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CHANGES & IMPACTS

11 November 2012tag:UNDERSTANDINGAuthor: Yuan Associates


      During the 18th National Congress of the Communist Party of China (CPC) in November 2012, Hu Jintao represented the outgoing top leadership of the CPC and relinquished China’s highest power to Xi Jinping. Xi Jinping is the head of a new group of leaders who are considered the fifth historical group of leaders since the founding of the P.R.C. in 1949. In comparison to previous political transitions that were accompanied by turmoil, accidents or unforeseen issues with candidates, the 16th CPC National Congress marked the beginning of a more stable period of political transitions as Jiang Zemin gave way to Hu Jintao in 2002 in the first smooth transition of political power since the founding of the People’s Republic of China. The 18th National Congress was also marked by a relatively smooth political transition and reflected a level of stability in the current political climate in China even after the Bo Xilai incident earlier this year. 

     

     When Jiang Zemin transferred power to Hu Jintao in 2002, China was the world's 6th largest economy, the world's 4th biggest exporting country, and the world's 6th largest importing country. After ten years, China became the world's 2nd largest economy, the world's 1st biggest exporting country, and the world's 2nd largest importer.  Meanwhile, China faces unprecedented economic and social challenges, such as slower economic growth, sluggish economic restructuring, an aging population, environmental pollution, moral deficiencies, unbalanced income distribution, the spread of corruption, and more burdensome social conflicts. The decisions and initiatives of the new leaders to meet these challenges will shape China’s development over the next 5 to 10 years. 

     

     The 18th Congress has brought changes from multiple standpoints. Personnel and institutional changes are the most obvious as almost 60% of the over 200 central committee members were newly-elected. Only 10 of the total 25 Politburo members were reelected, while the size of the nine-member Standing Committee of Politburo was reduced to seven, with two previous members retaining their seats (Xi Jinping and Li Keqiang). The constitution of the CPC was also amended during the 18th Congress. The new constitution confirmed the legacy of Hu Jintao by adding his development philosophy. It also stressed that China would continue its socialist political system as well as its reform and opening–up policies. Finally, the 18th Congress report set a new goal of achieving a “generally prosperous society in all respects” and doubling 2010 GDP and per capita income for both urban and rural residents by 2020. New concepts such as “build an ecological civilization and make a beautiful China” also indicate new policy directions.

    

     Although the 18th Congress report works as a framework that demonstrates CPC’s top working priorities and its major policy directions, the report itself is a product of compromise that considers everyone’s needs while balancing and coordinating multiple opinions from both inside and outside the party. So far, it is difficult to estimate the specific impacts on multinational companies based on the broad directions outlined in the report. The new administration that is set to take office in the next National People’s Congress to be held in March will begin turning the party’s political will into practical policies and implementing the new directives. 

     

     The 18th National Congress of the CPC is only a milestone in China’s leadership transition and one of many changes in party and government agencies and personnel between 2012 and 2013. Between now and October 2013, we will witness provincial government transitions, the party’s state leader nominations to the National People’s Congress, NPC’s approval of these nominations, the restructuring of the State Council, and other important events. In the 3rd plenary session of the 18th CPC Central Committee to be held around October 2013, following the completion of all personnel arrangements and consensus building, the new leadership is expected to announce its own governing philosophy with an announcement similar to a ‘New Deal’.

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