China Fifth Generation Leaders
By Jean-Christoph von Pfetten, President, Royal Institute of East-West Strategic Studies, United Kingdom
A new generation of Chinese leaders is poised to enter positions at central and local levels throughout China in the Party, Military, and Government. Two main Chinese political coalitions (also called cliques “bang” in Chinese) has been dominating the political landscape over the last ten years and effectively sharing power within the CCP Central Committee. The newer coalition which appears to be in control is the Chinese Communist Youth League (CCYL) or Tuanpai-led Populist Coalition. The other coalition is the Shanghai Bang-led Elitist Coalition. These two coalitions represent a balance of power that forms the basis of the CCP consensual decision-and policy-making in China today under China’s Fourth Generation leadership headed by Hu Jintao and Wen Jiabao.
China’s Fifth Generation leadership comprises these people born in the 1950s and early 1960s (50-60 years old today). They are also called the First Generation of Republic, as they were born after the founding of the PRC in 1949. They were sent down to work in the country side as youths during the Cultural Revolution and many of whom entered university only after the 1977-78 reopening of China’s universities where they did part-time work study programs for higher level post graduate degrees.
Fifth Generation leaders have a higher level of education-29 of the Fifth Generation leadership rising stars have higher education in law and politics (13 of 29-45%) , economics and management (8 of 29-30%), humanities (4 of 29-14%) and engineering (4 of 29 14%). In contrast, within the current Fourth Generation leadership, an engineering education was the standard (18 of 24-75%) of the current Politburo members and 9 of 9-100% of current Politburo Standing Committee members are engineers.
This means Fifth Generation leaders have had more exposure to western thought via higher education and frequent trips abroad than the current Fourth Generation leaders. It also means that they can be expected to be more critical of western ideas, given their better capacity to analyze and make independent judgments about complex issues. This does not mean that they would be more supportive of western ideas – they are often more critical of them.
China remains a one party state primarily focused on maintaining domestic stability while transitioning the Chinese Communist Party (CCP) from a revolutionary to a ruling party. Any intra-party policy differences within the CCP focus on mainly methodology and timing of how to achieve this goal.
The political agenda of the current Fourth Generation leadership is driven by Hu Jintao’s 'Harmonious Socialist Society' which is focused on reforms aiming to achieve greater social cohesion after the 6th Plenum of the 16th Party Congress (held in October 2006). This policy direction is different from the Third Generation leadership’s political agenda which was driven by Jiang Zemin’s 'Spiritual Society' which focused on achieving higher standards of living via rapid coastal-driven economic growth.
This new policy direction mean that there will be more emphasis on the Rule by Law and legal rights under the Fifth Generation leaders including greater protection of property rights (including intellectual property rights), stricter enforcement of anti-corruption rules, more consumer protection. This socio-political focus also means that under the Fifth Generation we can expect stronger participation and support from core CCP units such as the PLA and the Women Federation.
This new priority on dealing with socio-political issues also means that instead of foreign direct investment and foreign business interest groups, the Fifth Generation leaders will be more focused on farmers, migrant workers, welfare/social security issues and heading off increased domestic social unrest. The Fifth Generation leaders will also continue China’s increased engagement with international diplomatic relations and related issues that impact China’s energy and raw materials access, environment and security.
A key milestone in China’s transition from the Fourth Generation leadership to the emerging Fifth Generation will be whether Hu Jintao and his Populist Coalition will be able to anoint one or more Generation successor (s)-among them are Li Keqiang, Li Yuanchao and Liu Yandong. The current most thought successor Vice-president Xi Jinping is only the result of a compromise between the two cliques and might not represent entirely the interest of Hu Jinto.
Now called the Five Year Program instead of the Five Year Plan the Fourth Generation economic agenda is focused on indicative and strategic rather than hard targets to hit at all costs. During the aftermath of the 17th Congress, Hu Jintao and Wen Jiabao will continue pushing forward with sustainable scientific development of the economy and with a more socio-political, people-centric focus. The Fourth Generation Hu-Wen sustainable economic growth model will include better pollution controls and energy efficiency versus the Third Generation Jiang Zemin and Zhu Rongji obsession with higher economic and GDP growth at any social cost and export/trade-driven surpluses that created international tensions with USA/EU.
Economic policy emphasis will be more on inland rural/agricultural advancement concentrating on the successful completion the Land Reform and the stimulation of domestic demand especially in inland regions versus excessive focus on coastal economic growth with urban construction, foreign investment and foreign trade.
Within the current Fourth and emerging Fifth Generation leadership, a feeling has become prevalent that China has not truly benefited as much as it should have from the last 20 years of unprecedented export and GDP growth. This has led the current leadership to conclude that China has become too dependent on external trade which relies on foreign markets and international business dominated by foreign companies. This view has also led to increased economic nationalism and the emergence of competition policy targeting foreign companies in China.
Current Fourth Generation economic hot buttons include:
• Increasing focus on quality of growth, not just GDP growth for its own sake
• Increasing emphasis on innovation, brands making Chinese companies world leaders
• Harmonious society/balanced development/attempts to reduce social pressures as the focus shifts to dichotomy between haves and have nots
• Increased focus on sustainability both in a 'get the resources' sense and in terms of the environmental cost of growth
• Real attempts to back up regional development initiatives
• Rural, agricultural development, abolition of agricultural taxes, increase in farm incomes to reduce urban rural split. Emphasis given on the welfare of the farmers (particularly around a new National Social Security) and stronger urbanization drive
• People centric policy and reform focus, not as Darwinian as before
If the Populist Coalition continues to dominate CCP policy formulation and is able to appoint its own Fifth Generation successors, this means that what we can expect from the rising Fifth Generation leadership in terms of their economic agenda will be:
• More of same focus on people –centric socio-political reform with an even greater redistribution tendency
• Potential to reign in advanced mainly coastal regions out of regional jealousies
• Potential to make life very difficult for foreign companies
• Potential to meet WTO commitments, but just
• Likely to enforce more effectively anti-graft measures
• Since most Fifth Generation leader rising stares are found today in major provinces and cities, they will still need to show progress and do deals while toeing the current CCP policy line
Given that most intra-CCP political jockeying is non-transparent to nearly all outsiders, the key will be that foreign business must begin to track key people with the Fourth and Fifth Generation to monitor developments.
As Fourth Generation leadership emphasis shifts to a more balanced economic agenda, this means there will be less high-level CCP interest in export/trade and linked foreign direct investment (FDI) and more emphasis on rural/inland regional development and a shift towards less but higher quality foreign investment (e.g., higher-level technological transfer).
This will also mean less interest among and more barriers to accessing top CCP leadership in connection with foreign investment and foreign business related issues. The goal is to move China towards a consumption based economic growth model.
There will be greater emphasis on the Rule by law and its enforcement in terms of property right (IPR) and anti-corruption will be good for foreign business in China. There will also be more laws related to protecting China’s domestic groups and their interests such as Chinese companies and Chinese consumers from dominant western/foreign companies active in China for example the new anti monopoly and unionization laws-which will increase the complexity for foreign companies active in China.
Assuming we see a continuation of power sharing within the leadership of the CCP, this means that we can expect the following from the emerging Fifth Generation in terms of global business:
• Less emphasis on FDI and foreign trade, more economic protectionism and competition policy
• Harder to see top CCP leaders and less accessibility to them on investment and trade related issues
• But they still have to keep the economy growing and domestic firms cannot do all the leadership wants done so leaders are still going to have to be pragmatic
• OPPORTUNITY is in helping the leadership meet their goals in key areas: technology, branding, “higher quality” growth, internationalization of Chinese companies, resources, energy, energy efficiency, modern services
• OPPORTUNITY in serving new secondary, inland cities and new markets created by urbanization and improved infrastructure
• POTENTIAL to meet likely fifth Generation leaders in their local jobs before they get elevated therefore increased short term need to meet them before they get into the top spots
• POTENTIAL to help them meet their local goals with win-win propositions
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