralThe current men of power Committee Secretariat Politburo National Central People’s Committee Congress National Party Congress• The Politburo Standing Committee is the highest body of the Central Committee, which is the highest authority within CCP.• The Standing Committee currently consists of these 9 members: Hu Jintao. General Secretary. Head of Politburo Standing Committee (President of PRC). Chairman of the Central Military Commission Wen Jiabao. Secretary of Wu Bangguo. Secretary NPC. Premier of the State Jia Qinglin. Secretary of of NPC. Chairman of the Council of the NPC. NPC. Chairman of the Li Changchun. Secretary NPC Standing Committee NPC Political Consultive of NPC. Conference Li Keqiang. Deputy Zhou Yongkang. Secretary of the State He Guoqiang. Secretary Secretary of the Central Council of the NPC. Vice Xi Jinping. Head of of the Central Commission Political and Legislative Premier of the State General Secretariat. Vice- for Discipline Inspection Committee Council of the NPC. President of PRC
    • Power Triangle PRC Government Military CCP Legislative Executive Executive LegislativeMore educated and more State Council President General Secretary General Politburo Standing Committee NPC Standingdiversified Committee Secretariat Politburo National Central People’s Committee Congress National Party Congress• Big contrast between China’s leaders at the start of the reform period, and the present. Younger, more educated and more diversified background.• The new leaders may usher economic reforms, as the problems in China’s current economic model are now understood, potential policy solutions have already been researched and identified.
    • Power Triangle PRC Government Military CCP Legislative Executive Executive Legislative General Politburo State Council President Secretary Standing Committee NPC Standing General From 9 to 7? Committee Secretariat Politburo National Central People’s Committee Congress National Party• Some have speculated that the Politburo Standing Committee will be reduced from 9 to 7 members. Congress Expected to have a positive effect on the effectiveness of policy changes, as “fewer will be responsible for more”.• Who will fill up the empty positions? Members will be elected so that the balance between the two factions is maintained. Chen Li’s view on some of the contenders:
    • Power Triangle PRC Government Military CCP Legislative Executive Executive Legislative General Politburo State Council President Secretary Standing Committee NPC Standing GeneralWho should we look out for? Committee Secretariat Politburo National Central People’s Committee Congress National Party• Wang Qishan Congress - Good reputation abroad. Has previously been in charge for negotiations between China and the US Treasury. - Also known as “Chief of the fire brigade” for his work on Chinese banks in the late 90’s (“the fundamental principle of a market economy is that the winners win and the losers lose”); SARS in Beijing in 2003 (on errors counting dead: “one is one and two is two”). - Made vice-premier in 2008 in the State Council. Oversaw the government’s response during the financial crisis in 2008-09.• Li Yuanchao - Perceived to back political reform, on the basis of his record as Party Chief in Jiangsu Province and currently as head of the Party’s Organization Department. - According to Capital Economics, it will probably be seen as a set-back for reform efforts – both economic and political – if Li does not reach the Standing Committee.• Wang Yang - Guangdong Party Secretary Wang is seen as a political reformer for his light touch in response to social unrest in the province. Liberal.
    • When can we expect new economic policies?
    • But policy shouldn’t change too much• The most recent indications of economic policy has indicated a gradual shift towards a more liberal FX and interest rate policy.• The new leaders are likely to continue on that path. Speculation on if and how much they will speed up changes. China: Benchmark lending and USDCNY - deviation in % from PBoCs daily deposit rates with allowed limits fix (closing spot vs. fix) 1.2 8 0.9 0.6 6 0.3 0.0 4 -0.3 -0.6 2 -0.9 2008 2009 2010 2011 2012 -1.2 Apr-12 Jun-12 Aug-12 Oct-12 Lending DepositSouirce: Thomson Datastream/DNB Markets Source: Thomson Reuters/DNB Markets
    • Less “how to create growth” and more “what typeof growth to create”• Likely to abstain from “chasing growth”, and instead maintain housing market controls. Balancing risks: Investments in % of GDP 49 Decreasing risk of declining aggregate demand 45 41 37 Increasing risk of capital misallocation 33 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Thomson Datastream/DNB Markets
    • Political challengesGetting richer, but also more unequal• Within one or two generations, China has been transformed from one of the world’s most equitable countries in terms of income distribution to one of the least.• But i): Most have probably become better off with China lifting 500 mn people out of poverty from 1981 to 2004 ("a rising sea lifts even the smallest boat").• But ii) more inequality creates tensions, unrest and instability, and affects the possibilities to shift demand to consumption China: Gini coefficient Poverty headcount ratio At $2 a day (PPP) in percent of population45 90 8040 70 60 5035 40 30 2030 10 0 China India Brazil LIC MIC25 1981 1989 1997 2005 2008-10 1990Source: World Bank/DNB Markets Source: World Bank/DNB Markets
    • Political challengesNot getting any younger• China’s one-child policy which was introduced in 1978 has been one of the most effective birth-control measures introduced by any government in history.• In 1970 China’s fertility rate was close to 6. In 1980 it had dropped to 2.7, and by 1995 it had fallen below 2.• Simultaneously, the death rates declined, making China’s population significantly older. From having a typical “young” population in 1970, China is now moving towards the “Japanese scenario”. China: Population distribution 1970 China: Population distribution 2000 China: Population distribution 203095-99 Women 95-99 Women Men 95-99 Women Men Men85-89 85-89 85-89 80+ 80+ 80+70-74 70-74 70-7460-64 60-64 60-6450-54 50-54 50-5440-44 40-44 40-4430-34 30-34 30-3420-24 20-24 20-2410-14 10-14 10-14 0-4 0-4 0-4 10.0 5.0 0.0 5.0 10.0 6.0 4.0 2.0 0.0 2.0 4.0 6.0 6.0 4.0 2.0 0.0 2.0 4.0 6.0Source:: UN Population Dividsion/DNB Markets Source:: UN Population Dividsion/DNB Markets Source:: UN Population Dividsion/DNB Markets
    • Political challengesWho will support the growing group of old?• The UN’s projections of China’s demographics, the dependency ratio is expected to increase from less than 20% today to 40% in 2050.• In a low-fertility scenario, the ratio may increase to almost 100% by 2080. China: Dependency ratio Population aged 65+ in percent of population aged 20-64 years 120 100 80 60 40 20 0 1950 2000 2050 2100 Historic Low fertility Medium fertility High fertility Source:: UN Population Dividsion/DNB Markets
    • Political challengesHow has the Party retained its power?• Nathan (2003) outlined four important institutional developments in the Chinese political system: China: GDP (ppp) in USD trillion 1. The increasingly norm-bound nature of its Deng Era (1978 - 92) Jiang Era (1993 - 2003) Hu Era (2003 - present) succession politics (e.g. term limits) 12 2. The increase in meritocratic, as opposed to 10 factional, considerations in the promotion of political elites 8 3. The differentiation and functional 6 specialization of institutions within the regime 4. The establishment of institutions for political 4 participation that strengthen the CCP’s 2 legitimacy among the public at large 0 1981 1991 2001 2011• But also significant: From 1980 to 1990, Source: Thomson Datastream/DNB Markets GDP was quadrupled. In 2003, GDP was again quadrupled, and given the current forecasts, the same is about to happen in 2012.
    • Commmunism vs. capitalismA source of conflict?“We are the Communist Party, and we will define what communism is”. Chen Yuan, China Development Bank• After the Tiananmen incidence in 1989, the Party moved back on reforms. Private companies became hunted. But on Deng Xiaoping’s Southern Tour in 1992, the path again changed towards market reforms and economic liberalization. Jiang Zemin followed up on Deng’s stands by deregulating large sectors and joining WTO in 2001.• In 2001 Jiang allowed entrepreneurs to officially join the Party. According to McGregor (2008), Jiang and Deng’s though was that “the Party had much in common with private entrepreneurs, who disliked democratic politics and independent unions as much as they did. (…). Even by the standards of a capitalist economy, the Party could be unusually pro-business, as long as the state got a cut along the way”.• But still, many sectors are fully controlled by the state, such as oil, petrochemicals, mining, banks, insurance, telecom, steel, aluminum, electricity, airports, railways, ports, highways, autos, health care and education.• The new leadership’s main challenge will be to remove monopolies in important sectors, and continue to deregulate and de-link state and company.
    • Summary• A key characteristic of the Party is pragmatism."It doesnt matter whether a cat is white or black, as long as it catchesmice." Deng Xiaoping• No matter who will be elected for the politburo standing committee, it will be a priority for the party to project an image of seamless control and stability.• A key to the political dynamism and how the Party can avoid the trap of other communist states (one-party states) is to maintain the balance between the two factions within the party and the increasingly norm-based (s)election system of new top leaders.• To the extend we can expect major policy changes, they should be expected first in late 2013, when the 3rd session of the CCP is held.
    • Sources• Cheng, Li 2012. “The End of the CCP’s Resilient Authoritarianism? A Tripartite Assessment of Shifting Power in China,” The China Quarterly, 211, September 2012, pp. 595–623• Cheng, Li 2012. “Understanding Xi Jinping and Chinas New Generation of Leaders”. NBR, February 2012• Cheng, Li 2012. “The Power Shift in China”. Yale Global, April 2012• Kennedy, Scott 2012. “China Policy Watch: Leadership Transition - The Chance For Change”. Gavekal Dragonomics, June 2012.• McGregor, Richard 2010. “The Party: The Secret World of China’s Communist Rulers”. Harper Collins Publishers Inc., 2010.• Nathan, Allison 2012. “Top of Mind - Demystifying the China Handover”. Goldman Sachs, November 2012• Nathan, Andrew J. 2003. “Authoritarian resilience,” Journal of Democracy 14 (1), 6–17.• Williams, Mark and Qinwei Wang, 2012. “China Watch – Who will lead China?”. Capital Economics, October 2012.• In addition: Articles published by the Financial Times, Reuters, and Bloomberg.
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