China’s New Leadership: Implications for Business

Published on 2012-11-24

Last week saw the conclusion of The 18th National Congress of the Communist Party of China (CPC). Given China’s role in the global economy today, this leadership transition is arguably the most significant ever for foreign business.

Last week saw the conclusion of The 18th National Congress of the Communist Party of China (CPC). The once-in-a-decade leadership transition resulted in seven entirely new facesoccupying the Standing Committee positions. Given China’s role in the global economy today, this leadership transition is arguably the most significant ever for foreign business. Despite a decade of unrivalled growth and, the Party Congress comes at a time when there is a growing sense of anxiety within China with pressure mounting for both economic reform and social change.

On Friday 16th of November, The British Chamber of Commerce Shanghai and The European Chamber of Commerce in China invited Kenneth Jarrett, Chairman of APCO Worldwide Greater China Region, to outline the key takeaways from China’s leadership transition for foreign businesses including an analysis of the new leadership’s backgrounds and their policy priorities. He also looked at the main challenges faced by China’s incoming leaders and the implications of this for China and for foreign companies.

Going back ten years, when Hu Jin Tao took over as president, people expected a more foreign friendly and open business environment to follow. There were also expectations that Hu would initiate political reforms. Over the course of his tenure, these expectations did not quite materialise as expected. This suggests that, although we can speculate, it is difficult to really know the internal dynamics and how that will influence policy.

The Party Congress began with Hu Jin Tao’s work report. In summary,

  • Called for doubling GDP and per capita income by 2020 (against 2010 baseline)
  • Continue “socialist market economy” and “development model transformation”
  • Limit SOE role?
  • More market-driven interest rates and RMB exchange rate
  • Calls for greater protection of intellectual property
  • Said little about political reform, but said China would follow either the “old” way nor the “wicked” way
  • Stronger legal system inc. stronger stance against corruption
  • Combat corruption: corruption could cause party collapse
  • Greater emphasis on environmental protection


Most of these objectives sound promising for foreign business but only time will tell which in particular are given highest priority.

Moving on to the personnel decisions, Mr. Jarrett highlighted two commonly recognied separate factions within the CCP.
1) Princelings/Shanghai - ‘elitists’ e.g. Jiang Zemin
2) Youth League - ‘populists’ e.g. Hu Jintao

Tendency to a particular faction is based on the individual’s socio-economic background which influences their world view. Xi Jinping and all the other new additions to the Standing Committee (excluding Li Keqiang) are seen to be more aligned with the Princeling (elitist) faction.That said, for the first time, all seven members are from the ‘Fifth Generation’, born in the 1950s and thereforeexperienced the Cultural Revolution and are seen as less radical, more pragmatic and aware of the challenges. They have also witnessed the benefits foreign business can bring so expected to be more open than some of their predecessors. If anything, the newer generations could be increasingly progressive as more and more travel or study abroad.