Stability Trumps Reform at China’s Parliamentary Session

The Chinese leadership at the ongoing National People’s Congress (NPC) has announced tough measures to rein in inflation and to promote government efficiency. In their talk to deputies in the two-week-long parliamentary session, however, Premier Wen Jiabao and his senior colleagues appeared to have made significant compromises to myriad vested interests and power blocs. Relatively vague commitments to liberalization have been made in this “Year of the Olympics,” when the Chinese Communist Party (CCP) is due to celebrate the thirtieth anniversary of Deng Xiaoping’s reform and open-door policy. Yet the few economic—and particularly political—reforms that have been promised are overshadowed by the call to stifle dissent and to instill stability at all costs.

In his inaugural address to the First Session of the 11th National People’s Congress last week, Wen pledged to forge ahead with the “scientific theory of development” in his second five-year term as head of government. Taming inflation—and lessening the financial hardship of “under-classes” such as peasants and migrant workers—has become the top priority of the new cabinet. In February, the consumer price index (CPI) surged by 8.7 percent, the worst in more than a decade (Financial Times, March 11). Independent economists reckon that the actual inflation rate is considerably higher because essential services such as housing, energy and health care are not taken into account by the index. Yet Wen and his State Council colleagues seem to have buckled under pressure from powerful interest groups by promising to adopt an “appropriately flexible” tight-money policy.

On the one hand, Wen told the 3,000 parliamentarians that his team would persevere with the “get tough” macroeconomic measures to reduce inflation to 4.8 percent this year. The control mechanisms include curbing the money supply and bank loans, slashing non-essential fixed-assets investments and other capital outlays, and imposing price caps on some consumer items. The top cadre, however, also noted that the authorities would observe a sizable dose of flexibility in implementing contractionary policies. Concerning particular sectors that would be targeted, Wen said Beijing would “continue to deal with each situation on its own merits, encourage growth in some areas and discourage it in others … and refrain from taking a uniform approach to different situations or putting on the brakes abruptly” (Xinhua, March 5). Wen’s new-found flexibility seems at odds with the recommendations of a national planning meeting late last year, which decided that monetary and financial policy should shift from shiducongjin (“adequately tight”) to congjin (“tight”). Analysts fear that the beneficiaries of this “pragmatic approach” will be power blocs such as business conglomerates with close links to top cadres and their families. Vested interests related to the real-estate, construction, energy, infrastructure and banking sectors have long lobbied Beijing to be “selective” in its tight-money policies. After all, since Wen first introduced macro-level adjustment and control policies in early 2004, State Council edicts have been sabotaged or toned down along the country’s fast-developing coast.

Since late last year, the Hu Jintao-Wen Jiabao leadership has been under pressure to moderate their tight-money regime due to two factors. The first is that owing to the downturn in the U.S. economy and the ripple effects of the sub-prime crisis, Chinese exports to the United States and several other key markets may be hurt. In February, imports were up 35 percent, while exports grew by only 6 percent, down from 26 percent in January (China Economic Review, March 11). The second factor concerns the aftereffects of the gargantuan snowstorm in January, which inflicted economic losses in excess of $10 billion. The first sign that Beijing might fine-tune its “get tough” macro-economic measures came from President Hu. While inspecting disaster-stricken areas in late January, Hu said that his administration would “scientifically handle the pace and force of its macro-economic adjustment and control [policies]” for the coming year (People’s Daily, February 1). This essentially meant that some undisclosed sectors would be spared the wrath of Beijing’s cool-down-the-economy strictures.

Another hot initiative at this NPC, the creation of several “super-ministries,” has also met unexpected difficulties. This is despite the fact that Politburo Standing Committee (PBSC) member Li Keqiang, a Hu protégé who is expected to be endorsed executive vice-premier at the end of the parliamentary session, has been put in charge of restructuring the central government. The State Council boasts 28 ministries and a few dozen departments. Several “super-ministries” or “super-commissions” will be formed to curtail sinecures and expenditures—and more importantly, to improve administrative efficacy. During Wen’s first five-year term as premier, different departments have sometimes issued contradictory instructions and central orders have often been diluted or distorted by the localities. As Wen put it while briefing NPC deputies last week, the State Council would “establish larger departments that organically integrate the functions of smaller departments, to resolve the problem of overlapping responsibilities and of powers not being matched by responsibilities” (Xinhua, March 5; Associated Press, March 5). On Tuesday, the State Council presented to the NPC the final draft of its restructured units. A National Energy Commission will be set up to coordinate policymaking in this complicated and fast-changing arena. A Ministry of Industry and Information will be established out of the merger of units including the Ministry of Information Industry, the State Council Informatization Office, and the Commission of Science, Technology and Industry for National Defense. Likewise, the Ministry of Communications, civil aviation authorities and the postal services will be folded into a new Ministry of Transportation. The State Environmental Protection Agency is to be upgraded into a Ministry of Environmental Protection. Finally, the Ministry of Personnel and the Ministry of Labor and Social Securities will be combined to form a Ministry of Human Resources and Social Security (Xinhua, March 11; Straits Times, March 12).

The restructuring exercises, however, have proven dissatisfactory due to resistance from vested bureaucratic interests. The newly created National Energy Commission will not have jurisdiction over the three state oil and gas monopolies as well as other government-controlled energy and electricity conglomerates. The Ministry of Railways has refused to become part of the Ministry of Transportation. The revamped State Council will still have 27 ministries, just one less than before. Most importantly, the establishment of the one super-ministry that is deemed crucial to improving macro-management of the economy—the proposed National Finance Work Commission (NFWC)—has been delayed indefinitely. The NFWC is supposed to centralize and “unify” decision-making involving banking, finance and monetary policy. As of now, policymaking in this arena is scattered among units including the National Development and Reform Commission (NDRC), the Ministry of Finance, People’s Bank of China, the China Banking Regulatory Commission and the China Securities Regulatory Commission. According to original plans, Vice-Premier in charge of Finance Wang Qishan, the charismatic former Beijing mayor, will head the NFWC (Ming Pao, February 27). Political sources in the capital, however, have noted that owing to strong opposition from cadres in departments that stand to lose power to the NFWC, the Hu-Wen leadership has been obliged to mothball plans regarding this super-commission.

Equally disturbing is the fact that Hu, Wen and other PBSC members have failed to come out with bold initiatives for economic—and particularly political—reform. Traditionally, the plenary sessions of the NPC and the Chinese People’s Political Consultative Conference (CPPCC), held annually in the first half of March, have been deemed a “show-case of democracy with Chinese characteristics.” Expectations among not only NPC and CPPCC affiliates but also the intelligentsia are high that this being the thirtieth anniversary of Deng’s epoch-making reform and open-door policy, the Hu-Wen team would take substantial steps toward ringing in the new. The party’s liberal wing was also heartened by the forward-looking nature of the plenary session of the CCP Central Committee held on the eve of the NPC. The Central Committee communiqué noted that political reform should be “pushed ahead in an enthusiastic and adequate manner.” It admitted with unusual frankness “the [current] political structure is in some ways not commensurate with the new demands made by [the need to] safeguard the people’s democratic rights and to maintain social equality and justice” (Xinhua, February 27).

Neither new ideas nor thoroughgoing reform measures, however, have been spelled out at the NPC or the CPPCC. Wen, considered the most liberal member with the PBSC, did come up with what pundits have called the “Four Principles of the People.” He told parliamentarians last week that in China, “everything belongs to the people, [officials] do everything for their benefits, rely on them in everything we do, and attribute all our successes to their efforts” (People’s Daily, March 6). The premier even pledged to “create conditions to let the people supervise the government more effectively.” As of late last year, however, only minor steps that smack of public-relations gimmickry have been taken to demonstrate the CCP leadership’s apparent commitment to liberalization. For example, more private businessmen as well as non-Communist professionals have been given membership in the NPC and CPPCC, which are deemed toothless consultative bodies by Western diplomats and analysts.

In the mean time, big guns among the CCP’s commissars have issued warnings of the dire consequences of the “unthinking” adoption of Western political norms. Vice-President of the Central Party School Li Junru pointed out last week that Western democratic ideals were “not suitable” because Chinese would only benefit from a system “that tallies with China’s history and its national conditions today.” Li added that political reform “should not be hastily—or blindly— conceived.” Former Vice-President of the Chinese Academy of Social Sciences Liu Ji poured cold water on arguments made by liberal scholars such as Professor Xie Tao that the CCP should emulate the Swiss or Scandinavian-style socialism. In apparent reference to Western European socialism, Liu said: “It won’t do to borrow Western-style democratic socialism. In China, the only correct path is socialism with Chinese characteristics” (China News Service, March 7; Ming Pao, March 4).

Even more disquieting is the fact that issues about preserving socio-political stability—and even national safety—in the run-up to the all-important Summer Olympics have dominated NPC discussions. This also seems to have provided the leadership with an ideal pretext to switch the emphasis from liberalization to the quashing of dissident and assorted challenges to the regime. From day one of the parliamentary sessions, leaders including President Hu have underscored the imperative of preventing mishaps in Xinjiang and Tibet, seen by Beijing as hotbeds of violence-prone secessionist movements. While talking with legislators from Tibet last Thursday, President Hu noted that “stability in Tibet is intertwined with national stability; and security in Tibet is closely related to national security.” Hu repeated similar warnings regarding the restive Xinjiang Autonomous Region (XAR), adding that local cadres must do more to “enhance social harmony” and “strengthen unity among ethnic groups” (Xinhua, March 6; People’s Daily, March 9).

The issue of security—and the need for Beijing to clamp down harder on anti-state conspiracies that are supposedly brewing in Tibet and Xinjiang—has become even more prominent after the disclosure by XAR Chairman Nuer Baikeli last Sunday that several unspecified suspects had tried to “cause an air disaster” on a Urumqi-Beijing flight two days earlier. The official Xinhua news agency said authorities had “foiled a planned terrorist attack” even though the involvement of separatist groups run by Uighur nationalists in the XAR could not be established (Reuters March 10; Wen Wei Po, March 10). In any event, Beijing’s preoccupation with Olympics-related security, as well as threats allegedly coming from pro-independence elements in Tibet, Xinjiang and Taiwan would render the leadership highly unlikely to embark on far-reaching—and potentially risky—political reforms in the near future.