LONDON - 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 US sub-prime mortgage crisis in 2008 and the
EU [European Union] sovereign debt crisis in
2010-2011," Mei Xinyu, a
respected adviser to the Chinese government on
trade issues, said at a recent briefing in
Beijing.
"The emerging economies could
well become the center 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 eurozone 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.
What complicates the
change 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 Professor 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 favors independence from
mainland China, that will present a real problem
for Beijing.
Similarly, if the
presidential elections in the US 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 Organization through marathon grueling
negotiations, published his memoirs 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 past 10 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
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".
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