President Hu Jintao and Prime Minister Wen Jiabao are set to retire in two years. So it is opportune time for China to gear up for the next decade. The economic crisis that gripped the US in the past couple of years has thrown up new protectionist tendencies.  These are hurting China’s subsidized export oriented economy. Volume based producers of China will be increasingly at a disadvantage in the years ahead and no amount of diplomatic muscle flexing will be of any avail in the face of Washington’s determination to stop the flight of jobs to Beijing and Bangalore. The issue will dominate the Chinese Communist Party’s annual plenum, which opens in Beijing on Oct 15. The session will continue till Oct 18.

Chinese economy has seen some really bold measures in late seventies and early eighties; it is these policies that helped the country to sprint towards high growth rates; these policies are responsible for the US trade deficit to the dismay of Washington which is willing to do business despite all the fretting and fuming over valuation of Chinese currency.  In recent months, Chinese leadership appeared to be making a U-turn what with quasi-monopolistic state enterprises crowding out private enterprise.

China’s neighbours are keenly watching the churning in Beijing’s economic thinking. Firstly they have benefited from the Chinese surge thus far.  Secondly they will be the first to feel the impact of any inward looking policy.

Reports in the Chinese and Western media say that the Beijing session could give the go-ahead for a less export-oriented economic model. If this indeed is going to be the case that will be a clear acknowledgement of the whispers that the Chinese economic system is badly in need of an overhaul and that mere talking up the economy or doctoring the GDP data is no palliative to the internal hemorrhage, which has been shielded by the bamboo curtain.  

According to economists of all hues, the biggest private enterprise in China today is the Chinese Communist party. Big business is mostly state owned and directly managed by the party.  This is in contrast to pre-eighties when the Communist Party took relatively unbiased position on economic matters, and kept in check vested interests. The absence of checks and balances like in a democratic state has compounded the problems.

So, it will be interesting to watch what correctives the forthcoming party annual will put in place. 

The economic rejig is expected to be accompanied by political reforms. Only in August, Prime Minister Wen said, ‘Without the guarantee of political system reform, the successes of restructuring the economic system will be lost and the goal of modernization cannot be realized’.

These reforms may usher in new leadership. Already there is talk of appointing, Xi Jinping, the much speculated successor to President Hu, to the Central Military Commission. At present President Hu heads the commission.