China succession plan and “cultural reform”; Chinese economic growth cools

Updated On: Oct 19, 2011

Chinese leaders ended their closed-door five-day meeting of the ruling Chinese Communist Party's (CCP) Central Committee on Tuesday with a decision to hold a CCP congress in the second half of 2012 to appoint successors to President Hu Jintao’s generation.

That decision puts greater formality for the power transition, with a preparatory group for the congress headed by Vice President Xi Jinping, who is almost guaranteed to succeed President Hu as party and state leader. Vice Premier Li Keqiang is widely expected to take on the role of Premier. But influential party members are still trying to fill seven other slots in the Politburo Standing Committee.

The 2012 party congress will take place at a critical time of China's efforts at "deepening of reform and opening up, and the transformation of the pattern of economic development," according to the official Xinhua news agency, summarising the outcome of the meeting.

The meeting "stressed we must strengthen our awareness of perils and risks," said the official summary issued on the government's website. It added that the government will "maintain steady and relatively fast economic development", and put greater effort into improving public welfare and strengthening social stability.

Report: China sets in motion plan for 2012 succession meeting (Reuters, 18 Oct, 2011)

Report: China sets sights on succession plan (Today, 19 Oct 2011)

During the meeting, China's leaders also agreed upon guidelines to preserve "cultural security" and expanding Chinese soft power, according to state media. The country will strive to improve its citizens' "sense of identity and confidence in Chinese culture," according to a statement reported by Xinhua.

The focus on cultural issues, a code-word for ideology, comes at a critical juncture for the leadership. Beijing feels that with China's dramatic rise, it should receive greater respect from other powers and have a larger voice in global affairs. Meanwhile Chinese leaders are under domestic pressure from a increasingly vocal public unhappy with numerous ills of rapid growth and demanding greater change. Chinese leaders have tried to uphold their legitimacy by appealing to patriotic and nationalistic sentiment.

An editorial in the party’s official People’s Daily on Tuesday said that "Cultural development has lagged behind rising diplomatic and economic clout, reducing China's overall influence and exposing it to foreign dominance."

Beijing believes the solution is a buildup of the country's cultural industry, encompassing media companies, publishers and movie studios, to resist encroachment of Western ideas and to compete with large media corporations abroad, which the CCP says dominate global discourse.

Tuesday's statement referred to "core socialist values" multiple times, asserting that China's circumstances are unique and unsuited to Western notions of civil liberties.

Analysts say the meeting was largely focused on reinforcing the CCP’s tight control over the media and the Internet. With more than half a billion Internet users, the government is increasingly anxious about the power of the Internet to influence public opinion in a country that enforces tight controls over traditional media outlets.

Report: Leaders aim to expand 'influence' of Chinese culture (AFP, 18 Oct 2011)

Report: China's top communists call for cultural campaign (Associated Press, 18 Oct 2011)

Meanwhile, economic data released by China’s National Bureau of Statistics has shown that the country’s economy cooled to its slowest pace in more than two years in the third quarter. China’s gross domestic product expanded 9.1% in the third quarter from a year earlier, the slowest pace since early 2009 and down from 9.5% growth in the second quarter. China is seen as on track for a government-directed "soft landing."

With the global crisis continuing to affect Europe and the US, China is increasingly seen as the main source of hope in the global economy. But signs of slowed growth in China have unsettled market sentiment among global investors. Economists pointed out that the largest risks to the Chinese economy were a global recession leading to a huge decline in demand for Chinese exports, or a bust in China’s overheated real estate market.

Nonetheless, the slowdown is being welcomed by policy makers who have been trying to moderate growth and keep inflation in check. The consumer price index rose 6.1% from a year earlier in September, down from a three-year high of 6.5% in July. Food prices, however, increased by over 13%.

The overall economy has now slowed for three consecutive quarters mainly due to Beijing’s efforts to moderate growth and slow down inflation. Beijing has raised interest rates five times over the past year and increased the banks’ reserve requirement nine times, while instructing banks to reduce lending and enacting limits on home purchases to rein in property and consumer prices.

The economic data also suggest that China, long having depended on exports, is now getting more help form domestic demand. China’s status as a top exporter has been a major strength and also a weakness. During the worst of the global financial crisis, China’s economic growth fell below 7% in the fourth quarter of 2008 and the first quarter of 2009, triggering worries about social instability.

Since then, Chinese policy makers have promoted domestic consumption and made headway in rebalancing the economy away from exports. The country’s current-account surplus was just 2.8% of GDP in the first half of 2011, in contrast to more than 10% in 2007.

HSBC economist Qu Hongbing commented, "Even if Western economies slip into a renewed recession, the impact on China's growth should be much smaller than three years ago. China has been much less dependent on external demand."

Nomura economist Zhang Zhiwei remarked that China's central bank "is likely to keep policy on hold for the rest of 2011 and observe closely how the current global economic slowdown and financial market turmoil affects the domestic economy."

Report: China’s GDP up 9.1% in third quarter (Financial Times, 18 Oct 2011)

Report: China Gets Growth Help From Domestic Demand (Wall Street Journal, 19 Oct 2011)

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