Tuesday, April 30, 2013

Can the Dragon execute the ‘soft’ landing?

The world views with mixed feelings of awe, admiration, cynicism and even some apprehension, as the Chinese Communist Party undergoes a transition in leadership in August, as is customary in the country once in ten years. The 18th National Congress is now widely expected to see Xi Jinping and Li Keqiang as the new President and Premier of China, replacing Hu Jintao and Wen Jiabao respectively, a process which should be culminated by early next year.

It would be a gross understatement to call this the end of an era, besides the fact that it was the first peaceful regime change witnessed by the People’s Republic of China (Mao’s last years saw the Cultural Revolution accompanied by large scale violence and the end of Deng Xiaoping’s regime was marked by the infamous Tiananmen Square protests and subsequent military intervention). In the period since Hu Jintao first took over as General Secretary in 2002 and today, China has given the term ‘superlative’ a new meaning.

In 2002, China had a GDP (current US $) of $1.45 trillion, over 1/7th of US GDP of $10.59 trillion. The picture is starkly different now with Chinese GDP (current US $) at $7.29 trillion in 2011, which is a little less than half of US GDP of $15.09 trillion. Even in GDP per capita (PPP, current international $) terms, China has grown phenomenally, from $2,866 (less than 1/12th of US GDP per capita) to $8,442 (more than 1/6th of US GDP per capita). Net foreign assets (current CNY) have swelled from CNY 3.17 trillion to CNY 25.09 trillion. FDI (net BoP, current US $) has also surged from $46.78 billion in 2002 to $124.93 billion (2010). In 2010, China led the world in terms of exports of merchandise goods, which stood at $1.57 trillion (growth of 31% yoy) in value, and it cornered a share of 10.4% of global merchandise exports.

However, there is a catch, and a very critical one, and we are not talking about the malaise in China’s key export markets. Analysts have long argued that China’s ‘hard culture’ led by a one party top-down system will ultimately come face to face with its inherent limitations. This was evident to the world when Hu Jintao faced a massive rally from an estimated 4,00,000 protesters (as per the organisers) on his Hong Kong visit on July 1. They were protesting against the manner in which Hong Kong was run and also the way in which new Hong Kong Chief Executive Leung Chun-ying was appointed. In China, too, social unrest has been increasing quite alarmingly with rising social inequality. The Gini coefficient has breached the 0.47 mark, which is greater than 0.4, the accepted trigger for social unrest in an economy. The Chinese Academy of Governance estimates that the number of protests in China have doubled from 2006 to 2010 to 180000 incidents, which are over issues like corruption, forceful land grabs, Tibetan autonomy and environmental issues. The general mood is towards better people representation. Wen Jiabao himself commented last year, quite tellingly, that the Chinese government needed to embrace more democracy and implement wider political reforms to prevent the nation from descending into a chaos similar to the Cultural Revolution, which could undo much of the gains that the country has made over these years.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
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