Welcome to the Xi Jinping Era

Welcome to the Xi Jinping Era

China has entered the Xi Jinping era. The transition from Hu Jintao to Xi Jinping appears to have been messy, given both the Bo Xilai scandal and the machinations of former leader Jiang Zemin, but Mr. Hu no longer has any formal party positions and the handover was, at least on paper, the cleanest in the history of the People’s Republic of China. It was also the first to occur in the Internet age, so we may have just been more aware of the plotting, scheming and infighting.

Mr. Xi has a very different style from his predecessors, as you can see (Chinese, with English translation) from his remarks last Thursday when the new Politburo Standing Committee met domestic and international media. The first impression he gave is that he is a much more likable, almost retail, politician than his predecessor.

There has been much speculation about who is a reformer, conservative or hard-liner and what the policy preferences of the new leadership will be. In “China Reveals Its New Leaders: Habemus Papam,” The Economist reminds readers how little we actually know about these men while Professor Scott Kennedy of Indiana University provides important perspective in “China’s New Leadership: Economic Reform Yes, Political Reform No“:

Some of the disappointment about the new group is that the two most likely advocates of serious political reform, Li Yuanchao and Wang Yang, didn’t make it to the PBSC. But you’d have to be beyond optimistic to believe the Chinese Communist Party’s top leadership is at all serious about democratization. That is not on the cards no matter who is in the Politburo. There’s not a Gorbachev among them. We’ll see a range of reforms to improve how this system works…If you’re skeptical they can make this system work better, they’re going to try and prove everyone wrong. Either they’ll succeed, or there will be a political meltdown.

One senior banker told a conference Friday that Mr. Xi may unveil an economic reform plan in late 2013. Wang Xiangwei, editor in chief of Hong Kong’s South China Morning Post and someone with strong connections to Beijing, believes Westerners underestimate Mr. Xi’s plans for reforms, saying that he might be the strong reformer that China needs. I expect that Mr. Xi will be a hard-line, nationalist reformer.

MR. XI APPEARS TO BE STARTING HIS RULE his rule by signaling a possible crackdown on corruption. Chinese officials have made lots of anti-corruption noise over the last few years, even as graft has spread like a cancer through society, but Mr. Xi’s anti-corruption rhetoric is more dire and aggressive. By making such a big deal of it so early in his term, he risks quickly destroying any good will and credibility if he does not show results, though more high-profile corruption cases could be equally damaging. There are some who would argue that any crackdown might be too late as the system may now be so rotten that a serious crackdown on venality would destroy it.

Mr. Xi inherits a challenging foreign policy environment. The Diaoyu/Senkaku Islands dispute with Japan continues and the risks of a bad outcome are not insignificant, as MIT Professor Taylor Fravel explained in a very informative podcast last week. The Association of Southeast Asian Nations displayed an usual amount of cohesiveness on Sunday, when it called for talks with China on the South China Sea disputes even as an arms race is starting in the region as several of those countries try to counter China. China is also not happy about President Obama’s visit to Burma, to the point that censors ordered Chinese media to play down any news of the visit.

THE ECONOMY IS STILL IN A DIFFICULT SITUATION, though there are signs of stabilization and some bullishness for 2013, at least in Sunday’s $ 2.5 billion of upfront advertising sales for CCTV, China’s state TV network. The Shanghai Composite index did not welcome Mr. Xi’s ascension as it has dropped nearly 5 percent from the start of the 18th Party Congress and on Monday briefly broke below 2,000 before sharply rebounding to close up slightly.

At least when it comes to stock market reactions to their elections, Mr. Xi and Mr. Obama have something in common.


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