In a western democracy like the United States, we assume that the best time for a leader to accomplish something is in the first year of his first term. The election has just ended, the opposition is still scattered, and the legislative mandate is intact. Everybody still talks about Franklin Delano Roosevelt’s first 100 Days for a reason.
In authoritarian governments, like China’s, it’s supposed to be different. Steering such a large bureaucracy takes time, as all the moving pieces catch up with one another. What matters is minimizing risk surrounding the transfer of power, and then engaging in a slow buildup of consensus. And yet, Xi Jinping is proving the conventional wisdom wrong. After just six months at the helm, Xi is already clearly on track to accomplish far more than his predecessor Hu Jintao.
The constellation of China’s leadership left Xi Jinping with more room to maneuver upon taking office: the Politburo Standing Committee, the top brass in China’s government, was consolidated from nine members to seven. Over the next few months, Xi built up a track record of successful reforms. He has worked at overhauling the banking system and shaking out its bad loans. Through his anti-corruption efforts, he has increased the accountability for the leaders of state-owned enterprises and provincial leaders. He improved product safety and the environment by changing the reward structure for the people in charge and implementing air pollution regulations. We’ve also seen the establishment of a free trade zone in Shanghai.
Despite all this progress, there is vastly more to do. But Xi seems up to the task — and he is eager to get started. Over the weekend, one of Xi’s allies, Yu Zhengsheng, a member of the Politburo Standing Committee, promised even further reforms at the upcoming Third Plenum meeting of party leadership from November 9-12th, declaring it will usher in “unprecedented” policy changes and reform.
What might those unprecedented reforms be? I would expect some tangible, public commitments to rectify financial issues — some combination of things like the deregulation of interest rates, currency convertibility, or the liberalization of capital accounts. On top of that, I anticipate that the party will announce changes to the house registration policy (called “hukou” in China), which facilitates the historic rural to urban transition that’s moving 250 million Chinese from the countryside and into cities. Elsewhere, a move toward tax reform, particularly at the local level, would be very significant. We’ve seen local Chinese governments running up huge debt burdens: tax reforms that improved their revenues could help rectify the situation and offset potential financial disaster. And finally, although air pollution regulation has already been announced, expect even more focus on the environment. Studies now show that Chinese coal pollution is cutting life expectancy by up to five years. I wouldn’t be surprised if Xi delivers a more pointed declaration that China needs to wean itself off of coal in exchange for environmentally cleaner alternatives. We may get a step in this direction with the announcement of an intended coal tax.