News

Hu's Great Gamble



9 November 2012

Hu Jintao is a gambler. Not just any old gambler, but the man who has just committed one of the biggest wagers in history. It's a bet on which the fate of his country, and the rest of the world, depends. It carries almost incalculable risks, but if Hu is right China will be the dominant power of the coming century.

Like most gambles, this was a simple one. In 2004, the Communist Party's central committee met for its annual plenary sessions. The talk that year was of shifting from the party's traditional objective of the previous two decades of taking economic growth and lifting people into prosperity as its key aim to addressing the more complex issues that lay beyond just pumping out GDP growth — issues of well-being, equality, sustainability and human development.

A large part of the party elite knew that while economic reforms had continued apace, the maintenance of social cohesion was getting more complex. Protests were increasing. Petitions to the central government in Beijing were rising. Inequality was getting worse.

Former Prime Minister Zhu Rongji's statement at the end of the 1990s that China was the factory of the world was seen as a double-edged sword. Environment and resource issues were becoming more pressing, with one World Bank report of the time famously declaring that 16 of the world's 20 most polluted cities were in China. China was getting rich, but poisoning itself and growing old before it could enjoy the fruits of its hard-won labors.

In 2004, one of the more forward-thinking party secretaries, Liu Yuanchao, introduced modest township elections in the wealthy coastal province of Jiangsu, building on the village elections that had been in place for most of the previous decade. The plenary of the party that year talked of delivering on targets beyond GDP growth — to looking at green measures, to a greater stress on human well-being, to concepts of "harmony" and balance, and taking "people as the basis." That Hu Jintao was a latent liberal became more of a reality.

But then something happened. The so-called color revolutions swept former Soviet republics. China's Communist Party had never truly come to terms with the collapse of the USSR in 1991. It had revisited the issue many times, trying to understand — and thereby avoid — such a collapse in their country.

This new wave of popular protests ruffled feathers in the party elite. The head of security in the Politburo at the time, Luo Gan, produced an assessment in 2007 saying that China would never allow the two great drivers of political protest in the West, lawyers and civil society actors, to challenge the legitimacy of the Communist Party's monopoly on power. The party's appetite for any kinds of reform weakened.

Despite the fine language Hu Jintao used about the need for public participation in decision-making and creation of new forms of accountability, legal reform and power-sharing in his report to the 17th Party Congress in 2007, the party worked the other way. It built up a series of "pro-stability" measures, putting increased resources into public security, and again focusing more and more on GDP growth.

A series of events from 2008 reinforced this strategy. The Tibet uprising in 2008, and the Xinjiang unrest in 2009, along with the global economic crisis only strengthened the hand of those in the party who said that China was simply not ready for any kind of complex and potentially risky socio-political reforms. The only thing to do was continue getting wealthier and wait.

And that, in essence, was the gamble. Since 2007, when Hu finally consolidated his power and truly took charge of internal affairs, the strategic choice has been a brutally simple one: The government and the party have made growth, and growth alone, the sole objective of their policy.

This is predicated on the simple belief that, across the board, from the issues in Tibet, to social contention, to China's international role, growth will in the end make the country strong enough to solve everything. It will bring cohesion, make the country ready to reform, and mean that China can deal with its very real and deep internal fractures and challenges. Growth will buy China time to put on hold the increasing issues of contention in society, and mean it can reach a place, over the next decade, where all the pressing decisions of property rights, rule of law, nongovernmental organizations and other issues can be resolved.

This gamble may well prove right. But as always there is a big problem that Hu and Wen Jiabao were never able to address, but that the new leaders will have to — and quickly. From now on, growth will be dependent on a more stable, more predictable legal, social and political environment, where the key to the future is efficiency delivered by good governance.

China is already getting closer to the per capita levels of middle-income countries. In this context, delivering big GDP rises will get tougher, the economy more complex, and the sources of growth more restricted. Export-led and capital-investment growth will come to an end. Then it will be about creating a stronger domestic consumer market, and a service orientated, innovative economy.

Hu Jintao's gamble was to stop the whole process of looking at more complex socio-political reforms and go all out for GDP growth, to buy time and reduce risk. It was quite a gambit. If he was right, then in the next decade, with the minimum of risk and in a controlled way, China can face the tasks of huge governance and modernize and update its political model. If he was wrong, then China has just lost at least half a decade that could have been spent addressing these pressing issues.

Sometime in the next few years, we'll find out if Hu's wager paid off. If it does, China's path to great-power status will be assured. If not, then not only China, but the rest of the world, will be in for a very tough time.