Party divisions evident over Chinese stimulus
Updated
The Chinese government has announced tax cuts to metals exporters and help to logistics companies to modernise technology in its latest stimulus measures for industries that have been hit by China's economic slump.
Beijing has promised stimulus plans for 10 industries on top of its four-trillion-yuan or US 586-billion dollar - economic stimulus package unveiled last year. And while the action may seem resolute, some observers detect tensions beneath the surface.
Presenter: Sen Lam
Speaker: Jennifer Richmond, Director of Chinese Analysis with global intelligence company STRATFOR
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RICHMOND: We've seen a lot of arguments playing out in the media, the arguments are one side promoting rural consumption versus the other side promoting coastal industries that are driving high growth.
LAM: Yes but are there signs of tensions beneath the surface?
RICHMOND: There are signs of tensions. There're two factions; the Hu Jintao faction and also Li Keqiang, who is the vice premier is using unemployment and the unemployment crisis to show that there's a current dependence on the export sector, which is unsustainable. The other action which revolves around Xi Jinping, who is also the vice president, he is with what's called normally the 'Princeling Faction', and this focuses on the need to slow growth for unemployment. Both of these groups want social stability, that is their aim. And they both want the maintenance of one-party power through the Chinese Communist Party. The problem is that they disagree on how to obtain this and the fact that we are seeing a bi-polar policy prescription.
LAM: Indeed, as you say these two key figures in the politburo, the vice president Xi Jinping and vice premier Li Keqiang, they represent radically different backgrounds, but the fact that they're part of this so-called "fifth generation leadership", do you think that bodes ill for China -- that even this new generation of leaders, that they don't seem to agree?
RICHMOND: Well again, the bottom line is both groups want social stability even the fifth generation, they want the maintenance of one-party rule through the Communist Party. So they're trying to remain unified. They do this through a lot of negotiation and compromise. But if the crisis persists, this may become less and less tenable.
LAM: And Jennifer, Beijing's mantra of course is the need to shift China's economy from its heavy dependence on exports, to one that's more driven by domestic consumption. How has this been received domestically in China?
RICHMOND: This is the mantra of the Hu Jintao and the Li faction. The other mantra that we see is to promote high growth with the export industries. We see this playing out like I said, mainly with the unemployment crisis. The unemployment crisis has shown that there's a dependence on the export sector. This has both served the Hu Jintao faction. At the same time, the export sector is losing so much now, it's creating the unemployment crisis and this is both with the need to push money into this sector to promote it, and that's where we see a lot of the debate coming out.
LAM: Do you think part of the problem might lie in the fact that the Chinese leaders of today don't enjoy the sweeping powers of say, Mao Zedong or even Deng Xiaoping?
RICHMOND: Absolutely, Mao Zedong and Deng Xiaoping were central figures that could control themselves, the faction. Right now, these two parties have to rely on compromise and negotiation. Again, which is why we see these bi-polar policy prescriptions playing out in the media and also on the ground.
LAM: You mentioned earlier this business of stimulating rural consumption versus focussing the stimulus on the more economically vibrant coastal regions. Would it not make sense for the Chinese Communist Party, given that the bulk of the electorate is in the rural areas, that there's really no choice but to concentrate on the rural sector?
RICHMOND: That's true in large part and that's the Hu Jintao faction's argument. The rural masses are pretty much a pillar of the Chinese Communist Party. At the same time, what has led to the high growth that we've seen since Deng Xiaoping instituted reforms in 1978 has been a focus on the export sector on the coast. And maintaining that high growth is necessary for employment, and employment is necessary for social stability. So you see, both factions have a very strong point on which to move, and this is again where the debate is playing out.
