Of the four Permanent Members of the UN Security Council where the top jobs are up for grabs this year, no transition is as shrouded in secrecy and suspicion as China's upcoming leadership transition. Without even a semblance of popular legitimation, leadership transitions in China can be nasty affairs at the best of times. In the current political and economic climate, the leadership's capacity to keep the Party and State together is becoming stretched. Recently, Bo Xilai, the Party Chief of China's largest city, Chongqing, was publicly ousted in the most high-profile political incident since 1989.
Most importantly, this transition may become a defining moment, 34 years after Deng Xiaoping became paramount leader of the Chinese Party-State having skilfully manoeuvered his way past Hua Guofeng, Mao's hand-picked successor. Although Hua was able to restore a modicum of stability and initiate economic modernization during his brief spell in power, he remained too closely linked to the memory of Maoism to be able to lead China into a phase of economic development. Also, he did not have the personal authority of revolutionary veteran Deng, who commanded tremendous respect from the army, the scientific community and the economic planners. In the next few years, Deng hammered out a model for economic development as well as political stability which largely remains unchanged, and which enabled China to embark on the growth path that has now led it to become the second economy in the world.
Economically, Deng's strategy was based on pragmatism. For starters, Deng legitimized local experiments with market-like incentive mechanisms for agricultural production, phasing out collective agriculture. This led to a boom in food production which liberated millions of hands from the fields. Furthermore, realizing that China was far behind even the Soviet Union, and certainly behind western economies in nearly all aspects of economic activity, Deng supported scientific research at home, while opening China's borders to the world. Investors wanting to profit from the enormous pool of cheap and docile Chinese labour were welcome, but so was their technology. Millions of Chinese students have gone abroad to study, predominantly in scientific and professional fields, and brought this knowledge back to the motherland. Thousands of books and other scientific materials were imported, translated and made available to Chinese scholars.
Politically, Deng's position was complex. Having seen the horror and devastation of the Cultural Revolution up close (Deng's son was paralyzed from the waist down after falling out of a window during his persecution), Deng was determined to ensure that no individual would be able to lead the country into catastrophe again. Ironically, he used his own personal authority to force the Party into accepting collective leadership. He did away with the strict dogmatism and political correctness that reigned during the Maoist era, and introduced intra-Party democracy to some extent. He encouraged discussion about issues to come up with resolutions and ideas. At the same time, however, Deng was clear about the leading position of the Communist Party. His political objective was to consolidate this position through sound governance, rather than lead the Party to pluralisation or democratization. Factionalism would not be tolerated, and neither would organized dissent from outside the Party. This was, of course, most clearly demonstrated in 1989, but echoes earlier moves by Deng to counter calls for political reform in the early Eighties.
Internationally, Deng advocated a low profile. He wanted China to concentrate on economic growth and development, without becoming entangled in the Cold War rivalry between Russia and the United States. Throughout the last four decades, Chinese foreign policy has been aimed at participating in international regimes to obtain technological and legal knowledge, better opportunities for trade, and to make sure China's national interests are safeguarded in international treaties. Wanting to counter increasing concern about China's growing economic and military strength, the concept of peaceful development was launched, based on the idea that China would concentrate on its own international affairs, would not seek international expansion, but would work towards a multipolar world, and keep its borders open for international trade.
The problem facing the Party now is that different aspects of this model seem to be running out of steam. China's economic growth, for example, has been fuelled by export and investment. Enormous quantities of money have been shifted from private wealth, particularly savings, to large, mostly State-owned enterprises, in an effort to cushion the impact of market liberalization. This has avoided the economic catastrophe that happened after the Russian "shock therapy", but also created a new class of officials and SOE managers that grew tremendously wealthy off graft and corruption. As a result, Chinese household wealth remains relatively low, and the nearly non-existent social safety net further reduced incentives to spend. As the ongoing economic malaise in the United States and Europe dampens demand for Chinese products, it is clear that further growth needs to be fuelled by increase in domestic consumption.
Also, China is faced by economic challenges it created itself, in terms of inflationary pressure on commodities, but also matters such as environmental pollution. The voracious appetite of the Chinese economic machine has raised commodity prices across the board, causing inflation inside the country. The increasing use of cars causes traffic gridlock and severe environmental pollution in the larger cities, which themselves grow at breakneck pace. Growing meat consumption is straining Chinese agriculture. The speed at which new infrastructure is constructed, and the concomitant corruption, has led to quality and safety issues. There are significant amounts of bad investments, aimed at artificially boosting GDP numbers and local employment.
