EASTECONOMicS, POLITicS AND PUBASIALic POLicY IN EAST ASia ANDFORUM THE PaciFic Vol.5 No.3 July-September 2013 $9.50 Quarterly Leading China where? Yu Keping A quest for dynamic stability Fang Xinghai The question of containment Yao Yang Bold political reform needed at the local level Susan Shirk Can China’s leaders harness support for change? Dwight Perkins Institutional reforms the key to growth, stability and more . EASTASIAFORUM CONTENTS 3 RICHARD RIGBY Quarterly Whither the leadership? ISSN 1837-5081 (print) ISSN 1837-509X (online) 6 YAO YANG Bold political reform needed at the local From the editors’ desk level 8 SUSAN SHIRK The members of the fifth-generation leadership, with President Xi Can China’s leaders harness support for Jinping and Premier Li Keqiang at its core, have been in their party places change? for a year and in government positions for half a year. Now is a good 10 JOHN GARNAUT time to assess how they are doing and the context in which they have The importance of Bo Xilai’s day in court to operate, especially as the party plenum to be held in late 2013 will 13 XINGHAI FANG articulate their economic policies more fully. The question of containment As the articles by international experts in this issue of EAFQ make 14 DAVID M. LAMPTON clear, this is a leadership that practices incremental reform. In internal Building relations beyond Washington’s issues, like managing the falling growth rate and the structural issues rebalancing policy of increasing consumption, supporting sustainability and making the 17 REN XIAO Chinese economy more competitive, it is a leadership that maintains Diaoyu–Senkaku dispute: a view from faith in the market but also in state control. Its members support private- China sector development and greater international access to the domestic 19 DWIGHT H. PERKINS market—but only up to a point. Institutional reforms the key to growth, On China’s international role, they inherit from the previous stability administration the problem of managing the country’s increased profile 21 YU KEPING and importance while maintaining constructive relations with America, A quest for dynamic stability Japan and other key countries. They continue to plan policy around 25 TIM SUMMERS what they perceive as US attempts at containment and a Japan whose Still ‘going west’? behaviour over the Senkaku–Diaoyu islands is curtailing their strategic 27 YIPING HUANG space. ‘Likonomics’ the right policy for At the heart of both these issues is the dominant contradiction in sustainable growth China’s current role—a major country central to global growth and 29 PAUL FRENCH stability, but one that feels beset by immense internal challenges and the Can China escape its demographic bind? need to give these priority rather than involving itself in the affairs of 31 JIAO WANG others. Time for financial reform The Xi–Li leadership has been working within a framework created 32 KARL P. SAUVANT AND by its predecessors, but one which put GDP growth ahead of almost VICTOR ZITIAN CHEN everything else. Its language of a ‘China dream’ and of needing to create Advancing domestic development a more urban, sustainable economic model starts to move away from this through overseas investment GDP dominance. But as these articles show, the challenges in creating 34 SHUJIE YAO political consensus among a highly fractured polity remain dauntingly Challenges in China’s next stage of high. And it is too early to say just how radical the new leaders will be development as reformers when the time comes to make choices between the options available to them. COVER PHOTO: Presidents Xi Jinping and Barack Richard Rigby and Kerry Brown Obama stroll in the grounds of the Annenberg Retreat, California, before sitting down to the formal business www.eastasiaforum.org at their bilateral meeting on 8 June 2013. Picture: Pete Souza / The White House. 2 EAST ASIA FORUM QUARTERLY JULY – SEPTEMBER 2013 keepINg coNtrol Whither the leadership? RICHARD RIGby numbers, but the characteristics of the at the provincial level. Arguably this membership have also changed. The has been the largest transition over the HE Xi Jinping–Li Keqiang age of the engineers and technocrats past 30 years. T leadership is still relatively new, is over, their replacements including a Whatever differences there may but enough time has passed since lawyer, an historian, two economists, be within the leadership, one thing last year’s 18th Party Congress and a former schoolteacher and a ballistic on which they all agree is that in the this year’s National People’s Congress missile engineer. They have a broader party state (党国)—that is, the People’s (NPC) to give us at least some sense of range of experience, prior jobs and Republic of China (PRC)—it’s the where things might be going. workplaces. They also represent a new party that comes first. Whether a There are big changes in the factional balance. leader is a ‘princeling’, a China Youth nature of the new Politburo Standing In addition to the PBSC, there have League man, a protégé of Jiang Zemin Committee (PBSC). The overall also been sweeping changes in the or of Hu Jintao, there is the same sense numbers are reduced from nine to broader leading groups: over half of of entitlement and ownership—China seven, and of those seven, five are the politburo, seven out of 10 of the is us. This is very much the case with new. It’s also worth noting that five Central Military Commission, and Xi Jinping, already showing signs of of these are due to be replaced at the similar infusions of new blood in the being more than primus inter pares time of the next party congress—late NPC, the state-owned enterprises, the (unlike Hu Jintao). He presents as 2017, if things go to plan. Not only the People’s Liberation Army (PLA) and strong, confident and clear (although China’s inner circle: the new Politburo Standing Committee—Zhang Gaoli, Liu Yunshan, Zhang Dejiang, Xi Jinping, Li Keqiang, Yu Zhengsheng and Wang Qishan— are presented in the Great Hall of the People in Beijing on 15 November, 2012, the day after the 18th Chinese Communist Party Congress ended. PictuRE: ViNCENT Yu / AP photo / AAP EAST ASIA FORUM QUARTERLY JULY – SEPTEMBER 2013 3 not too clear: he can articulate his It seems quite clear that ‘China dream’ in general terms, but EASTASIAFORUM leaves it to others to fill in the detail; Quarterly Xi genuinely believes the if they get it wrong, then they have misunderstood the leader’s intentions). party needs to be called EDITORIAL While confident, though, and capable of speaking and acting in to order, and few would STAFF ways that appeal to ordinary Chinese, Xi clearly senses serious problems question that Issue Editors in the credibility of the party vis-à- Richard Rigby and Kerry Brown. vis society. This includes the party’s Editors moral credibility, crucially tied to Peter Drysdale, Head, East Asia Forum legitimacy in the Chinese political and East Asian Bureau of Economic context. Similarly, he sees this as an surrender of Beiping (Beijing) in 1949, Research, Crawford School, ANU. issue within the party itself. Hence and his reminder of the continuing Shiro Armstrong, Executive Director, East Asia Forum and East Asian Bureau the renewed attacks on corruption, importance of Mao’s ‘two musts’ (a of Economic Research, Crawford which have had an immediate impact modest demeanour, commitment to School, ANU. on banqueting habits and other arduous struggle)—repeating similar Editorial Staff more egregious manifestations of exhortations from the revolutionary Mark Fabian, Kai Ito, Rosemary Tran, party members behaving badly. But site by Jiang Zemin in 1991 and Hu Sara Smylie, Olivia Liang, Madeleine restricting menus to four dishes Jintao in 2002. Willis, Ryan Manuel, ANU. and one soup has been tried and Attempts to stymie a very vigorous Editorial Advisers: Peter Fuller, Max abandoned repeatedly since first discussion of constitutionalism, or Suich. mandated during the Ming dynasty, constitutional governance, as the way Peter Fuller, Words & Pics. Production: and such is the degree to which far forward for China need to be seen Original design: Peter Schofield. worse forms of corruption have in this context, as do recent much- Email [email protected], now become systemic that most are discussed guidelines regarding the [email protected]. sceptical, if not cynical, as to how ‘seven things not for discussion’ in successful the current campaign will educational institutions, the media and The views expressed are those of the be. In recent months dire warnings of so on, and the two ‘cannot negates’. individual authors and do not represent the the dangers of corruption have also The former are: universal values, views of the Crawford School, ANU, EABER, focused on the PLA; the mechanisms media freedom, civil society, citizens’ EAF, or the institutions to which the authors for dealing with these now endemic rights, the Chinese Communist Party’s are attached. problems are still designed by the historical aberrations, the privileged party itself, and the dilemma of self- capitalist class and independence of policing within a closed system has the judiciary. The latter refers to not Each author’s name appears been widely recognised. using the first 30 years of the PRC in the form preferred by the At the same time, we are seeing to negate the latter (that is, Mao writer. a significant ideological hardening and post-Mao, pre- and post-reform coupled with a crackdown on lawyers, and opening), or vice-versa. It now journalists, bloggers and human rights appears that both of these are based advocates. Party members are being on Document No.