Wednesday, January 19, 2011

After Hu Jintao

Given all the hoopla over Hu Jintao's visit to the United States, I thought that it would be useful to think about what happens after Hu leaves the stage. Who takes the mantle of leadership and what are his views?

Here are some clues from analyst Willy Lam [emphasis added]:
Vice-President Xi Jinping’s brief visit to the western-China metropolis of Chongqing earlier this month has given important clues about the “crown prince’s” political orientations and his relations with key Chinese Communist Party (CCP) factions. After his induction into the Central Military Commission (CMC) last October, there is little doubt that the 57-year-old Politburo Standing Committee (PBSC) member will succeed Hu Jintao as Party General Secretary at the 18th Party Congress slated for late 2012.
First question is answered. What about the second? Lam went on to speculate:
During his "Chongqing tour," however, Xi dropped strong hints about his deeply-held ideology and aspirations. Equally significantly, Xi’s bonding with Politburo member and Chongqing Party Secretary Bo Xilai shows that the vice-president may be putting together his own team in the run-up to taking over the helm in less than two years’ time. Seeds of conflict between Hu and Xi, respectively the “core” of the CCP’s Fourth- and Fifth-Generation leadership, might also have been sown.

Since Bo became party chief of China’s most populous city in late 2007, the flamboyant former minister of commerce has made headlines with his no-holds-barred advocacy of Maoist norms. In his speeches, the charismatic Bo has profusely cited Mao-era slogans such as “plain living and hard struggle” and “human beings need to have [a revolutionary] spirit” (People’s Daily, June 7; Chongqing Evening News, June 28). He has resuscitated Cultural Revolution-vintage revolutionary operas. Bo, who is the 61-year-old son of conservative party elder Bo Yibo, even asks his secretaries to regularly text-message Mao quotations to the city’s students (See “The CCP's Disturbing Revival of Maoism,” China Brief, November 19, 2009). On the economic front, the high-profile “princeling” has made waves with his attempts to go after “red GDP,” a reference to economic construction that exemplifies Maoist egalitarianism. Chongqing has emerged as a national pacesetter in social-welfare policies such as providing subsidized public housing to the city’s masses (Chongqing Evening News, May 1; China News Service, April 20).
In other words, the next Party General Secretary is closely tied to someone who leans Maoist. If Xi Jinping does embrace some form of Maoism, what happens to China then? Will Deng Xiaopeng's comment about "glorious to be rich" be no longer applicable?

The change in Chinese leadership doesn't seem to be on the market's radar screen at the moment, but as we approach the end of 2012 it will be. As I outlined in my 2011 forecast, concerns like these are a 2H 2011 story, possibly even 1H 2012.

For now, the Fed wants to have a party so let's party on (but keep an eye on the exit).

1 comment:

Patrick said...

Very interesting, the idea of a loco commandant in China appeals to my inner bear - credit contraction, millions of people starving and revolting, a new cultural revolution, makes Hugh Hendry's missives about empty cities and hollow commercial RE debt seem tame in comparison.

But how Maoist is he really?

I did a bit of light digging at this question, from Wikipedia:

When Xi was 10, during the Cultural Revolution, his father was purged and was sent to work in a factory in Luoyang, and jailed in 1968. Without the protection of his father, Xi went to work in Yanchuan County, Yan'an, Shaanxi, in 1969 in Mao Zedong's Down to the Countryside Movement. He later became the Party branch Secretary of the production team. When he left in 1975, he was only 22 years old. When asked about this experience later by state television, Xi recalled it saying, " was emotional. It was a mood. And when the ideals of the Cultural Revolution could not be realised, it proved an illusion...".

So I don't think you'll find a dyed in the wool Maoist in power, though high interest rates and more protectionism is a possibility. That'd be great, the world needs some deflation. The second most interesting thing I read today, after this post, stipulates that we'll need over $200,000,000,000,000 in debt by 2020 to maintain global GDP growth. I think history has something else in the cards.