This Thursday (8 November) in Beijing, the long-awaited 18th Party Congress will begin, culminating a week later in a new party leadership that will take the helm of the world’s second largest economy for the next decade. Much has been written about the unusual drama that has taken place so far, as well as the usual secrecy associated with leadership transition in China. A few key questions remain.

With this new leadership, should we expect China to deviate significantly from its development trajectory?

The short answer is no. In spite of the consistently impressive growth of the past 30 years, China is still in the stage of industrialization. On a per capita basis, it will take another seven or eight years before China becomes an upper middle-income country. While the West wakes up from its own crisis, and is suddenly alarmed to see a country with a different set of beliefs and systems humming unstoppably forward, to China this is simply another year of a three-decade stretch of development. China is not at a “pivotal moment”. There is no pressing imperative for new leadership to take China on an entirely different path. Politically, the widely recognized policy, system and value failures associated with the prolonged financial crisis, and the emergence of radicals in recent democratic elections in Europe and the Middle East, have sent even the Chinese neo-liberals to question the moral high ground they have previously ceded to Western electoral democracy.

What are the immediate challenges the new leadership face?

Chief among them is that the export and investment-driven economy, while not yet running out steam, needs to be rebalanced. The new leadership will need to quickly find a new dynamic balance between investment and consumption, or, more broadly, between state and people. I recently argued in my WSJ column that the country needs to find a “third way” focusing on people’s quality of life as a new engine for the economy.

And the longer term challenges?

There are a few. I would argue that the biggest challenge the Party will face is the deep “trust deficit” in the country, most notably in the form of widespread corruption at all levels of society. Chinese society today, in absence of a unifying ideology or belief, is largely transactional. The trust deficit would not swing into a surplus overnight. Combined with the vulnerability of a non-democratic government, China’s trust deficit could allow local problems to develop into nationwide shocks. The new leadership needs to find structural and long-term solutions.

As the seven members of the new Politburo Standing Committee, all wearing dark-blue suits, white shirts and red ties, walk on to the stage in the exact sequence as they are supposed to on one bright autumn day in Beijing this month, they will be looking across the Pacific at the United States. The US has just devoted more than a year’s national discourse and intellectual/political bandwidth into possibly re-electing Barack Obama into the White House, with 51% or 52% of voters for him and 48% or 49% against.

They will be looking, possibly with disbelief and concern, at the world’s most powerful country, which, in spite of open discussions, at times entertaining televised debates, and US$ 6 billion spent on this election, has not come any closer to solving its fundamental problems, including a failing infrastructure, retreating national competitiveness, worsening income disparity and looming fiscal disasters. The new Politburo members may just breathe a sigh of relief that they have another ten years to try to solve the problems China is facing and not have to worry about elections in two years, polls tomorrow, or fundraising events their counterparts in DC have to attend, 184 of these in October by House Democrats alone.


Author: Kevin Lu was named a Young Global Leader by the World Economic Forum in 2010.

Photo Credit: Reuters Pictures