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BW Businessworld

The Big Muddle Ahead

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Two historically momentous events will unfold in the next few days. The Americans will decide who will run their country for the next four years, and the Chinese Communist Party will bring in a new leadership that would be responsible for shaping the world’s second-largest economy for the next decade.

While there is little similarity in the ways institutional politics plays out in the two countries, a change at the top of decision-making in the world’s two biggest economies at the same time is likely to have far-reaching implications since they are both so closely linked.

The impact on the world of the leadership change in a cloak-and-dagger China will probably be greater than in the United States where issues and political players are mostly out in the open. For China not only has to keep its place in the external world, but ensure internal stability.

As Beijing prepares to host the 18th National Party Congress, China-focused websites are already talking of a “state of lockdown so extreme that it feels like war “for the sake of stability and security. There is good reason behind the paranoia.

China’s political, social and economic landscape is looking the shakiest in a long time. The economy is showing signs of slowing, putting pressure on a government wracked by corruption allegations against top leaders to take strong steps towards revival or face increased social unrest.

The latest scandal – a report by The New York Times about Premier Wen Jiabao’s family estimated $2.7 billion wealth – would have rattled the Communist Party leaders already battling the ramifications of the corruption and murder charges against former high-profile Chongqing party chief Bo Xilai, which cast a shadow over the government for several months. Wen — widely seen as a reformist — is understood to have led the charge against Bo.

Earlier this year the Bloomberg news agency carried a report on the wealth of the family ofChinese Vice-President Xi Jingpeng, who is expected to become the Communist Party Secretary and take over the presidential reins from Hu Jintao next year.

An insecure political class, under severe scrutiny after revelation of high-level corruption, doesn’t bode well for China or for the rest of the world. A fractious, unsettled leadership can only make mistakes, which can only damage China where a widening chasm between the rich and the poor is creating unhappiness and the middle class is coming out on the streets in protests the government.

The Hurun Report, which tracks China’s wealthy, said in a report earlier this year that the combined net worth of the 70 richest delegates to China’s National People’s Congress was nearly $90 billion in 2011. This was more than 10 times that of all 660 officials of the three branches of the American government.

The cosy relationship between money and politics is a cause of great concern in China, just as it is in India; but what happens in India doesn’t have as deep an impact on the world as what happens in China.

The new Chinese leadership will have two choices – continue to gratify itself as the practice has been, or change a system that like a pressure cooker might explode one day if the steam is not released on time. The one thing that worries the Chinese decision-makers is internal strife and instability that could cause the breakdown of the party machinery. This is a phenomenon they are not used to and probably don’t know how to deal with except through a heavy hand.

Nearly three generations of Chinese have only benefited from an economic growth that has powered the once-reviled nation to the top of the world. These hundreds of millions who have become rich and now form the urban middle class are in no mood to give up their demand for a better life and want more rights in a country where media is controlled and dissent throttled.

Protests have not only increased in recent years, but have also turned violent, as an aware and educated milled class has increasingly taken on local governments on environmental issues. Last month there were reports of thousands of people protesting against the nearly $9 billion expansion of a petrochemical factory on Ningbo, a port city. Similarly, there have been protests in Dalian and Xiamen in the past.

A survey of the residents of the Chinese capital by the Beijing Academy of Social Sciences last month showed that only 1 per cent of those polled felt that their quality of life had greatly improved in recent years. Around 20 per cent said it had improved slightly, while nearly 35 per cent said they felt there had been no change. The remaining -- more than 40 per cent -- said their quality of life had actually declined.

The same survey showed that people were worried about rising medical expenses, housing prices, old-age security and prices of commodities. In short, it only indicates widespread unhappiness in China despite an increase in income levels.

The sooner China’s new leadership comes to grasp with the ground reality and finds ways to address the concerns of its people, the better it will be for all. An unstable China can only be bad news. The next American president along with the rest of the world will be watching the tea leaves closely.


(The author is President, Public Affairs, South Asia, Genesis Burson-Marsteller and former Editor, Khaleej Times, Dubai. He has a deep interest in China and Southeast Asia. Views are personal)