It has been a busy season for global politics. Both the U.S. and China have now selected the leaders to carry them forward for the next four and ten years respectively.
In America, Barack Obama was one of the only Western leaders to be re-elected since the economic downturn – a remarkable achievement. While in China, correct protocol ensured the reins of power were handed over as smoothly as possible to Xi Jinping, who will formally take over as head of the Chinese Communist Party next March.
Xi Jinping looking towards a positive future for China Image: |
As power in the upper echelons of Chinese politics is inherited through invisible lines of patronage, the new roster of the powerful Standing Committee of the Political Bureau is far from surprising.
The relatively young Xi Jinping (59) and Li Keqiang (57) both slid into the top spots tacitly guaranteed to them by their respective sponsors, President Hu Jintao and Premier Wen Jiabao.
The opaque selection criteria and vague Party rhetoric have given rise to much debate and speculation from both domestic and international analysts, especially on the subjects of political and economic reform.
For every article which extols the new leaders’ steadfast resolution and commitment to reform, there is an equally compelling report suggesting they will find it difficult to do anything other than maintain the status quo. In either case, they are unlikely to be rushing to undertake any major policy changes within the next year.
China’s rise in prosperity over the last few decades is unparalleled in human history. National GDP has grown almost five-fold under Hu Jintao’s supervision. Since Hu came to power, the nation has pulled over 100 million people above the poverty line, car ownership has reached 100 million vehicles and China has raised GDP per capita (in PPP terms) from $2,800 in 2002 to a forecast $9,100 by year end. In his keynote speech, Hu forecast that GDP would double from its 2010 figure of $5.9 trillion to $12 trillion by 2020.
Xi and Li, however, unlike Hu and Wen, did not inherit a nation on the verge of an enormous industrial boom. Rather, they will take over a slowing economy struggling to rebalance itself from an export-led manufacturing economy to one based on consumption.
Nobody realistically expects the return of blistering double-digit growth, but if, under pressure from Party elders, China’s new leaders feel the economy isn’t growing fast enough, they may be tempted to splash out on fixed investment. This has been the government’s response before, but could prove disastrous for the new leadership.
Increased investment would reduce efficiency, especially in state-owned companies and bring with it waves of bad debt and non-performing loans. If the state spends all of its massive half-trillion dollar sovereign wealth fund in a panic, it risks becoming destabilised and vulnerable.
Reform or not, the affable and charismatic Xi Jinping is a good choice for China’s next leader. Educated in the US and with an excellent grasp of the English language, Xi is an enigmatic and well-travelled cadre who has visited over 50 countries during his time in office – a hectic schedule for any diplomat – and will be a fresh alternative to his more home-bound predecessors.
A leader adept in international relations will almost certainly help China's state-owned oil companies - CNPC, Sinopec Group and CNOOC - who are turning to developing nations to secure the country's energy future. In developed countries, too, an adroit, English-speaking statesman should help the nation’s energy companies close important deals. One could speculate that a reform-minded, gregarious and friendly politician like Xi might calm fears surrounding the CNOOC-Nexen deal.
State-owned oil companies will also benefit if the Party chooses to loosen its tough economic policies and allows inflation to rise at a quicker rate, as they could then mitigate steep drops in profitability with marginally higher fuel prices.
Whatever the future holds for China and its booming lubricants industry, near or far, the OATS China bulletin will continue to bring the latest news from the lubricants and OEM sectors.
If you would like to comment on anything you have read in this Bulletin, or offer suggestions as to how might improve our coverage in the future, simply contact Diana at DShen@oats.co.uk. We look forward to hearing from you.
Sebastian Crawshaw
Chairman, OATS