China's Regime Change

Posted on December 8, 2012 at 12:12 AM

For some time now, China, as the world’s second-largest economy and burgeoning superpower, has been executing their generational change in leadership and results were unveiled in mid November.  Many thought the composition of the Standing Committee might signal China’s continued liberalization and globalization or a retrenchment of hard line policies of the past.  The Standing Committee shrank from nine to seven members, and it is split in terms of political leanings with Hu’s reformers controlling three seats and four seats held by Jiang conservatives.  With the speed of changes both in China and the rest of the world, it remains to be seen which faction will eventually not only win out but how these factions will lean and their impact on the legal industry in China.  To find out more about such speculation, please read our upcoming post on the topic.

Xi Jinping is taking over as Party boss for the departing Hu Jintao.  In March, Hu Jintao, who had to wait two years for Jiang Zemin to vacate as head of the military, will cede Xi Jinping, as the military and the party leader.  This will arguably be the most orderly and voluntary transition of power in China’s modern history.  The other two Hu proteges on the Standing Committee are Li Keqiang, who succeeded Wen Jiabao as Premiere, and new Vice Premiere Wang Qishan.  The Jiang-influenced appointments are Zhag Dejiang, Yu Zhengsheng, Liu Yunshan and Zhang Gaoli.  And while the conservatives might enjoy a slim majority on the Standing Committee, Hu’s “Scientific Outlook on Development” has been elevated into the State’s recognized philosophical firmament shared by Marx and Mao.

Hu Jintao presided over a decade that saw profound urbanization, increase in production, economic growth as well as the launch of China’s first aircraft carrier, stealth fighter and drone.  Some view this as a success and argue to continue his policies.  However, with his policies, corruption and graft also grew and perhaps that was the opening the old guard exploited.  Or perhaps such growth simply can’t be sustained.  Some speculate that China my be exposed to a forthcoming global economic slowdown before its transition from an export economy to a growing middle class consumer based economy.  But Hu’s “Outlook” recognizes that economic goals can’t be separated from the sustainability of the environment and citizens’ health.  It also questions the preference for SOE (State Owned Enterprises) vs. growing privatization – specifically, the rampant corruption that Hu warned of in his last speech and echoed by Xi Jinping in his first.

Corruption and graft, which can enrich a local party leaders’ salary more than one hundred fold, has led to growing outrage and public protests.  Recently disgraced Bo Xilai became the poster child for these problems but his story includes the high profile murder of a foreign national for which his wife was convicted.  The party has been careful to keep the focus on that element of the story.  Information like the recent revelation that Wen Jiabao’s family has amassed a fortune in excess of $2 billion can only fuel the growing perception that the leadership is out of touch with the masses.

The decade of globalization has increased the size, scope and independence of the legal institutions and practitioners.  The domestic and international demand for a more sophisticated and mature legal scheme has been stimulated by several factors including  the (i) increase in ‘protectionism’ from OECD countries evidenced the increasing number of WTO complaints, (ii) China’s central bank’s goal of establishing a potential alternative reserve currency in world trade and (iii) growing number of conflicts over sovereign lands such as the Senkaku Islands demand an evolving and more sophisticated legal industry.

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