Wednesday, February 29, 2012

Political reform in China - Stratfor

China: Reform in a Resilient Political System
Stratfor, February 29, 2012

A spate of recent articles in Chinese state-run media has raised speculation that the country's leadership may address the issue of political reform. Though the issue is by no means a new one, slowing economic growth, a widening income gap and public alienation from the political system are all threatening to undermine the Communist Party's claim to legitimacy, lending a new urgency to the problem. In order to head off the kind of unpredictable or even violent change that could accompany a political crisis, CPC leadership will try to introduce reforms from the top down, but because the current business and political elite have a disproportionate stake in the status quo, this will be easier said than done. 

Over the past week several Chinese state-owned media agencies, including the People's Daily and Xinhua, have commented extensively on the need for political reform. One People's Daily article published Feb. 23, while highlighting the challenges political reform would entail, suggested that failing to enact reforms would have a far more dire consequence: a full-blown political crisis. The following day, semi-state owned Global Times ran an article entitled "Reform Is a Consensus, The Path Is In Debate," which echoed the People's Daily article and laid out a conservative discussion of political reform and China's path forward. 

For the Communist Party of China (CPC), the need for political reform is not up for debate. Since 1978, the CPC has staked its legitimacy on economic growth, but this is showing signs of diminishing returns as growth slows amid the global downturn and as the inefficiencies of China's export-dependent model become more apparent. CPC leadership realizes that to stay in power, the regime will have to implement political reform to address the country's many social and economic inequities. However, top-down political reform has always been difficult to implement because it challenges the interests of people benefitting most from the current system, while bottom-up political change in China historically has taken the form of revolution. To pre-empt rapid or even violent change that would threaten the current system and the party's hold on power, CPC leadership will introduce political reform slowly and incrementally.

Reform in a Chinese Context 
Rhetoric over political reform in China is not as alien as some may think, especially in the years since China's economic opening under former leader Deng Xiaoping. Chinese Premier Wen Jiabao and several high-ranking officials have in recent years repeatedly made high-profile statements about reforms, accompanied by increasing public discourse about the need for political reform. However, no explicit policy prescriptions have accompanied these statements, leaving many to doubt how -- and whether -- reform will be enacted. 

The renewed calls through state media organs therefore have raised public expectations about reform. While no substantial steps could be taken until the 2012 leadership transition is complete and incoming leaders have consolidated their power, some believe that the new generation of leaders, many of whom are considered more liberal than the leaders in the current generation, may actively pursue reform. Nevertheless, even if the individuals in charge sincerely desire political reform, systemic hindrances -- not personalities -- will prove the biggest obstacle to the reform agenda. 

The timing of recent heightened rhetoric is not coincidental. Economically, the imperative for change is clear. After years of rapid growth, the Chinese economy is slowing, and Beijing expects that economic growth will continue to slow over the next few years. Economic restructuring in this context is needed to address corruption, the widening income gap and unequal access to political power, in order to preserve the CPC's legitimacy. 

Thus far, the CPC has paradoxically addressed the issue by further centralizing power and control over the economy, while attempting to promote wealth distribution and increased domestic consumption. But this centralization has been employed in a political system in which the business and political elite play a disproportionately large role in shaping economic policy. This could strengthen their already strong position at a time when their disproportionate wealth and power is starting to stoke feelings of unfairness in the rest of the population. 

As the CPC has evolved, an oligarchy has consolidated within the Party, forming a powerful bureaucracy and controlling the majority of the country's resources and wealth. Princelings, or the descendants of the original CPC elite, have risen to prominent positions in the CPC and in China's many state-owned enterprises. These moves have reinforced an already powerful political-economic network. 

The social environment in China also reveals the need for reform. China's economy is large, but its wealth disparity is immense: Around 0.2 percent of the Chinese population controls 70 percent of the country's wealth. This inequality has led to social frustration and has called into question the CPC's legitimacy. 

Empowering the middle class could help China maintain its dynamic growth by encouraging increased consumption, but the middle class is shrinking, due in part to economic hardship. This has distilled in the middle class a degree of distrust of the government, which came to the fore in urban political demonstrations, including China's Jasmine gatherings. By themselves these demonstrations posed little threat to the CPC, but they had the potential to unify citizens at the grassroots level to form larger movements, evidenced by the so-called Wukan model.

Systemic Challenges 
Those calls for political reform have generated little momentum. They were substantially quelled, with the central government in turn employing a more conciliatory political approach or enforcing security crackdowns. Still, the issue remains the biggest threat to the government's sustainability. 

Governing China requires a strong central government. Centralized power characterizes the CPC today much as it characterized China's early dynasties. When the CPC came to power, its legitimacy flowed from sentiments opposing nationalism and Japanese imperialism, as well as from communist ideology. These sustained the Party even through the Great Leap Forward and the Cultural Revolution but were not enough to unify the country after those disasters. It was not until Deng promised economic betterment that the CPC found a new way to preserve its centrality. 

The CPC is beginning to understand that the current phase is untenable, since large segments of the country clearly have not realized economic betterment. While the general population today is better off than were its grandparents, there is a demonstrable and systemic wealth gap favoring the CPC elite and those associated with them. This phenomenon has occurred due to, not in spite of, the centrality of the CPC. The ruling party can and has instituted economic and social reforms in the past, but such reforms will have negligible effects without accompanying political reforms. 

While the CPC's decision-making process is more democratic than it has been in the past, only a small number of Party members participate. The general population knows that cronyism is still practiced. Demands from the bottom are increasing, as reflected by the rising public outcry against corruption and the increased airing of social grievances, which the Jasmine gatherings, among other political movements, sought to harness. 

The challenges of economic and social management now are moving beyond the control of the current CPC leadership structure. The central authority has weakened and can no longer dictate the terms of the economy. The CPC needs to redefine itself in order to avert a bottom-up movement for regime change, and to do so it must enact political reforms. The problem is that such reforms could risk either the collapse of the entire structure or the loss of power by CPC leaders. 

Political reform could come in the form of a major break within the Party that forces change from the inside, but the CPC desperately wants to avoid the kind of political instability this sort of split could bring; indeed, the whole point of instituting reform from the top is to avoid a political crisis. Any efforts undertaken toward political reform will thus be introduced slowly and incrementally in order to prevent putting the government's hold on power at risk.