A push for change in China as new leaders take the helm

YUANGUDUI, China Sun Mar 3, 2013 3:51am EST

1 of 18. Chief of China's Communist Party Xi Jinping is seen in a picture during a visit in Yuangudui village, Gansu Province February 12, 2013. Communist Party chief Xi Jinping, who takes over as China's new president during the annual meeting of the legislature beginning on March 5, visited Yuangudui in February to highlight the poverty that still reigns in huge swaths of the country. Closing a yawning income gap is likely to be one of the policy priorities of his administration and the impoverished villagers are fully conscious of the inequality plaguing China, even if some of them had never heard of Xi Jinping before he showed up in town. Most young people have left for the provincial capital of Lanzhou, where they can make 1,000 yuan ($160) a month, more than the average village income of 800 yuan a year. Picture taken on February 12, 2013.

Credit: Reuters/Carlos Barria

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YUANGUDUI, China (Reuters) - For Chen Qiuyang, the new Chinese leadership that formally takes over this month can radically improve her life by doing just one thing: providing running water in her village in a remote corner of the northwestern province of Gansu.

"We have to carry water from the well on our shoulders several times day. It's exhausting," Chen, who looked older than her 28 years, said in Yuangudui village, resting on a stool outside her home after completing another trip to the well.

Communist Party chief Xi Jinping takes over as China's new president during the annual meeting of parliament beginning on Tuesday and bridging the widening income gap in the vast nation is one of his foremost challenges.

Xi has effectively been running China since assuming leadership of the party and military - where real power lies - in November, and has already projected a more relaxed, softer image than his stern predecessor Hu Jintao.

But there will be pressure on him to tackle problems accumulated during Hu's era like inequality and pervasive corruption, which have given rise to often violent outbursts in the world's second-biggest economy, sending shivers through the party.

Outgoing Premier Wen Jiabao will likely address these issues in his last "state of the nation" report at the National People's Congress to nearly 3,000 delegates, whose ranks include CEOs, generals, political leaders and Tibetan monks - as well as some of China's richest businessmen.

China now has 317 billionaires, a fifth of the total number in the world, and is on track to overtake the United States as the largest luxury car market by 2016.

Yet the United Nations says 13 percent of China's 1.3 billion population, or about 170 million people, still live on less than $1.25 a day.

While parliament is a regimented show of unity that affirms rather than criticizes policies, income redistribution is likely to be a hot topic, along with other issues like ministry restructuring, corruption and the environment.

In January, the State Council, or cabinet, issued a new fiscal framework designed to make rich individuals and state corporations contribute more to government coffers and strengthen a social security net for those at the bottom.

But tackling China's wealth gap will need more than just taxes. Analysts say state-owned enterprises will have to be privatized and the household registration, or hukou, system that prevents migrants from enjoying the benefits of urban citizens, will have to be dismantled.

"Fiscal reforms and changes to let private firms advance and the state retreat will decide whether this round of reforms can succeed," said Xia Bin, an economist at the cabinet think-tank Development Research Centre and a former central bank adviser.

"There is definitely no way out," he wrote in the latest edition of China Finance, a magazine published by the central bank.


Many groups have said they will make sure that message is heard at the parliament, even though the session typically acts more as a talking shop for decisions already made by the party rather than approving new laws. On its closing day it will formally vote in Xi as the new president and Li Keqiang as new premier.

A group of private businessmen will meet on the sidelines to push for privatization of state firms, which they view as a "vital second round of reforms", according to a person knowledgeable about their plans.

A separate forum for private steel producers will air grievances about preferential loan access for state firms, even though the state firms were less profitable than their more flexible cousins in last year's volatile steel market.

The champions of the private sector argue that private firms generate nearly 60 percent of China's economic growth and 75 percent of jobs.

Favoring state firms that thrive on political connections rather than market discipline skews the economy, undermining future competitiveness, they say.

Some export-oriented companies have ceased manufacturing and are simply speculating in property or the grey finance market.

"Private firms are having a hard time," said Xu Qing, general manager of Zhongbohong Urban Development Co, a unit of privately owned property and investment firm Boao Hungkai Enterprise Group in Guangzhou.

"I believe top leaders have seen the problems and I'm cautiously optimistic about reforms."

Without reforms, China is at risk of falling into the "middle income trap" after three decades of breakneck growth, the World Bank warned last year.

Growth in the world's second-biggest economy slowed in 2012 to a 13-year low, albeit at a 7.8 percent rate that is the envy of other major economies.

The annual economic growth target is likely to be set at 7.5 percent for this year, the same as in 2012.

Many analysts believe China's growth will be nearer 5 percent than 10 percent by the end of this decade without reform, making it even harder to tackle the gap between the rich and the poor.


China's Gini co-efficient, a measure of social inequality, stands at 0.474 according to official estimates, well above the 0.4 level that analysts view as the point at which social tensions may come to a head.

A 0 score on the Gini scale denotes perfect equality and 1.0 complete inequality.

For now, such statistics are a long way from Yuangudui, where government support boils down to repaving rutted roads, building latrines and subsidizing planting of potatoes, a cash crop.

But the villagers are fully conscious of the inequality plaguing China, even if some of them had never heard of Xi Jinping before he showed up last month on a visit.

Most young people have left for the provincial capital of Lanzhou, where they can make 1,000 yuan ($160) a month as construction workers, far more than the income from farming.

"The rich get richer while we in the village are getting poorer," said Guo Lianying, 32, holding out his hands to symbolize the growing gap.

"This is a problem the general secretary has to solve," he added, using Xi's formal title as Communist Party boss.

(Writing and additional reporting by Kevin Yao and Lucy Hornby; Editing by Raju Gopalakrishnan)

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Comments (3)
gee.la wrote:
China is in the bottle neck. The way to lower the costs to get competition advantage and to pump the asset value for GDP growth is close to its end. The industry of heavy pollution will meet a crisis, as central government gradually get the control back from the local government and the normal regulations start to function.

During the past five years, the central government had lost the control to local and industrial department governments. They created a complicated situation that the new leaders has to confront. Xi’s reign has already dipped into the water and showed the flexibility to gain the control back in different manners and presentations, domestically and internationally. Xi’s goal is, to the best, to get help and approve from the powerful and influential people. He knows clearly, without their appreciation, any reform or change is fated to fail and the outcome isn’t pretty. The complication of China will make things and considerations more complicated. But it cannot deviate from the central- how to make things resolved without causing a disaster or a suddenness that put everything out of control. It is hard, obviously. I don’t know what he can do to change the fate of China without deeply depressing some ones in power. He also need to keep a potential good relations with western world. That makes things more complicated. To the best of my knowledge, changing the fate of a country peacefully is an impossible mission. Anyway, I sincerely hope he will get successful.

To observe China, observe its air the first.

Mar 02, 2013 11:51pm EST  --  Report as abuse
gee.la wrote:
Not only needs Xi to get help from the powerful men, but he also needs to get help and support from the average people. That makes things more complicated, because in most of occasions, their interests conflict and this contradictory cannot be compromised, as I know. It is much more protracted and incompatible than the interest conflict of the two parties in America. So how to adjust the policy to suit and to take care of the two totally different interests and views is truly an art. In the other side, how to achieve both the short term goal and long term goal and consider both short and long term interests at the same time is even harder.

In general, in China there are too many conflicts which need to be thought about in the depths. But all of these thoughts and compromises must disagree with the truly genius resolution. So I think it is impossible to be resolved by humans, it can only be resolved by God or nature.

Mar 03, 2013 12:30am EST  --  Report as abuse
FreedomFries wrote:
“Change” in China? They have been promising reform since Tiennanman square. They have only gotten worse.

The only thing they do differently is make sure not to go after large crowds in public. But to pursue their detractors individually, and use mechanisms such as black jails and tax charges to go after them. They haven’t reformed a bit. They’ve gotten better at covering up their crimes against humanity.

And we send them our money hand over fist, and give them our technology. Which they use against us.

Mar 03, 2013 1:07am EST  --  Report as abuse
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