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The U.S. Energy Revolution: Retreat from the Middle East?

Although an energy revolution is taking place in the U.S., it is unlikely that this will cause the country to lose interest in the Middle East, argue Stormy-Annika Mildner and Kirsten Westphal.

Point of View, 26.02.2013 Research Areas

Even if, contrary to all expectations, the new Chinese leadership embarks on a path of fundamental reforms, their implementation will face enormous structural obstacles, says Gudrun Wacker.

The new leadership and its inheritance

The 18th Congress of China's Communist Party, which opened on November 8, will put an end to speculations concerning the top positions in the Chinese Party hierarchy. So far, however, it is unclear whether all personnel decisions have been made or whether the next Standing Committee of the Politburo will consist of nine members as before or of only seven. Decision-making processes within the Party remain rather intransparent.

Biographical data of the candidates who might make it to the top positions are known, but what kind of political program they might have can only be deducted from central documents like the Five-Year-Program which provide us with general targets and benchmark date for China's development.

The inheritance for the new leadership group is not an easy one. The scandal about the Party Secretary of Chongqing, Bo Xilai, who in the meantime has been stripped of all his positions, implies that power struggles have been going on at the top, and Party elders like Jiang Zemin, former Secretary-General of the Party and predecessor of Hu Jintao, presumably play an important role through their networks within the Party. One question, therefore, is whether the new group of Chinese leaders will present a change in the existing power balance. Should this be the case, it still remains to be seen whether the new leadership will have the will and the courage to initiate reforms which are necessary to tackle the problems existing in China today. And even if they have this will, such reforms would have to be pushed through against powerful interest groups. Today, the structural obstacles for this to succeed are bigger than in the late 1990s when then Prime Minister Zhu Rongji could use China's WTO accession as an external “stick” for painful domestic reforms.

The “lost decade”

Over two terms of office, that is ten years, the leadership of Hu Jintao and Wen Jiabao has steered Party and country. Looking back, the balance sheet of their reign looks quite mixed. Many Chinese and outside observers have started to call it a “lost decade”. The two huge tasks that Hu Wen had announced to undertake, namely reorienting the Chinese growth model towards more sustainability – away from the dependence on exports and investment towards economic growth driven by domestic consumption – and more social and distributional equity have been accomplished only in part.

During the last ten years some reforms have stalled, some have even been reversed. Today, state-owned enterprises and state intervention in the economy dominate the picture (“Chinese state capitalism”); private enterprises are systematically discriminated against, and further steps towards liberalization are controversial.

Although some successes in building a social security system have been reached including for the rural population, the measures are far from complete. This explains at least in part the high rate of private savings in China and it is also one of the basic obstacles for a growth model based on domestic consumption. Environmental degradation, corruption and bad governance in general trigger protests and unrest in China. The unequal distribution of income has increased: Today, one percent of the population possesses more than 40 per cent of the country's wealth. While the leadership rhetorically is committed to the rule of law, there is no independence of the judiciary in practice. The media are following a commercial rationale, but independent and critical reporting is discouraged. Activities of civil society are officially welcome, but at the same time are suspected to be subversive and/or steered from abroad. Due to China's hosting of international events like the Olympics, but also as a reaction to the „Arab Spring“, the security apparatus has gained in capacity and power – a power that will be hard to constrain again.

Problem(s) identified, problem(s) solved?

Most of the challenges China is facing now have existed before the last generational power transition in 2002. However, due to political stagnation in the transformation process during the last ten years, structures have hardened and those forces whose interests lie with preserving the present system – big SOEs, parts of the bureaucracy, local officials, the security apparatus – were able to improve their standing. It would require a strong consensus within the leadership to push through drastic reforms against these interest groups. At present, there are no signs for such a consensus. It can be assumed that the composition of the highest body of the Communist party will be the result of a compromise and will not shift the balance of power in favor of the proponents of reform. Adding to this is the fact that the top political leaders themselves or through their relatives are intertwined with economic interests. And in the end the new political leadership is facing the same dilemma as their predecessors: If they really want to embark on a path of fundamental reforms, they would have to curtail their own power by introducing real checks-and-balances. In sum, the prospects for the necessary policy shift are slim.

This English version of »Parteitag in China: Auch nach Machtwechsel werden Reformen schwierig« has first been published on ISPI's Website at http://www.ispionline.it/en/pubblicazione/chinese-reforms-remain-difficult; Translation by Gudrun Wacker