April 2012

As China’s 18th Party Congress looms, it is clear that we are now in the thick of transition. The impending transition creates uncertainty about China’s future, but it also opens up new possibilities. Already, the discussion of economic policies in China reflects the greater range of options made possible by the impending leadership change. For several years, economic reforms in China have essentially been dead in the water. Recently, the need for a more forceful push on economic reform has been acknowledged publicly in ways that would scarcely have been possible a few years earlier. This piece traces some of the key personalities and events involved in this opening policy space. It examines some of the signals that Xi Jinping, the presumptive next top leader, has sent in the policy realm. This piece examines a few of the interactions already beginning to take shape between new policy agendas, on the one hand, and the coming widespread turnover of policymakers and technocrats, on the other.

President Ma Ying-jeou’s solid re-election victory on January 14 and the Kuomintang’s respectable showing in the Legislative Yuan (LY) contests not only eased anxiety in Beijing and Washington, but laid a foundation for yet further progress along all sides of the triangular relationship. On the other hand, they created challenges for Ma, the opposition Democratic Progressive Party (DPP), Beijing, and the United States. The substantially reduced margin of Ma’s victory as compared with 2008, and the smaller Kuomintang (KMT) majority in the LY, reflected not only the “recovery” of the DPP from the low point of the Chen Shui-bian years, but widespread ambivalence about the Ma administration’s policies and performance. Beijing was obviously gratified by the election results, and reaffirmed earlier indications of its intention to enrich cross-Strait economic, cultural, and similar relations. But, contrary to the prognostication of some China-watchers, the PRC was careful to avoid any suggestion it intended to press political and security issues, even as it made clear it wanted to continue to work on establishing a foundation of political trust that could form the basis for addressing such issues in the future. Issues of international space, however, continued to fester, and questions remained about whether efforts would be made to negotiate a peace accord—and, if so, on what terms.