Xi Follows in Deng’s Steps in China

China’s incoming leader Xi Jinping emphasizes reform during his first public speech, before local leaders in Shenzhen.


Until last week China’s incoming leader Xi Jinping hadn’t revealed much about his policies or what he stood for. But Xi, who was selected by China’s Communist Party as general secretary in November and is set to succeed President Hu Jintao in March, made his priorities abundantly clear when he spoke in public for the first time during his inaugural trip as head of the ruling party. His speeches before local leaders in Shenzhen, China’s first special economic zone, took place during his first stop on a five-day visit to four cities in Guangdong province that ended on Saturday. The visit retraced former paramount leader Deng Xiaoping’s “trip to the South” in 1992, which Deng used as a political pulpit from which to accelerate market reforms that led to 20 years of double-digit growth.

There will be “no stop in reform, no stop in opening up,” China’s official Xinhua News Agency quoted Xi as saying in his many speeches to local leaders. Xinhua says Xi had reiterated during the trip that “reform and opening up was a great awakening in the party’s history.” Xi’s trip comes amidst deep concerns among the public that powerful and entrenched vested interests — particularly state-owned conglomerates and self-enriching bureaucrats — had highjacked China’s economic reforms.

Though state-owned firms contribute to just 35 percent of China’s economy, they control nearly 80 percent of the financial resources, says Jing Ulrich, chairman of global markets, China, at J.P. Morgan.

Economic reforms, particularly of financial markets, stalled under the previous leadership. Though bureaucrats have launched a raft of new efforts in recent months, investors fear that the momentum will stall again.

The latest attempts at reform, including interest rate liberalization, increased lending to private enterprises and more market access for foreign investors, seek to direct more financial resources to the private sector.

Upon his election on November 14 in Beijing, the 18th Party Congress issued a declaration that there will be a “new order of mobilization” for deepening reforms and opening up. Xi said during his visit to Shenzhen last week that he chose Guangdong, which abuts the former British colony Hong Kong, because he wanted to “conduct an onsite retrospection of the history of reform and opening up and declare the resolve to press ahead with that policy.” Xi’s inaugural trip as leader contrasts with that of his predecessor. Upon becoming general secretary in 2002, Hu Jintao visited Xi Bai Po, a village in Hebei province that was the former headquarters of the People’s Liberation Army. In 1948, Chairman Mao Zedong made a famous speech there, rallying the troops before their ultimate victory over the pro-capitalist ruling Kuomintang in 1949.

Unlike Hu, the son of tea merchants, Xi doesn’t need to prove his “red” credentials. Xi’s father, Xi Zhongxun was a revolutionary and former vice premier, and most importantly, he helped Deng Xiaoping design and launch special economic zones, chief among them Shenzhen, where China began its initial experiments in capitalism in 1992. But Xi also acknowledged that the country’s reforms had entered a difficult phase, which would require “greater political courage and wisdom” to deepen reform in key areas.

Pro-reform elements in the ruling circle are also pushing for administrative and political change that would check official corruption. As much as a fifth of China’s gross domestic product of $7 trillion is estimated to go to officials in government and executives in state-owned enterprises through bribery and kickbacks. A recent investigation into former Chongqing party chief Bo Xilai revealed that he and his family may have funneled more than $1 billion out of China. “The fastest way to make quick money in China is to become a government official,” says a Beijing-based businessman who asked not to be identified by name.

Xi recently named former investment banker and vice premier Wang Qishan to head up the party’s top disciplinary body in a fight against official corruption.

Whether Xi can push through aggressive reforms is anyone’s guess. “Without an independent media and political opposition, it is literally impossible to initiate aggressive reforms in China,” says a veteran foreign investment banker based in Beijing. “Xi Jinping has his work cut out for him.”

Though he has been in office for less than a month, there are signs that Xi is beginning to shake up the bureaucracy. Last week, state media announced that Li Chuncheng, the deputy party chief of Sichuan province, had been sacked for corruption. Li, 56, became the first ministerial-level official to be investigated following the Party’s national congress last month. He is alleged to have offered bribes for promotion, selling official positions to incompetent candidates, and making his wife head of Chengdu’s Red Cross after it received huge sums of donations following the 2008 Sichuan earthquake.“Whether you believe Xi’s anti-corruption campaign is sincere or just public relations, there is no question that he has already begun to take solid steps,” says Guan Anping, a Beijing-based securities lawyer. “He will go after corrupt officials and vested interests in the state-owned conglomerates. He knows the public at large is angry, so watch out for fireworks in the coming months. More heads will roll.”