A push for change in China as new leaders take the helm
| Ben Blanchard |
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 per cent of China’s 1.3 billion population, or about 170 million people, still live on less than US$1.25 a day.
While parliament is a regimented show of unity that affirms rather than criticises 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 privatised 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 privatisation 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 per cent of China’s economic growth and 75 per cent of jobs.
Favouring 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.