The new leadership has stressed it will make a priority of social spending and other measures to spread prosperity more evenly and narrow a politically volatile gap between China’s wealthy elite and poor majority, as well combat endemic corruption that has angered the public.

“In face of the mighty trend of the times and earnest expectations of the people for a better life, we cannot have the slightest complacency, or get the slightest slack at work,” Xi told the nearly 3,000 delegates at the congress’ closing ceremony at the Great Hall of the People in the heart of Beijing.

“We must resolutely reject formalism, bureaucratism, hedonism and extravagance, and resolutely fight against corruption and other misconduct in all manifestations,” Xi said.

Xi, already the country’s overall leader since being named Communist Party general secretary in November, was installed as president during the 13-day session ending Sunday, and the party’s No. 2 leader, Li Keqiang, was named premier.

Premier Li Keqiang held a press conference Sunday, during which he was asked a number of pre-screened questions on a range of topics, including environmental degradation, reform of the re-education through labor system, and U.S.-China relations. Foreign journalists at the event live-tweeted his comments:

Li Keqiang has 3 rules for next 10 yrs. 1. No new govn’t buildings 2. Gov payroll will decrease 3. Entertainment budget will decrease.

— malcolmmoore (@MalcolmMoore) March 17, 2013

Li: no matter how deep the water, we must wade into it. There is no choice. The country’s future depends on it. #reform

— Damien Ma (@damienics) March 17, 2013

Li Keqiang laughs during response to @charleshutzler question: When will China stop hack attacks against the US?

— April Rabkin (@AprilRabkin) March 17, 2013

Li Keqiang breaks into full laughter while responding to hacking question

— April Rabkin (@AprilRabkin) March 17, 2013

Li on environment: it’s no good to be poor in a beautiful environment, nor any good to be well-off and live with environmental degradation

— Mark MacKinnon/马凯 (@markmackinnon) March 17, 2013

China Daily asks Li about time table on re-education through labor reform.

— Eric Fish (@ericfish85) March 17, 2013

Li: Plan on Re-education through labor reform may be unveiled by the end of the year.

— Eric Fish (@ericfish85) March 17, 2013

Journos around me chiding me for bothering to raise my hand. Allegation that I’m contributing to charade this is an actual press conference.

— Mark MacKinnon/马凯 (@markmackinnon) March 17, 2013

NYT has not been invited to Li Keqiang’s inaugural press conference Sunday. I was so looking forward to showing off my new red suede shoes!

— Andrew Jacobs (@AndrewJacobsNYT) March 16, 2013

Interesting – Li Keqiang says he knows many foreign journos didn’t get to ask a question…

— Mark MacKinnon/马凯 (@markmackinnon) March 17, 2013

Nobody asked a question that wasn’t pre-screened RT @ericfish85: Nobody asked how Li’s experience in Henan affected his view on AIDS policy.

— Mark MacKinnon/马凯 (@markmackinnon) March 17, 2013

This is literally true RT @malcolmmoore: Li Keqiang is now putting questions to himself on behalf of the foreign media.

— Tom Lasseter (@TomLasseter) March 17, 2013

Strikes me that Xi and Li were more philosophical this morning than usual, but still steadfastly dull.

— malcolmmoore (@MalcolmMoore) March 17, 2013

Well, show’s over. This was the reform and good governance speech. Li invoked rule of law and transparency more than I expected.

— Damien Ma (@damienics) March 17, 2013

South China Morning Post also posted live updates from the press conference.

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As delegates in the Great Hall of the People in Beijing applauded on Friday, Li stood up, bowed and shook hands with Xi Jinping, who was named as China’s new president on Thursday, and his predecessor Wen Jiabao.

Li received 2,940 votes out of 2,949 cast, a 99.69 percent vote share, slightly lower than Xi’s.

“I announce that comrade Li Keqiang has been chosen as premier of the People’s Republic of China,” said Yan Junqi, a vice-chairwoman of the National People’s Congress, China’s parliament.

Li becomes the country’s first premier with an economics doctorate, according to Bloomberg News, “expertise he may need” as China seeks to restructure a growth model that has begun to stumble. Similarly, The Associated Press repots that China’s new top leaders now face a number of internal challenges:

An increasingly vocal Chinese public is expressing impatience with the government’s unfulfilled promises to curb abuses of power by local officials, better police the food supply and clean up the country’s polluted rivers, air and soil.

“What do ordinary people care about? Food safety, and smog if you are in a big city, and official corruption,” said the prominent Chinese author and social commentator Murong Xuecun, the pen name of author Hao Qun. “They just want to have a peaceful, stable and safe life. To have money and food, and live without worry of being tortured, or having their homes forcefully demolished.”

“The entire country is watching for Xi’s next step,” the writer said.

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The 59-year-old was also elected head of the Central Military Commission, the parallel government post to the party’s top military position which he already holds, ensuring that he has full power over the party, state and armed forces.

There was virtually no opposition among the carefully selected legislators to Xi becoming president. Xi drew just one no vote and three abstentions from the almost 3,000 delegates.

Li Yuanchao was also elected vice president, confirming an earlier Reuters story.

Bloomberg reports on the significance of Xi’s promotion after a tumultuous year in Chinese politics:

The appointment of Xi cements a power transition that was thrown into turmoil last year when Bo Xilai was expelled from the ruling Politburo and his wife convicted of murdering a British businessman. Having all the formal positions gives Xi a leadership mandate in a system where retired leaders still hold sway, said Kerry Brown, a former British diplomat in Beijing.

“The party secretary is the bones, this is the covering of flesh,” said Brown, now a professor at the University of Sydney. “Granting Xi the full suite so quickly is a big deal — it shows huge confidence in him by the party elders and across factions.”

Yet the confidence in Xi shown by the Party elite may take more time to trickle down to the public, who have become increasingly outspoken about government malfeasance on a number of issues. From the New York Times:

Xi takes charge at a time when the public is looking for leadership that can address sputtering economic growth and mounting anger over widespread graft, high-handed officialdom and increasing unfairness. A growth-at-all-costs model that defined the outgoing administration’s era has befouled the country’s air, waterways and soil, adding another serious threat to social stability.

Underlying public unhappiness with the party is a deficit in trust.

“At present, the party and the government have very little public credibility,” said Zhang Ming, a China politics expert at the prestigious Renmin University in Beijing. “The way to regain credibility is to at least show some results, but at this point that can’t be seen and I predict there won’t be any real results later.”

For more on expectations for the Xi administration, watch this video from the Carnegie Endowment for International Peace, which interviews Douglas Paal:

As the carefully scripted elections were held in the Great Hall of the People in Beijing, foreign journalists and others in China tweeted their responses, comparing the closed conclave to the one in the Vatican which elected a new Pope on Wednesday:

As votes are being counted in China’s parliament, guy behind me is snoring, guy in front playing a video game. #redsmoke

— Mark MacKinnon/马凯 (@markmackinnon) March 14, 2013

Xi Jinping’s 99.86% win tops Bashar al-Assad’s 97.62% margin in 2007, but just shy of Kim Jong Il’s 99.98% in 2009.

— Eric Fish (@ericfish85) March 14, 2013

Maybe himself RT @kemc: Wonder who the 1 is. RT @malcolmmoore: RT @aaronback NPC vote for Xi as President: 2952 for, 1 against, 3 abstention

— Philip Pan (@panphil) March 14, 2013

Same result as Xi Jinping elected Chairman of Central Military Commission. One lonely vote against. #redsmoke

— Mark MacKinnon/马凯 (@markmackinnon) March 14, 2013

Xinhua news announced on Weibo: Xi “elected” as president. Minutes later Sina weibo closed the comment function on this post. 37 comments.

— XQ (@MissXQ) March 14, 2013

Today’s broadcast of Red Smoke 2013 has been brought to you by Audi. twitter.com/markmackinnon/…

— Mark MacKinnon/马凯 (@markmackinnon) March 14, 2013

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Leadership changes in China are thrashed out behind closed doors through horse-trading between new leaders and outgoing or retired leaders anxious to preserve their influence and protect family interests, but reshuffles must go through a choreographed selection process.

Two other sources, who declined to be identified because it is sensitive to discuss elite politics with foreign media, also confirmed that Xi had decided to make Li his vice president rather than Liu.

The National People’s Congress, China’s rubber-stamp parliament, will vote in Xi and Li as president and vice president respectively on March 14. Li Keqiang, the party’s new No.2 official, will succeed Wen Jiabao to become premier and oversee the economy and day-to-day running of the cabinet.

[...]

“It was Xi’s decision and a sign he is strong and able to say ‘no’ to Jiang,” the source told Reuters

Reuters adds that Li’s promotion may also indicate Xi’s willingness to pursue limited reforms. But while he has taken steps to increase the inefficiency and tone down the extravagance of the Chinese government, and even said that the government should tolerate “sharp criticism”, a leaked speech from December also dampened expectations of more substantive political reforms.

Noted political theorist Wu Jiaxiang, however, is keeping the faith that Xi can deliver on reform expectations. From an interview with Hong Kong’s Yazhou Zhoukan, via the China Media Project:

YZZK: Those internal speeches by Xi Jinping have created a lot of dissatisfaction. How do [you] view this?

Wu Jiaxiang: My guess is that this is about [addressing] a sense among some prominent old politicians that says basically, look, this Xi Jinping cares only about Deng Xiaoping, he has no use for us — he denies Mao Zedong, he doesn’t mention Jiang Zemin, he talks even less about Hu Jintao. I believe Xi Jinping’s speech at the Central Party School already marked a major compromise, a huge back-step in comparison to how much Deng Xiaoping was willing to give. Deng Xiaoping essentially yielded nothing to the Cultural Revolution faction. Xi Jinping made this [compromise] because he recognised the fact that the Cultural Revolution faction had already made a comeback, that, moreover, this comeback was quite substantial, like a bunch of walking dead if you will. Faced with this situation, how could a General Secretary who has just come to power declare war against these monsters?

A wise politician won’t declare war before they’ve even managed to accomplish something. [Xi Jinping] has a major strategic consideration, and that is to first ensure that this year’s meetings of the National People’s Congress and the Chinese People’s Political Consultative Conference proceed smoothly. If he didn’t compromise, this would instantly drive a major wedge in the Party. The ripples would run across the internet and through the Party ranks. So Xi Jinping must seek the greatest common denominator. He must find broad consensus — and that comes on the issue of the past thirty years of reform, which no side rejects outright.

[...] It might be that he talks about some things he won’t necessarily do. He may also do things he doesn’t necessarily talk about. There may also be things he’s thinking about that he can neither say nor do. This administration is like an iceberg, and right now we see maybe one-eighth. There are still seven-eighths we haven’t seen yet.

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At the largest reunion, held on Saturday at the People’s Liberation Army’s August 1 film studio in West Beijing, children of revolutionary leaders lauded the Xi administration for “correcting” the Party’s course at its “critical moment of life and death”, when it was in danger of abandoning socialism altogether.

“There is hope in the snake year now the Party leadership has shown us the content and direction of Socialism with Chinese Characteristics,” Hu Muying, the daughter of former Politburo member Hu Qiaomu, told the gathering of about a thousand descendants of revolutionary veterans.

“We shall prove by our own actions that we, the children of veterans, are indeed worthy of the name ‘Second Generation Red’,” said Ms Hu. “Let’s strive together towards The China Dream,” she said, endorsing Mr Xi’s political motto.

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Xi and the other six newly elected members of the Standing Committee of the CPC Central Committee Political Bureau have followed a very tight timetable in their first 100 days of rule.

They made many inspection tours of poverty-hit rural areas, sitting on brick beds, chatting with farmers and learning the real situation.

They convened many efficient, down-to-earth but frugal meetings, and promulgated a series of practical and to-the-point policies and measures.

Their jargon-free speeches have become popular soundbites.

The new CPC leaders also used their public appearances in various occasions — inspection tours, meetings and speeches — to deploy political, economic, diplomatic and national defense work, showcasing their ruling principle and concept.

These moves were hailed by media from home and abroad as the “new deal.”

Singapore’s Straits Times also spoke to a number of China observers and put together a report card for Xi:

Asked to grade Mr Xi on a scale from “A” to “F”, Singapore-based observer Li Mingjiang gave him an “A minus”. “Xi has done a fairly good job so far. First of all, he has created a new and positive political atmosphere in China,” he added.

Professor Li cited Mr Xi’s efforts such as cutting back on lavish ceremonies and receptions for officials, encouraging local governments to be less wasteful, and taking tougher steps against graft.

…

Mr Xi got a “B” grade from Nottingham University analyst Steve Tsang, who credits the leader for taking on corruption and abuse of power verbally.

“He has also projected an image of taking these issues seriously by appointing Wang Qishan to this portfolio,” he added.

…

But Hong Kong-based analyst Willy Lam gave Mr Xi “a mere pass” – a “D” grade.

He said Mr Xi has been disappointing in not saying much so far about economic and especially political reform, and has also continued the illegal treatment of dissidents such as the house arrest of jailed Nobel laureate Liu Xiaobo’s wife Liu Xia.

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In Mr. Xi’s first three months as China’s top leader, he has gyrated between defending the party’s absolute hold on power and vowing a fundamental assault on entrenched interests of the party elite that fuel corruption. How to balance those goals presents a quandary to Mr. Xi, whose agenda could easily be undermined by rival leaders determined to protect their own bailiwicks and on guard against anything that weakens the party’s authority, insiders and analysts say.

“Everyone is talking about reform, but in fact everyone has a fear of reform,” said Ma Yong, a historian at the Chinese Academy of Social Sciences. For party leaders, he added: “The question is: Can society be kept under control while you go forward? That’s the test.”

[...]

The tension between embracing change and defending top-down party power has been an abiding theme in China since Deng set the country on its economic transformation in the late 1970s. But Mr. Xi has come to power at a time when such strains are especially acute, and the pressure of public expectations for greater official accountability is growing, amplified by millions of participants in online forums.

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In the wake of the recent Bo Xilai scandal and the resulting crisis of CPC rule, many had anticipated that party leaders would adopt certain election mechanisms—what the Chinese authorities call “intra-party democracy”—to restore the party’s much-damaged legitimacy and to generate a sense that the new top leaders do indeed have an election-based new mandate to rule. For example, some analysts had anticipated that the CPC Central Committee might use competitive (though limited) multiple-candidate elections to select members of its leadership bodies, such as the twenty-five-member politburo or even the PSC. Such high-level elections, however, did not take place. The selection of elites at this congress continued to be done the old fashioned way—through the “black box” of manipulation, deal-cutting, and trade-offs that occur behind the scenes among a handful of politicians (e.g., outgoing PSC members and retired heavyweight figures—most noticeably the 86-year old Jiang).

What is even more troubling is the fact that four out of the seven PSC members are princelings—leaders who come from families of either veteran revolutionaries or high-ranking officials. It has been widely noted that large numbers of prominent party leaders and families have used their political power to convert state assets into their own private wealth. The unprecedentedly strong presence of princelings in the new PSC is likely to reinforce public resentment of how power and wealth continue to converge in China.

Chinese politics thus seem to be entering a new era characterized by the concentration of princeling power at the top. This gives rise to important questions regarding the nature and implications of the new leadership. What caused the dramatic defeat of the Hu camp in this political succession? Does the six-to-one split of the PSC mean a shift from factional power-sharing to a new “winner takes all” mode of Chinese elite politics? Will the factional imbalance at the top seriously undermine leadership unity and elite cohesion, thus potentially threatening the sociopolitical stability of the country at large? What are the main characteristics of this new princeling elite? What should we expect in terms of economic policies, political reforms, and foreign relations under the Xi Jinping administration? And can the identities of newly promoted leaders help us understand where China is headed?

The issue also includes a Pico Iyer essay about the Dalai Lama, an article about the South China Sea disputes, and interview with Orville Schell, and a review of two recent e-books about the fall of Bo Xilai, written by CDT’s Translation Coordinator, Anne Henochowicz.

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Jiang asked the party’s new Central Committee to put his name among those of other retired leaders, and behind incumbent party and state leaders, after the party’s national congress in November, Xinhua reported.

It praised Jiang’s move as “reflecting the noble character and sterling integrity and open-mindedness of a Communist”.

At the funeral of General Yang Baibing on Monday, Jiang’s name appeared after those of members of the party’s Politburo Standing Committee and state leaders for the first time since his full retirement in 2004.

Jiang had previously ranked second only to President Hu Jintao at official occasions following his retirement.

The South China Morning Post had reported Jiang’s tumble in the pecking order on Tuesday, before state media claimed the change came at the former leader’s own request. Still, one Beijing-based political analyst told the South China Morning Post on Thursday that Jiang “had most likely been forced to take a step back.” Chris Buckley of The New York Times noted that Jiang was listed third in a similar mourning announcement just two months ago:

For some political analysts seeking to fathom the undercurrents of power in China’s elite, Mr. Jiang’s reduced protocol ranking suggested something more: that he may finally curb any impulses to exert influence in Zhongnanhai, the party leadership’s compound in Beijing.

“In China, the saying goes that you must live up to your title to give your words sway, so if Jiang Zemin meddles in politics again after making this step, his reputation will be badly damaged,” said Yao Jianfu, a retired party official and researcher in Beijing.

“It’s a change in protocol, but now he’ll be expected to live up to it and stop being such a political busybody,” Mr. Yao said.

One observer, however, told NPR’s Louisa Lim that it’s too soon to say whether Jiang had really relinquished his behind-the scenes influence on party affairs:

“In terms of the symbolism, this is a step forward to mitigate and to guard against the so-called geriatric politics: the old men interfering, retired old cadres who have no position still having a big say in party affairs,” said Willy Lam, a China politics expert at the Chinese University of Hong Kong.

“But on a practical level, it’s difficult to prevent Jiang Zemin from still trying to do whatever he can to interfere in party affairs,” Lam said. “In the Chinese context, tradition dies hard and you have a long record of retired party elders still interfering in party politics.”

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He could try to force a showdown with Hu and his allies on major issues. Or Xi and his colleagues might risk a bit of radical reform of some sort, to find support in the street, and try to capitalize on those parts of the society and the party that clamor for change, and are weary of waiting.

Or Xi could wait a bit, hibernate until the spring, when Hu is scheduled to step down as president in March and the political path for the summer then a bit clearer. Xi could initiate some small change in the interim – perhaps speeding up the restructuring of the hukou system.

But can reform wait even that long? Can the economy?

Or Xi could move to find an accommodation now, working from the common ground that surely must exist–even after Xi’s early sniping at the state of the party that he’s had to inherit. It’s not entirely clear if it’s Xi’s program that opponents object to, or more the speed at which Xi seems to be pursuing reforms.

This much seems already true: that the handover to a new leadership was the easy part—a mere transition. The hopes—and the hazards — of a far greater transformation beckon.

See also CDT coverage of an open letter released on Christmas Day urging the new leadership to pursue political reform.

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The profiles seemed to be a well-intentioned nod to lift the veil of secrecy long surrounding party leaders. The articles’ obsequiousness, however, was a reminder how far Mr. Xi and other newly anointed leaders have to go if they’re serious about following through on pledges to reconnect the party to the people.

“From the Loess Plateau to the southeast coast, from localities to central leadership, Xi has had a well-rounded political career and has developed a deep understanding of the conditions of his country and people,” gushed the Xinhua profile of Mr. Xi. The article’s English version, published Sunday, sprawled some 3,000 words.

The profiles’ thrusts are all roughly the same: China’s newest generation of leaders rose through individual hard work and sacrifice, but never lost their affinity for China’s laobaixing, or common folks.

To underscore the point, Xinhua published more than a dozen photos of Mr. Xi in his younger – and slightly trimmer – days that have been widely reposted on Chinese news websites. One photo shows Mr. Xi smiling with villagers in the northern province of Hebei, where he served as a young cadre. Another photo shows Mr. Xi bicycling with daughter Xi Mingze seated on the back, clutching at her father’s waist.

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Economists reacted positively to the data, according to The Sydney Morning Herald:

“The export slowdown shows external demand faces uncertainty due to concerns over the fiscal cliff in the US,” said Zhang Zhiwei, chief China economist at Nomura in Hong Kong. “Nonetheless it does not change our view that growth is on track for a strong recovery in Q4, as (growth) is mostly domestically driven.”

…

“The Chinese economy is now in a sweet spot and can stay in the sweet spot through the first half of 2013,” Ting Lu, an economist at Bank of America-Merrill Lynch, said before the trade figures were released. “Beijing will be happy to sustain the current policy stance.”

With China likely to post its slowest full-year of growth since 1999, however, Chinese leaders concluded the annual Central Economic Work Conference in Beijing on Sunday by warning that the world’s second largest economy is not yet out of the woods. With Europe’s debt crisis still raging, and with the U.S. economic recovery still uncertain amid the ongoing “fiscal cliff” deadlock in Washington, The Wall Street Journal adds that China’s new leaders “sent their strongest signal yet” that they will focus on retooling the economy to rely less on export growth and more on domestic demand. Here, the China Daily reports that top policymakers continued to pledge reform - from cutting taxes to enabling greater mobility for rural workers, and providing more support to agriculture and innovation – to keep economic growth stable.

But was anything new put forth following the conference? The Financial Times’ Jamil Anderlini checked in from Beijing today with a resounding “no”, writing that the leaders revealed an economic agenda “largely in line with that of the outgoing administration.” Similarly, Keith Bradsher of The New York Times reports that the government released a lengthy statement calling for continuity, at least for now:

The statement endorsed tax cuts, continued curbs on real estate speculation and a broader effort to increase domestic consumption and wean the economy from its dependence on exports and investment.

“The opportunities facing us are no longer the traditional ones of simply entering the international division of labor, expanding exports and accelerating investments, but rather new opportunities forcing us to expand domestic demand, improve innovative capacities and promoting the transformation of the mode of development,” the statement said.

…

While China has many economic opportunities, “we must soberly recognize that there are still many risks and challenges confronting our national development,” the overview released by Xinhua said. “Problems with imbalances, ill-coordination and lack of sustainability remain pronounced.”

“The contradiction between downward pressures on the economy and relative overcapacity in production is deepening,” the statement continued. “Business operating costs are rising while innovative capacities are inadequate. There are latent risks in the financial sphere.”

Expectations of reform have indeed been heightened of late, as new Communist Party chief Xi Jinping retraced Deng Xiaoping’s 1992 “Southern Tour” with a similar trip of his own last week. The Chinese Academy of Social Sciences even warned last week that China’s economic imbalance had reached alarming levels that would hamper growth in the absence of bold action. Such a warning comes as a new survey indicates that China’s Gini coefficient, or measure of income inequality, may be far higher than previously thought.

While China will need reform to ensure that growth returns to the 8% level that the state-run Bank of China predicts for 2013, not everyone has bought into the rhetoric. MarketWatch’s Craig Stephen wrote Sunday that “once again it looks as if talk is easier than action when it comes to economic reform in China.” The Financial Times’ Kate Mackenzie echoed that sentiment today:

Don’t be misled by the proclamations of ‘reform‘ or ‘quality growth‘ from China’s central economic work conference at the weekend. It’s more of the same, at least for the time being.

The more concrete message was that economic and monetary policies would “remain stable for year ahead”. In other words: keep pursuing for just a little longer the brittle policies of property price inflation, more infrastructure investment, and looser money and credit.

Dr. Robert Lawrence Kuhn, however, does see some key reforms on the horizon. From Forbes India:

I expect substantial changes in the economy in the months following March. In China, it is a (cultural) tradition of new governments to carry on with policies of the earlier regime for a long time. Any change is thought to be disrespectful. But this time, it seems, the risk of not reforming is much higher than the risk of change. For example, there have been a series of corruption scandals. The new leaders will be under more pressure to change much quicker. While I do not expect much change on international policies—the rigid nationalism and tough rhetoric—there will be quick changes on the economic front. Xi Jinping’s opening speech showed this. The address was rational, without the usual political jargon, and offered hope. One feedback I got from his aides is that “the biggest concern now is high expectations”. The seven top leaders are the first batch not picked by Chairman Mao Zedong or Deng Xiaoping. This marks a very important transition for China.

One question I am asked very often is for how long will China be able to retain its edge in manufacturing? From the leadership’s standpoint, the answer is clear: Wages have to go up. The economic divide is at several levels—the coastal population versus those living inland, urban versus rural, basically rich versus poor. For decades, rural wages have been increased by moving population to the cities. In the past 40 years, about 500 million people have moved to urban areas. So, the rural population has halved, while income levels have doubled. It is only possible to increase workers’ wages if the margins on manufacturing go up.

The bottom line, according to Asia advertising executive Tom Doctoroff, is that reform is no longer a luxury and all eyes are on Xi Jinping and his new regime to inspire public confidence in his blueprint for economic progress:

Many now ask whether the contradictions of society — between rich and poor, urban and rural, young and old, politically connected and “small potatoes” — are approaching the breaking point. While crisis is not imminent, loss of absolute confidence in the future of the country has manifested itself in many ways, from 200,000 local protests to a slowdown in sales of luxury goods, real estate and autos. According to C-trip, bookings mid-level travel destinations such as Hainan island, usually popular amongst the new middle class, are down dramatically. Job-hopping, perhaps the greatest indicator of economic optimism amongst ambitious Chinese, has slowed, a sign of diffused anxiety.

…

However, until Mr. Xi outlines specific, incremental steps of structural reform — intra-party checks and balances, independent commercial courts, urban residency reform, rural land-ownership reform, further strengthening of the welfare net and other institutional mechanism to safeguard the economic interests of individuals — consumer confidence will wane. If so, “rebalancing” will remain a long way off, and the China’s potential under-realized. China will certainly not flirt with Western-style democracy or laissez-faire capitalism. But the Chinese, supreme pragmatists that value stability above all else, know the status quo is unsustainable.

Have China’s Trade Statistics Been Inflated?

November export growth of 2.9% may have disappointed, especially when compared to robust figures of 9.9% and 11.6% in September and October, respectively, but what explains the big swing? Forbes’ Gordon Chang points to a couple of reasons why fake transactions may have distorted the trade data:

Are we to believe China had an export boom lasting just two months?  Anything is possible, but a more likely explanation for the anomalous September and October figures is that they were distorted by fictitious transactions.

Anne Stevenson-Yang of J Capital Research in Beijing, in one of her November e-mail alerts, suggests that the uptick in exports may have been partly due to hot-money inflows caused by currency speculation.  Exporters, she notes, are overstating sales, allowing them to book revenues in dollars.  They then use the paperwork to get permission to sell dollars for renminbi.  The result is that exporters made money with their currency transactions, but the byproduct is that the Ministry of Commerce’s trade figures overstate China’s exports.

Tom Holland of the South China Morning Post reports an even more ingenious scheme that has artificially pushed up Beijing’s trade statistics.  There is, he notes, legitimate trade where goods go from one part of China to another through Hong Kong.  For example, it makes sense to transport through Hong Kong components manufactured in Shanghai for final assembly in Shenzhen.  Since 1997, Hong Kong has been part of the People’s Republic, but it is not considered as such for customs purposes.

Other News:

• Japan may have overtaken China as the largest holder of U.S. debt, according to The Wall Street Journal.
• The Wall Street Journal reports that as part of its push to boost domestic demand, China will lower tariffs on a range of imported items next year.
• Bloomberg reports that power consumption posted its biggest monthly gain since February.
• MarketWatch’s Craig Stephen writes that China’s regulator is taking steps to heal its sickly stock markets.
• The State Administration of Foreign Exchange has removed the $1 billion limit for foreign sovereign wealth funds, central banks and monetary authorities investing in China through the QFII program, according to Reuters.

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Post tags: bank lending, CCP 5th generation, debt crisis, economic growth, economic reform, exports, gini coefficient, inflation, manufacturing, trade data, Xi Jinping
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Of the seven men who now comprise the Communist Party’s new politburo standing committee, the apex of political power in China, four are members of “the red aristocracy”, led by the new general secretary of the party, Xi Jinping.

The thriving of the princelings should not be a surprise, analysts and party insiders say. Rarely in its six decades in power has the party been under more stress. Public anger over widespread corruption, widening income inequality and vast environmental degradation have chipped away at its legitimacy.

The party’s over-arching goal is to maintain its grip on the nation, and moving so many princelings into top positions is akin to taking out a political insurance policy.

“Fundamentally, princelings advocate maintaining one-party dictatorship,” said Zhang Lifan, a Beijing-based political commentator. “This is (their) bottom line.”

With five Standing Committee members expected to retire in 2017 due to an age limit, it remains to be seen whether the “princelings” can hold their slight edge on the Party’s top ruling body. The New York Times’ Edward Wong calls out recently-promoted Hu Chunhua and Sun Zhengcai, neither “princelings,” who may have an inside  edge on an open Standing Committee seat in five years:

Mr. Hu’s rising star got brighter this month when he was named one of 15 new members on the party’s 25-seat Politburo. Political analysts say he could be on track to ascend to the Politburo’s elite Standing Committee at the next party congress, in 2017. That would put him in the running for the top party job — and the mantle of leader of China — when Xi Jinping, the new party chief, steps down after his expected two five-year terms.

Mr. Hu is the most prominent of a clutch of political stars known as China’s “sixth generation.” They were handpicked by party leaders and elders years ago to succeed Mr. Xi’s fifth generation (the first generation was that of Mao Zedong). Now, those politicians are being slotted into some of the most important posts across China.

Political insiders say Mr. Hu will probably be sent soon to Guangdong, a coastal province that is central to China’s export economy. His closest rival, Sun Zhengcai, whom Mr. Locke also met this year, was posted earlier this month to Chongqing, the booming southwest municipality of 31 million once run by Bo Xilai, the disgraced party aristocrat.

If Mr. Hu and Mr. Sun both make it onto the Standing Committee in 2017, they would be in position to vie for the top two party posts in 2022, which would confer on them the state titles of president or premier.

For more on Sun and Hu’s prospects, see ‘Chongqing, a Slippery Stepping Stone‘ on CDT.

© Scott Greene for China Digital Times (CDT), 2012. | Permalink | One comment | Add to del.icio.us
Post tags: CCP, CCP 5th generation, CCP 6th generation, Hu Chunhua, Politburo Standing Committee, princelings
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A member of the first group of students admitted to university after late paramount leader Deng Xiaoping ordered the resumption of the university entrance exam in 1977, following the chaos of the Cultural Revolution, Li studied law under Professor Gong Xiangrui , an expert on Western constitutional law who had studied in Britain in the 1930s. Li followed that with a PhD in economics under Li Yining, the mainland’s market reform guru.

[...] Li reportedly plunged into campus politics as reformist ideas galvanised students, befriending freethinkers who went on to become dissidents in exile, and helping to translate The Due Process of Law by famed English jurist Lord Denning.

[...] Former classmate and prominent dissident Wang Jintao [sic], who has lived in exile in the United States since 1994 after being sentenced to 13 years in jail for supporting the 1989 Tiananmen Square democracy movement, said Li was outspoken and quick-witted on campus.

[...] ”On campus, Li Keqiang was a student with an active mind and sharp words,” Wang wrote in a memoir. “He has his own independent thinking and preferences. But he will not challenge authority on major issues. He is also a person who wants to have big personal accomplishments.”

In his discussion with delegates from Shandong Province during the 18th Party Congress, Li made his intention to push through reforms clear. From People’s Daily:

Li Keqiang said on Thursday that China should lose no time in deepening reform in key sectors and resolutely discard all notions and systems that hinder efforts to pursue development in a scientific way.

[...] Li noted China remains in an important period of strategic opportunities for its development, the period that is full of unprecedented risks and challenges.

Under such circumstances, he said, China should accelerate improvement of the socialist market economy and facilitate the change of growth model to complete the building of a moderately prosperous society in all respects as well as deepen reform and opening up in an all-round way.

The Party needs to properly handle the relations between the regulators and the market and implement a more proactive opening up strategy to boost the momentum and vitality of development, he said.

Several of his classmates have expressed their hope that Li has not abandoned his early political beliefs. One of his classmates tells Jeremy Page at the Wall Street Journal that Li is believed to have ”a clear understanding of the weakness of China’s legal system as many of his close friends are lawyers, judges and law professors”. Given his relatively vague political reform agenda, more believe Li will tackle economic reform as job number one. From Simon Rabinovitch at Financial Times:

He is also believed to have played a role in the China 2030 report authored by the World Bank and the Development Research Center, a think-tank under the Chinese cabinet, that recommended limiting the power of state-owned companies.

[...] “Li Keqiang will be more effective than Wen Jiabao,” said Bo Zhiyue, an expert on Chinese politics at the National University of Singapore. “Wen Jiabao tried to promote too many things – political reform, social reform as well as economic reform. Li Keqiang will be more focused.”

Some analysts, however, see Li Keqiang’s grassroots background as an obstacle for him to implement his reformist ambitions. From Keith B. Richburg at the Washington Post:

Li’s father was a mid-level county official — “a small potato,” said one classmate — in Anhui province, one of China’s poorest areas. And unlike Xi and the other princelings, whose upward path was eased by family connections, Li was admitted to Peking University on the basis of his scores on the national entrance exam, or “gaokao,” when it was first reinstated in 1977 after being suspended during the Cultural Revolution.

[...] Li Datong, who was fired as an editor of a China Youth Daily supplement for pushing the boundaries of official censorship, met Li Keqiang in the ’90s and considers him a reformer — even though, like others, he said the incoming premier’s hands may be tied by the system.

[...] “If we can expect any democracy, it will be democracy within the system, and Li will help Xi in doing this,” said Yan Huai, a former official with the Communists’ now-disbanded Young Cadres Bureau, who joined the 1989 protests and then left for the United States. “How far Xi walks will determine how far Li can go. He won’t walk in front of Xi. And neither will he lag behind him.”

As some analysts see his early liberal education and his fluent self-taught English as hints of his western-leaning political beliefs, other more skeptical observers are questioning his political integrity based on his dealing with the AIDS crisis in Henan. Christopher Bodeen at Associated Press wrote last week:

Li, to be promoted within the leadership’s top council after a pivotal party congress closes later this week and expected to take the economy-focused post of premier from outgoing Wen Jiabao next spring, was governor of the agricultural province of Henan in 1998 during an unusual explosion of AIDS cases.

Tens of thousands of people had contracted HIV from illegal blood-buying rings that pooled plasma and re-injected it into donors after removing the blood products. But Beijing hadn’t acknowledged the problem yet, and Li oversaw a campaign to squelch reporting about it, harass activists and isolate affected villages.

[...] ”He just tried to escape from this crisis” at first, said Wan Yanhai, a prominent Chinese AIDS activist who fled to the United States with his family in 2010 following increasing police harassment. “He’s probably not a bad guy, but he’s not shown himself to be very capable of managing crises in a strong and responsible way.”

Andrew Jacobs at the New York Times also questions Li’s administrative capacity based on his unremarkable achievements as vice premier for the last five years:

As vice premier in charge of economic development, food safety and health care, Mr. Li has overseen an expansion of the medical insurance program. But his other signature project, which seeks to build 36 million low-cost apartments, has been criticized by some for poor planning and shoddy construction. And some analysts say his commitment to the commonweal has been tested by his brother’s role as the top official in China’s State Tobacco Monopoly Administration.

[...O]ne former official turned businessman thought it would probably take a crisis to compel Mr. Li and other leaders to embrace a substantial loosening of political and economic controls.

“I think in the end, events will force them to change, even if they don’t want to,” the businessman said. “Smart leaders will reform because they want to. Idiots will reform because they have to.”

See also a video on Li Keqiang, China’s “effective second fiddle?”, via CNN. See more on Li Keqiang via CDT.

© Mengyu Dong for China Digital Times (CDT), 2012. | Permalink | One comment | Add to del.icio.us
Post tags: 18th party congress, CCP, CCP 5th generation, Communist Youth League, economic reform, leadership transition, Li Keqiang, Peking University, Politburo Standing Committee, political reform, reformers
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No Michelle Obama-style advocacy. Nor Jackie Kennedy-like glamour. Simply the expectation that one will fade into the black cloak of secrecy that surrounds all of China’s leaders.

And yet if anyone could break free of that muted tradition, it would be Peng, one of China’s most recognizable folk singers.

For most of her marriage to China’s current vice president, Xi Jinping, her fame has eclipsed his. A civilian member of the Chinese army’s musicale troupe, she was admired by hundreds of millions for her annual performances on state television’s New Year’s Eve shows. And according to people who have met her, she exudes an easy grace, a confident grasp of conversational English and a seemingly sincere heart for charitable causes.

“If this were the West, one would say she has the perfect requirements for being a leader’s wife: beauty, stage presence, public approval,” said one party intellectual, who spoke on the condition of anonymity to avoid jeopardizing his work teaching future government officials at party schools. “But things are different in China.”

In another profile of Peng, the Globe and Mail looks at the early days of Peng and Xi’s relationship:

In Ms. Peng’s telling, it was her husband who did the courting when they first met. In a rare newspaper interview ahead of her husband’s promotion to the Standing Committee, she told the Zhejiang Daily that when the couple went on their first date in 1986, she dressed in plain military attire to make sure that he paid attention to her personality rather than her widely admired looks.

Mr. Xi, then 32 and a recent divorcée, was already rising political star, the executive vice-mayor of the port city of Xiamen. While he couldn’t match for the national celebrity of his 24-year-old companion, he didn’t seem aware of that.

“In our first encounter, I found his dress outmoded and severely plain, while [his face] looked older than his real age,” Ms. Peng told the Zhejiang Daily in 2007. “He didn’t even realize how famous I was and that I was the original performer of one of his favourite songs.”

Despite Mr. Xi’s underwhelming first impression, the couple married a year later. The future president apparently charmed her with his knowledge of music theory. “At that time, I was very moved. Isn’t this the one I’ve been looking for?” the Zhejiang Daily quoted Ms. Peng saying. “He’s unsophisticated but he’s really intelligent.”

The South China Morning Post tells the story of their daughter’s birth, during which Xi Jinping was called away for work and was not present:

A provincial foreign affairs official said Xi’s wife, famous soprano Peng Liyuan – who holds the rank of major general in the People’s Liberation Army, was in Fuzhou as her due date approached and hoped that Xi would be present for the birth.

“But at that time, Fuzhou was hit by a strong typhoon, and Xi had to direct disaster relief work in the worst-hit area, keeping him away for three days and nights,” the official said.

Many officials in Fujian said that most people in the province were aware that Xi had ordered Peng not to accept offers of freelance work after their marriage, causing her to lose countless opportunities to make money.

“When Xi was in Xiamen, he even asked Peng to do free performances for local people,” the foreign affairs official said.

“Xi is so lucky to have such a virtuous and approachable wife, who has helped earn him a lot of publicity.”

The Washington Post has compiled a slideshow of Chinese First Ladies, past and present. See also Peng’s performances of Our Motherland:

And of The Laundry Song, a propaganda song about Tibet, the significance of which is explained by High Peaks Pure Earth:

© Sophie Beach for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us
Post tags: 18th party congress, CCP 5th generation, Peng Liyuan, Xi Jinping
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