2012 - China's year of change

A Chinese shopper leaves a Walmart store in Beijing The president has warned that 'hostile' powers are seeking to 'Westernise' the country

2012 promises to be a landmark year for China, a year of change. But here's the paradox - you are unlikely to see much change, not for most of this year, not in China.

In fact, the opposite is more likely to be the case. China's current leaders, who will step down later this year, are expected to batten down the hatches, clamp down on discussion and dissent and avoid any controversial decisions.

For them this is the start of an unnerving period of flux, both in China and the outside world.

Not only is China preparing to replace its leaders, two of its most important relationships could change fundamentally too. The United States will have a presidential election this year, and Taiwan is about to stage an election that is too close to call.

Controlled change

The result could be new presidents in Washington and Taipei who have very different attitudes to China from the incumbents.

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Just now no leader or aspiring leader in China wants to stick their neck out and take any radical decisions, or tackle any particularly tricky issues”

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Some of the Republican candidates running for president in America have already talked about taking a far tougher line with China over trade and currency issues.

If President Ma Ying-jeou of Taiwan - who has overseen a rapprochement with Beijing - loses to Tsai Ing-wen from the Democratic Progressive Party that will be a real setback for China's leaders.

In the meantime Europe's economy is in trouble, with the future of the euro uncertain. And inside China its leaders are facing a slowing economy, high inflation and protests and social unrest that seem to be spreading.

Against this backdrop caution will probably be the watchword for China's rulers. Even at the best of times they are pretty conservative, favouring gradual, controlled change.

Later in the year, China's all-powerful Communist Party will begin the process of replacing the men who sit at its apex. It is a shift that happens in China once every decade, and will mark the move from one generation of communist leaders to the next.

Most observers predict that the outgoing leaders will do little that is controversial, wanting to leave office with their legacies intact. That way they hope to ensure they retain influence once they have stood aside.

The incoming leaders, the received wisdom goes, will also want to keep their heads down so they do nothing that might harm their chances of landing a plum position.

Hu Jintao will step down in October or November from his most powerful post as general secretary of the Communist Party and hand over to a new, younger leader, expected to be the current Vice-President Xi Jinping, who is now 58.

Along with Mr Hu, seven of the nine members of the party's highest decision making body, the Politburo Standing Committee, are expected to retire, including current Premier Wen Jiabao. His most likely replacement is the Vice-Premier Li Keqiang.

The process will take place behind closed doors so we will not see any of the discussions, debates or votes. Only at the party congress at the end of the year will the new line-up emerge when the new leadership marches onto the stage in order of seniority.

Then, early in 2013, a few months after the Party Congress, Xi Jinping is expected to replace Mr Hu as China's president. It should all be choreographed so nothing goes wrong, but behind the scenes there will be much jockeying for position, even scheming and tensions.

The last leadership change in China was 2002-3. That was the first time the Communist Party managed to stage a peaceful handover of power. So the party will do everything to ensure this one passes off as smoothly.

Rallying cry
President Hu Jintao Hu Jintao is due to to step down in October or November

Caution though could prove to be a serious weakness for China. If the economic situation in Europe worsens, if China's own economy slows faster than expected, or unforeseen political problems erupt in its neighbourhood, then what Beijing may need is decisive leadership.

But just now no leader or aspiring leader in China wants to stick their neck out and take any radical decisions, or tackle any particularly tricky issues. Instead it is possible that in the coming months China's leaders will turn inwards.

The Communist Party magazine Seeking the Truth has just published an article written by President Hu Jintao in which he issues a rallying cry to party members to be vigilant about threats from outside China.

President Hu writes that "hostile international forces are strengthening their efforts to Westernise and divide us", according to one translation, adding "ideology and culture are their main targets".

He went on that "the international culture of the West is strong while we are weak", and urged party members "we must be aware of the seriousness and complexity of the struggles and take powerful measures to prevent and deal with them".

That all sounds like a rallying cry to defend the Communist Party and its rule from outside criticism and influences, to preserve the status quo. It is the sort of talk we might hear more of as China embarks on its year of change.

Damian Grammaticas, China correspondent Article written by Damian Grammaticas Damian Grammaticas China correspondent

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  • rate this

    Comment number 1.

    New Year's address broadcast on Saturday, Chinese President Hu Jintao vowed China will continue to develop friendly exchanges with other countries & positively participate in international cooperation on global issues. Hu urged acceleration of the transformation of the country's economic development pattern & structural adjustments while making more efforts in ensuring people's livelihood.

  • rate this

    Comment number 2.

    2011 was the first year of the country's 12th Five-Year Plan period (2011-2015). Hu said China will stick to peace, development and cooperation, adhere to independent foreign policy, maintain world peace & promote common development. The country will stick to the principle of mutual benefit when opening itself up. Looks like China is not about to make any dramatic changes.

  • rate this

    Comment number 3.

    Past year: growing concerns over inflation, credit tightening, off-balance sheet loans & bankrupt local government financing platforms - what may lie ahead for China's banking system? Another set of risks has been looming liabilities of China's policy banks. In 1994, China restructured its banking system to create two distinct types of state-owned banks: 1. commercial banks, tasked with retail deposits & lending, 2. policy banks, which were to serve as government-directed lending arms for politically important projects.

  • rate this

    Comment number 4.

    China's recent policy bank lending has been even more aggressive than 2009/10. Often dangled as sweeteners to secure energy deals or buy political influence, policy bank loans have been dispersed globally with little regard to the credit-worthiness of the projects (or borrowers), from bankrolling serial defaulters such as Argentina & Ecuador to teetering economies such as Greece, Portugal & Venezuela to regimes & small businesses alike throughout southern Africa & Central Asia. This seems risky, but could pay off BIG.

  • rate this

    Comment number 5.

    Domestically too, policy bank loans continue to serve as little more than political slush fund, financing virtually all of Beijing's most ambitious infrastructure projects including the Three Gorges Dam, the massive South-North Water Transfer Project, the country's Strategic Petroleum Reserves & most recently, the country's affordable housing program. If a high profile project needs money, policy bank loans have become the all-purpose gap to keep them going. Such lavish lending, however, is not without risk.


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