China’s Power Transition: The Challenges Ahead – Analysis

By Billy Tea

After months of being groomed, Xi Jinping, unsurprisingly, was named China’s General Secretary of the Chinese Communist Party last November. Many analysts have described China’s new Standing Committee as a “conservative line up.” In addition, the Standing Committee has shrunk from 9 to 7 members. In theory, this smaller group will streamline the decision-making process, consolidate actions to promote economic development, and be able to act faster to both prevent and manage conflict as issues arise. China’s main priority is to bring stability within its boundary and to prevent civil protest against its government.

China’s population is reaching 1.4 billion people and its need for fossil fuel is constantly increasing. As experienced in the MENA region last year, if the basic needs of the population are not met, it could spark social unrest leading to the fall of the party. This is what China fears the most. Therefore China must assure the “healthiness” of its society by responding adequately to social issues that are threatening the government’s legitimacy and credibility to provide for and protect its people. There are six main domestic challenges that the new leadership will have to face in the next decade:

First, to secure access to natural resources: China’s development and prosperity depends on its access to natural resources. Even with a slowdown in world economy, China is expected to grow at 9% in 2013. Fu Chengyu, chairman of top Asian refiner Sinopec Corp, told Reuters that he expected Chinese oil demand to hold steady. “Global oil demand is unlikely to grow strongly due to the economic outlook, but China will see sustainable growth next year, similar to this year.”[1]

Moreover, it is estimated that China’s compound annual aggregated oil growth will be 6.7% until 2015.[2] China’s oil demand this year thus far has amounted to more than half of the global incremental demand, according to the International Energy Agency. It is estimated that by 2025 China will import three-quarters of its oil requirement. Guaranteeing access to natural resources is a basic requirement that needs to be fulfilled both for the stability of its society and to maintain its economic growth.

Second, to reform the pension system: According to a 2010 census, the number of people over 60 grew to 13.26 percent of the population, up 2.98 percent from 2000, and the number of people under 14 declined to 16 percent of the population, down 6.29 percent from 2000.[3] Today, there are 180 million people who are over 60 years old, and that number is estimated to double to 365 million by 2030. As a result of the one-child policy, there are 10 million fewer births a year, therefore making 6 workers per pensioner today. By 2030, there will only be 2 workers per pensioner. This imminent population crisis combined with a shrinking work force and the soaring number of elderly people will have a detrimental effect on its economy and domestic stability.[4]

Third, to close the gap between the rich and the poor: According to an NGO, China has reached “dangerous levels of wealth inequality.” In addition, China scored 0.438 in 2010 on the Gini Index by the Institute of Urban Development. The Gini Index measures inequality of income on a scale of zero to one (zero being totally equal and one being totally unequal); it suggests that a country with a figure higher than 0.4 has dangerous levels of wealth inequality. The report explained that there are risks of instability such as the increasing gap between the rich and poor, which is associated with reform and liberalization.[5] In times of economic hardship, the poor are the most vulnerable socioeconomic group. The simple sight of the elite living in excess during these times could trigger immense resentment leading to street riot.

Fourth, to fight corruption: This year’s Bo Xilai case is just one example in a long series of this serious problem in Chinese society. Corruption is present at various levels of Chinese society, including the education system, food industry, and government officials. Every year there are about 130,000 to 160,000 cases of corruption but only 6 percent of them end up with any kind of criminal prosecution and out of that 6% only half of those prosecuted go to jail[6]. This year, according to Transparency International’s Corruption Perception Index, China slipped down to number 80 from 75 in 2011, to join the company of Serbia and Trinidad and Tobago. In addition, more than one-third of Chinese people said they thought the government was ineffective in the fight against corruption and 46 percent said corruption had increased in the previous 12 month period based on a survey in 2010/11.[7] Corruption delegitimizes the government’s authority, power, and image. The consequences of the loss of faith in the system or authority would symbolize the start of chaos.

Fifth, to respond to the long standing problems with China’s Tibetan and Uyghur minorities: Only a few years ago in 2009, the deaths of two Uighur factory workers in Xinjiang triggered a riot that left more than 150 dead, as Uighur and Han Chinese mobs battled in the streets. More recently, on 31st October 2012, 4 Tibetans set themselves on fire to protest Chinese rule days before the 18th Party Congress.[8] Since 2009, dozens of Tibetans have set themselves on fire to call attention to the ongoing oppression of their people. [9] If the Chinese government does not come up with a suitable long-term solution, these long-standing conflicts could further segregate the Chinese population and lead to greater internal conflict within ethnic groups.

Sixth, to manage the conflict both in the East and South China Seas: the potentially resource-rich areas combined with the modernization of naval forces and internationalization of the conflict have limited the ability for parties to negotiate toward a peaceful resolution, especially with the presence of state-sponsored nationalist movement. Last September, Japan and Taiwan fired water cannons over the disputed territory only days after another naval confrontation between China and Japan. Moreover, this Japan-Taiwan issue puts the US in a difficult situation, as it is an ally of both countries. Also, at the last ASEAN Foreign Minister meeting in July, the Philippines’ vocal stand against China in the maritime dispute combined with China’s close relation with Cambodia led to a division within the members of ASEAN as demonstrated by the inability to provide a Joint Communiqué. This was a first since its inception in 1967.

One issue that might need to be addressed rapidly is the question of fish stocks. Indeed, the South China Sea is home to 300 million people who are dependent on this resource both in terms of nutritional needs and economy. Fish are the cheapest form of protein and it can be a large part of the economy such as in Vietnam and the Philippines. Moreover, most of the maritime altercations involve fishermen, coastguards, and navies. Food security is of the utmost importance and people will go to great lengths if they are unable to eat adequately or provide food for their families. More generally, the East and South China Seas are strategically located with high economic potential making it of the utmost priority not just for China but for the whole region.

Since the end of the Cultural Revolution, China has achieved great economic and social development. However, this fast economic growth came with its own baggage of problems that if left uncheck will undermine the new leadership and delegitimize the party. No one denies China’s past achievements, but in order to pursue its economic development and rise as a regional if not global power, China will have to first resolve its domestic and regional issues. These six issues will be crucial to the new administration, and consequently it is in China’s interest to prevent, manage, and resolve these conflicts because failure to do so could mark the start of its decline. At the 18th Party Congress, the Chinese government seemingly demonstrated a strong will to tackle these issues. However, it is up to the newly-named leader, Xi Jinping, to confront these issues during his term, thus demonstrating that China is not simply talking the talk but is walking the talk.

Author:
Mr. Billy Tea (USA) is a WSD-Handa Fellow at the Pacific Forum CSIS, where he focuses on security issues in South East Asia and maritime security in the Asia-Pacific region. He was formerly an Analyst with the Foreign Policy and Security Studies Bureau at the Institute of Strategic and International Studies (ISIS) Malaysia, where his research focused on conflict prevention, conflict management, and regional cooperation; Chinese foreign policy in Asia; and security and defense relations among the US, Asia, and Europe.

[1] http://www.reuters.com/article/2011/10/12/us-china-oil-demand-idUSTRE79B1GY20111012
[2] http://www.reuters.com/article/2011/10/12/us-china-oil-demand-idUSTRE79B1GY20111012
[3] http://pg2.mofcom.gov.cn/aarticle/aboutchina/population/201208/20120808302400.html
[4] http://www.bbc.co.uk/news/world-asia-china-19662365
[5] http://english.people.com.cn/90882/7950072.html
[6] http://ntdtv.org/en/news/china/china-focus/2012-11-15/china-s-power-transition-new-and-old-leaders.html
[7] http://www.transparency.org/news/feature/fighting_corruption_in_china
[8] http://www.cnn.com/2012/11/08/world/asia/china-tibetan-self-immolations/index.html
[9] http://www.unpo.org/article/15143