As the U.S. digests Hu Jintao’s recent visit to the U.S., his motives become a bit clearer, and his task as China’s designated leader for the foreseeable future is laid out before him.

The U.S. can expect a distinct, though subtle decline in the tone of Sino-U.S. relations, due mainly to domestic Chinese economic and political conditions.

Hu Jintao’s primary concern for the coming months will be political succession, culminating in the 16^th Party Congress in October, when Hu is expected to succeed Jiang Zemin as the Chairman of the party.

His appointment as the top leader provides no guarantee that he will stay at the top. He will have to quickly consolidate his position with various factions within the party, including the recently retired third generation leaders that appointed him. Jiang Zemin, Zhu Rongji and Li Peng are unlikely to fade away quietly, and are already promoting and encouraging their own proteges to challenge Hu, ensuring that major decisions are reached through consensus, and their councils are sought long after their retirement.

Hu’s greatest challenge for the top spot is presented by Zeng Qinghong, known as the "Head Eunuch of Zhongnanhai." He is Jiang Zemin’s chief protégé, and head of the powerful Party Organziation Department, responsible for promotions and personnel appointments within the Party. Numerous cadres are beholden to Zeng for their current positions. Zeng recently appointed one of his deputies at the Organization Department, Yu Yunyao, to the position of vice-principal at the Central Party School, where Hu is the president.

If Hu is to retain the top spot, he will have to subjugate Zeng and the other contenders, while not offending the retired leaders, such as Jiang. Hu’s experience cracking down on disenfranchised monks and nuns in Tibet may not have prepared him for the powerful adversaries he will have to face in Beijing.

Mao’s reminder that power comes from the muzzle of a gun continues to resonate in modern Chinese politics. The PLA retains influence within the party, and traditionally considers itself to be the ultimate arbiter of dynastic succession.

Jiang Zemin is likely to remain the chairman of the Central Military Commission after he retires from his other posts, in what is being called the "Deng Xiaoping Model." As Jiang expects to continue to exert influence from the sidelines, Hu faces the increased risk of Jiang dragging the PLA into party politics.

However, Jiang Zemin’s record with the PLA should give some hope to Hu. When Jiang took over the party in 1989, some critics said he would never survive Deng, partly because he had never served with the army, and would never receive the PLA’s backing. After 12 years, Jiang proved that he could be the first non-veteran to command the PLA, and to enjoy their allegiance.

By promoting generals beholden to himself, and offering generous budget increases over the last two years, Jiang even managed to force the PLA to give up portions of its wide ranging business empire which it had built over the previous 20 years. While not entirely removing itself from "commercial interests," Jiang has lead the PLA to modernize in form and function to some extent. It is conceivable that in the coming years, the PLA (and People’s Armed Police) will further remove itself from politics and become a ‘national army’ answering to the people’s congress instead of the party, and exerting less influence in foreign and domestic policies.

If Hu does not step up and quickly gain firm control of the party, it is possible that the PLA will become more aggressive in exerting their influence, and step in to ‘supervise’ the fourth generation of leaders. Hu’s ability to suppress unrest both in the countryside and industrial centers will make him dependent on PLA and PAP support. In exchange, he is likely to give Jiang free reign to continue to cultivate the PLA.

It’s the economy, stupid

While putting on a strong face by publicizing questionable economic growth figures every year, the Chinese economy is undoubtedly faltering. Despite major domestic infrastructure projects designed to boost the economy, foreign direct investment is slipping, unemployment is rising, and recovery is nowhere in sight. In managing the economy, the Chinese leadership is facing its greatest challenge in the past two decades.

Unrest in the countryside reflects the weak economic situation, exasperated by corrupt officials overtaxing the peasantry. Unrest in the northeast rust-belt has unbelievably spread to Daqing, the legendary oil field acclaimed by a generation of Communist propagandists.

Unemployed workers are posing the greatest political threat to the party. The unemployed are swelling the ranks of unsanctioned civil groups such as Falun gong and underground churches. Major cities are experiencing regular, organized protest marches. For the first time, unemployed industrial workers have begun calling for not only the removal of corrupt officials and payment of promised benefits, they are calling for independent trade unions; an unprecedented challenge to the party’s leadership in all civil matters.

Improving the economy is key to China’s continued stability, as well as ensuring Hu Jintao’s success as the future leader of China.

What is Hu going to do?   

The 1990’s saw the rise of the Chinese patriots. The return of Hong Kong to Chinese sovereignty in 1997 ‘erased centuries of shame’ and provided nationalists the first opportunity to cheer about the motherland since 1949. The follow up success of the Macau handover in 1999, and in 2001, the award of the 2008 Olympics to Beijing has finally validated what they have known all along.

While the economy is faltering, and the unemployment rate is rising, saluting the red flag will distract from obvious problems at home. The 1999 NATO bombing of the Chinese Embassy in Belgrade saw an unprecedented reaction from the Chinese people who stormed U.S. and British embassies, consulates and chanceries throughout China. Chinese students formed ‘hacker brigades’ reminiscent of the cultural revolution to attack U.S. government web sites en masse.

The party leadership did not suppress these outbursts in 1999, seeing them as a cathartic outlet for the people. In 2001, the spyplane incident in Hainan, and the death of Chinese fighter pilot Wang Wei elicited less vehement reactions from the Chinese people, as the leadership exerted more control over nationalists and hawks within the PLA and party. By 2002, when the PLA discovered several listening devices on a U.S. manufactured and outfitted 767 designated for Jiang Zemin’s use, the Chinese press was discouraged from reporting on the story, partly because it spotlighted the extravagance of the plane itself, but also highlighted the incompetence (or worse, corruption) of the PLA Airforce officers detailed to oversee the outfitting of the aircraft.

Chinese leaders have a long history of encouraging nationalists to rise up and challenge foreign forces, while trying to steer their attention away from injustices at home. Riding a tiger is easy, getting off is hard.

While China is geographically contained by Russia, India and Japan, Chinese nationalists tend to paint the U.S. as the primary source of China’s problems. They see the U.S. as guilty of ‘containing’ China and preventing it from assuming its rightful place on the world stage.

Unfortunately for Hu, the U.S. is also China’s key export market, and the source of much of China’s foreign exchange reserve due to the major trade surplus they enjoy. Furthering China’s dependence on the U.S., much of China’s reserve is invested in U.S. Treasury instruments, thereby increasing China’s dependence on a stable U.S. economy and good relations with the American people. A catastrophic decline in Sino-U.S. relations could potentially derail the Chinese economy.

Hu Jintao can be expected to walk a fine line between encouraging the nationalists who draw attention away from internal problems such as unemployment and corruption, and assuaging them when they call for China to stand up to the hegemonic Americans.

Before Hu Jintao’s April visit to the U.S., he toured European capitals with a two-fold mission. Firstly, his goal was to raise his profile with European leaders and express his willingness to work closely with EU leaders on a variety of issues including trade and government level exchange. Secondly, his mission was a subtle message to the Americans that they are not the only game in town, and that they should not use their status as the world’s only super power to ‘contain’ China, or try to leverage their economic might.

Hu Jintao has recently instructed cadres within the Communist Youth League, Chinese Academy of Sciences and the Central Party School to study the "Social Democrat" models of several European governments with an eye to infusing select democratic principles to China’s evolving Communist system. This is also a subtle missive to the U.S. that their brand of ‘Western democracy’ is not the inevitable evolution of all world governments.

Jiang Zemin spent a great deal of his political capital making friends with the U.S. leadership over the past decade. Jiang made it a cornerstone of his presidency to befriend two U.S. presidents, by visiting the U.S. on multiple occasions and hosting Bush, Clinton and Gore on state visits to China. Jiang never missed a photo opportunity with his arm around Clinton, and even maneuvered Gore into toasting him at a state dinner at the Great Hall of the People in Beijing. Hu may be Jiang’s successor, but he can be expected to chart his own path.

American China watchers fear that "multipolar" is a catchword for an ‘anti-american’ world order. Hu can be expected to foster better economic and political relations with Europe as an obvious foil to increasing dependence on U.S. markets and financial instruments. While not alienating China’s largest trading partner and a key source of direct investment, Hu will try to appease hawks and nationalists in China by not outwardly supporting the U.S.

For now, the U.S. remains critical to China’s economy. Nonetheless, China recently announced that they would increase their foreign exchange holdings in Euros. However, the total value in Euros is expected to be minor compared to dollar-denominated holdings. While, diversification may be a key goal for any portfolio, China’s dependence on the U.S. will remain for some time to come.

Hu will have to talk a fine line between repudiating his main customer and banker to please his constituents at home, and embracing America as his predecessor did, which would certainly risk his own political future.

Hu’s first priority will be to consolidate power within the party. He will have to fend off Zeng Qinghong without offending Jiang Zemin. Other opportunists will try to take advantage of any perceived weaknesses on Hu’s part.

Recent reports that Wen Jiabao, the frontrunner to become premier in 2003, had offered to resign but was refused by a split vote of the politburo standing committee shows that there are few strong contenders to depose Hu. Unless Hu makes serious mistakes, he should be able to keep his challengers in check.

As leader of the party, one of Hu’s key roles will be to keep domestic disturbances firmly under control. Increasing urban labor unrest due to unemployment, as well as rural dissatisfaction with corruption by party bosses are major threats to continued stability. Hu can be expected to apply a firm hand to keep the peace.

Lastly, Hu will have to appease the nationalists and hawks within the party and PLA by building the army, taking a strong stance against Taiwanese independence, and being firm with the Americans.

Membership in the WTO politically benefited Jiang Zemin and Zhu Rongji. Hu Jintao may pay the price of extended insolvency in Chinese banks, growing failures of state owned companies who can not compete with increased imports. The obvious solution is to erect non-tariff barriers similar to Japan and South Korea to slow the deluge of foreign goods, and increase the cost of foreign participation in the Chinese domestic economy.

Maintaining the growth of exports as the U.S. and European economies improve will be a high priority.

The Chinese economy will be further supported by continued massive infrastructure projects, including new rail lines to connect the western provinces, including Tibet, with the prosperous eastern region. Improved transportation will have the added benefit of encouraging the ‘Go West Young Han’ campaign, which will someday see Tibetans and Muslim Uighers become minorities in their own autonomous regions, thereby settling the currently restive and potentially separatist population.

The continued encouragement of foreign direct investment will help keep employment levels up and drive growth in exports. While counter to WTO intentions, foreign invested companies in China are still strongly encouraged to export a portion of their output to satisfy licensing requirements.

Hu can be expected to spend more time on cultivating European ties, as well as building greater interdependence between Asian nations. China would like to paint itself as the leader of Asia and other developing nations. The recent Boao conference in Hainan, however, has proven that China has a long way to go before it can be considered a true leader that other nations will willingly follow, however, it is a clear signal of their future multilateral intentions.

Though, the U.S. will remain their major economic partner, the current U.S. administration has taken a hard look at China as a potential future threat. Outspoken individuals in the U.S. government have hinted that a future regional war with China is inevitable. Military ties have been severely curtailed between the two countries. Two bullies are eyeing one another in the schoolyard, with one looking to prove himself, the other confident in his ability to soundly beat the other, but not wanting to skin a knuckle.

Hu Jintao faces serious challenges in his first critical years in the top office. He will have to consolidate his own power within the party, fend off rivals and improve the economy to maintain the peace.

Managing China’s relationships with the rest of the world will likely occupy the remainder of his time as he tries to resolve the apparent contradiction of his strategic relationship with the world’s only superpower.

May 8, 2002

Links to more info:

Hu Jintao
Zeng Qinghong
Wen Jiabao

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©2002 diver_drew

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