As the National People's Congress (NPC) -- China's rubber stamp parliament -- concluded on Sunday, China's historic leadership transition came to an end after more than two years of political intrigue and factional infighting. In the carefully choreographed tradition of previous transitions, the 3,000 parliamentary delegates convened in Beijing and elected the new government with an overwhelming majority. Xi Jinping was voted president with one opposing vote, just like Mao Zedong in 1949, and Li Keqiang became China's new premier, with three opposing votes.
But something was decidedly different this time around. It was a combination of the smog-filled skies, the reports of thousands of dead pigs floating in Shanghai's water source, and a growing public disenchantment with the Communist Party. Expectations for change were high, and tolerance for another orchestrated Communist gathering was low.
The signals coming from the NPC reflected a clear recognition from Xi and Li that something has to change. Over the past year, the party's domestic credibility has taken a serious beating: from the ouster of Chongqing Party Secretary Bo Xilai last March in a tale of murder and betrayal fit for a novel to foreign press accounts of unseemly wealth amassed by family members of Xi and outgoing premier Wen Jiabao to strikes earlier this year by journalists at liberal media outlets.
At the NPC, the leadership moved to address popular criticism. By dismantling two highly unpopular administrations -- the Railways Ministry and the family planning commission -- China's new leaders made the first real attempt to streamline the bureaucracy since reformer Premier Zhu Rongji in 1998. They vowed to improve food safety and fight environmental degradation, two issues of great public concern. The government also pledged to reduce the state's role in the economy and society.
Thus far, these moves amount to political symbolism rather than substantial change, but there is a lingering sense that this time is different. Since coming to power in November, Xi Jinping has consolidated his power base in the party and army more rapidly than his predecessor. He also has greater credibility and a more appealing public persona than the outgoing Hu Jintao, in part thanks to the aggressive promotion of the anti-corruption and frugality campaigns.
But while Xi Jinping is better placed than his predecessors to take on that broad agenda, the high expectations that come with that recognition are not always helpful. The new president will spend the year setting priorities and consolidating internal support for them even as pent-up internal and popular pressure on the young administration continues to build. Xi will have to move quickly. Beyond the signals, he will have to give substance to his reform agenda by the third plenum in the fall of 2013. The symbolism will not be lost on Chinese leaders, since it was Deng Xiaoping who also announced his transformative "reform and opening up" policy at the third plenum in 1978.
Only then will it be clearer if this time it really is different -- and if Xi's the one to bring about lasting and substantive change for a party and a country that needs it.
Michael Meidan is an analyst in Eurasia Group's Asia practice.
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Eurasia Group's weekly selection of essential reading for the political risk junkie -- presented in no particular order. As always, feel free to give us your feedback or selections via @EurasiaGroup or @IanBremmer.
How does "a quaint historical pageant played out with live ammunition" erupt into what could become a full-fledged guerilla war?
By P.W. Singer, Foreign Policy
So much for the U.S.'s perceived monopoly on drones. There are at least 75 countries using unmanned aircraft in their militaries. As the technology spreads into more hands and more sectors, what impact will that have?
By Joe Leahy, Financial Times
This week, Brazilians were confusing the World Cup and the Holy Grail. Losing out to Argentina in the papal selection was painful, but it was a victory of sorts: Brazil is celebrating the first-ever pope from Latin America, a region that is home to 40 percent of the world's Catholics.
By Cris Chinaka, Reuters
What can we expect in Zimbabwe's upcoming elections? The population's median age is 33 years old -- more than half of Zimbabweans were born after independence in 1980. How will an increasingly youthful electorate impact the aspirations of an aging mainstay like 89-year-old president Robert Mugabe?
By Barbara Demick, Los Angeles Times
It turns out the lifestyle of a Chinese hacker isn't all it's cracked up to be. This rare glimpse at the day-to-day life of a hacker in the Chinese army is fascinating.
As we wrote last August, some governments are watching political developments in Venezuela more closely -- and with more anxiety -- than others. For the past decade, that country's Petrocaribe program has helped 18 Central American and Caribbean leaders avoid the kinds of tough economic choices that sometimes drive angry citizens into the streets -- and helped Hugo Chávez extend his regional influence. Each of these countries has benefited from concessional financing schemes for their imports of Venezuelan crude oil, as well as Venezuelan support for infrastructure projects and social programs. Beneficiaries, especially Cuba, will be watching closely as Venezuelans go to the polls on April 14 to elect Chávez's successor.
They can expect good news and bad news.
The good news for them is that acting-President Nicolas Maduro, Chávez's hand-picked successor, is highly likely to win. Opposition leader Henrique Capriles Radonski is back for another run after losing to Chávez in October, but following a campaign that is likely to prove nasty, brutish, and short, Maduro will benefit from still-strong popular support for Chavismo, public sympathy for those close to Chávez, and fear that the opposition would reverse the late president's most popular policies. Maduro and his allies will also have the resources and political leverage to boost spending and mobilize supporters.
The bad news is that policy is unlikely to improve under a Maduro administration, and political conditions within the country could deteriorate over time as internal dissent becomes more difficult to manage and worsening economic conditions stoke social unrest. Maduro is likely to maintain Petrocaribe, but in the medium term, domestic fiscal constraints may well force him to reduce foreign aid, since among the spending commitments of state-run oil firm and government piggy bank PDVSA, help for foreign governments is the easiest area to cut. Maduro will have to care more about support at home than friends abroad.
Venezuela is currently giving away about one-third of its oil production at below-market prices, including as part of the Petrocaribe program. At today's prices, the volumes that go to Petrocaribe partners amount to more than $6 billion in lost revenue -- about 2 percent of Venezuela's total GDP.
The new president will probably prioritize aid to Cuba, since the Castro brothers are strategic allies and high-profile friends who likely played a role in vetting him for the presidency. Maintaining strong relations with the Castro regime is also a means for Maduro to protect his revolutionary credentials as he works to establish himself as Chávez's legitimate political heir.
But for other Petrocaribe countries, aid reduction will likely be substantial. The Dominican Republic and Nicaragua would likely face the toughest economic challenges, forcing policymakers to make sharp policy adjustments. Reduction or elimination of Petrocaribe financing would put the DR's Danilo Medina in an especially tight spot. Given the size of its economy and its access to international financial markets, the Dominican Republic is better placed than Cuba or Nicaragua to weather the storm, but Medina is already looking for new sources of state revenue.
Cuts to Petrocaribe would also be bad news for Daniel Ortega's government in Nicaragua. Some estimates have Venezuelan support -- in the form of direct loans to Ortega, energy projects, and oil -- at about $500-600 million a year. That's 7-8 percent of Nicaragua's GDP. Petrocaribe has allowed Ortega to subsidize electricity rates and public transportation, boost public sector wages, spend on infrastructure improvements, and enhance food security. A significant cut to Petrocaribe might even persuade Ortega to make new friends in Washington.
These are a few of the reasons why there will be so much international interest in Venezuela's election -- and in what comes next.
Risa Grais-Targow and Heather Berkman are analysts in Eurasia Group's Latin America practice.
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Eurasia Group's weekly selection of essential reading for the political risk junkie -- presented in no particular order. As always, feel free to give us your feedback or selections by tweeting at us via @EurasiaGroup or @ianbremmer.
The theme of this week's must-reads is number crunching -- whether it's budgets in China and Iran, record-long filibusters in the US senate, or how much the quality of life has improved in Africa over the last decade. Get out your calculators. Here goes.
Crunching the numbers
In terms of halting climate change, natural gas has been dubbed a "bridge fuel" for its growing role in the energy mix as the world transitions to renewable energy. But just how far into the future can this bridge reach?
By Lily Kuo, Quartz
China announced a 10.7 percent increase in its defense budget for the coming year. But it still spends more on "public security," underscoring Beijing's real focus.
By Eve Cary, The Diplomat
China's reported 2012 GDP: 51.9 trillion yuan. The reported GDP of its 31 provinces: 57.6 trillion yuan. The numbers don't add up. Li Keqiang's 2007 admission that GDP statistics are "man-made" became public via a Wikileaks cable in 2010.
By Mohammad Ali Shabani, Al-Monitor
Ahmadinjead's proposed budget has some eye-openers. An 82 percent increase in the executive branch's operating budget. Significant cuts for councils run by his rivals, such as Hasemi Rafsanjani. And how does it all add up? Last year the oil price per barrel that balanced the budget was $81.50. This year it's $85. The proposed budget? $95.
Correspondent Oliver August outlines how African lives have tangibly improved over the past decade. Real income per person is up more than 30 percent, while malaria deaths in some of the worst-affected countries are down 30 percent -- and HIV infections are down as much as 74 percent.
By Bobby Cervantes, Politico
On Wednesday, Rand Paul filibustered the nomination of John Brennan as CIA director for nearly 13 hours. How does that rank compared to the all-time longest talking filibusters in the U.S. Senate?
NATALIA KOLESNIKOVA/AFP/Getty Images
With a surprising and inconclusive election result and no clear route to a government almost two weeks later, Italian politics appear to have returned to what passes for normalcy there. Despite the near-term uncertainty, three things do seem clear. First, new elections are likely to take place between six months and a year from now. Second, voters are fed up with tax-heavy fiscal consolidation and structural reforms. Third, Italians have had their fill of a corrupt and gerontocratic political class, as demonstrated by the success of comedian Beppe Grillo's anti-party, anti-corruption Five Star Movement (M5S).
Despite the movement's negative portrayal in the media, Grillo's M5S could be the breath of fresh air that Italian politics badly needs if -- and it's a big if -- it can make a constructive contribution to dialog in the parliament. It is true that M5S's feud with the domestic media, crude skewering of established politicians, and potentially disastrous economic views have raised concerns from foreign policymakers and market participants. For example, Grillo personally supports a referendum on euro membership and has discussed restructuring the public debt or delaying interest payments. Officially, the Five Star Movement also hopes to roll-back the Biagi law, a liberalizing labor market reform, and renationalize the telephone network, among other economically questionable proposals.
But the movement has also been treated unfairly by international commentators. Comparisons to populist, far-right groups are just wrong. The M5S is not racist, violent, nationalist, or anti-democratic. Moreover, some of its economic proposals, especially where competition policy and reducing the state bureaucracy are concerned, are sensible. And while M5S's newly-elected parliamentarians may be inexperienced, they are also younger, more educated, and include more women than most other parties. These qualities make the movement more representative of modern Italy than many of their opponents.
But in the near-term, Italian politics will be dominated by efforts to form a government. Pier Luigi Bersani, the leader of the "Italy Common Good" coalition, gets the first crack at forming a cabinet thanks to his coalition's majority in the lower house (it failed to secure a senate majority, though). Bersani hopes to persuade the "Grillini" to support an eight point legislative plan, though Grillo has only agreed to evaluate each bill independently. The markets and the Italian public seem to understand that economic reforms are on hold for now, but both are hoping for political reforms.
Should Grillo allow political reform to move forward -- especially to the flawed electoral system -- the public will likely reward the Five Star Movement when Italy returns to the polls. (A new president must first be chosen, while electoral reform and cutting the number of parliamentarians and their salaries, as Bersani has proposed, would take several months.) A more cynical electoral strategy would be to hamstring any attempt at change, perhaps forcing Bersani to turn to Berlusconi and the center-right for a grand coalition. That strategy may allow the Grillini to capitalize on public disgust when new elections are called, but it is unclear how voters will respond if M5S adopts such an intransigent approach.
Whatever M5S does, even greater uncertainty will probably surround the next elections. Inaccurate polling, and perhaps a new voting system, will again make seat counts difficult to predict. And because markets will demand more than just political housekeeping, the stakes are almost certain to be higher. But the election could also provide an opportunity to finally move on from the dysfunctional, bipolar politics of the Second Republic, and that would be no small achievement.
Peter Ceretti is a researcher with Eurasia Group's Europe practice
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Eurasia Group's weekly selection of essential reading for the political risk junkie -- presented in no particular order. As always, feel free to give us your feedback or selections @EurasiaGroup or @IanBremmer.
David Horowitz, The Times of Israel
Israel's quantity of natural water per capita is the lowest in its entire region. But it seems Israel's water crisis may be a thing of the past. Why? More than 80 percent of Israel's purified sewage is reused for agriculture. The next best in the OECD? Spain, at 18 percent.
Stephen Brown and Holger Hansen, Reuters
Yes, Spain's unemployment rate is over 26 percent. But elsewhere in the Eurozone, it's a different story. Germany's unemployment rate is at its lowest since reunification in 1990 -- and Berlin is actively recruiting certain skilled labor.
In Italian elections this week, voters set a post-war record ... for lowest turnout.
Simon Shuster, TIME
In a recent study, a group of academics analyzed a random sampling of 25 dissertations from the history department of Moscow Pedagogical State University. They found that all but one had been "at least 50 percent plagiarized." So how high up the ranks does plagiarism go? Perhaps more to the point, how high up the ranks will Medvedev's campaign to weed out plagiarism be permitted to go?
Kenneth G. Lieberthal, Brookings
This piece takes a realistic approach to highlighting potential common ground on cybersecurity between the United States and China.
Katherine Maher, Foreign Policy
Have you ever thought of the internet as unclaimed territory, awaiting a basic framework for division of sovereignty? You're not the only one -- a lot of nations have, too.
MENAHEM KAHANA/AFP/Getty Images
By Risa Grais-Targow
Beginning what he says will be his final five-year term as Cuba's president, Raul Castro surprised Cuba observers this week by appointing Miguel Diaz-Canel as first vice-president. At 52, Diaz-Canel is a spring chicken compared to Jose Ramon Machado Ventura, his 82-year old predecessor, and it appears generational change within the leadership might finally be on the agenda. Though Raul Castro, 81, appears in good health, Diaz-Canel would automatically assume the presidency if Castro is forced to step aside before 2018.
What does all this mean for policy? In the near-term, probably not much. Under Raul's leadership, the government has embarked on an incremental path toward economic liberalization while keeping a tight lid on political reform, and that's unlikely to change anytime soon. Diaz-Canel seems to have been selected precisely because he is both a trusted Communist Party loyalist and a proven manager who can balance the delicate process of gradual economic opening with the need to work closely with the still-influential first generation of revolutionaries within Cuba's politburo. Diaz-Canel, a former education minister and an engineer by training, has slowly worked his way through the party ranks. He served two years in the military and reportedly maintains close relations with top brass. He is not particularly charismatic, but, then again, neither is the man he's now in line to replace, who assumed power after older brother Fidel relinquished the reins in 2006.
The appointment suggests the Castro regime knows it must finally address the issue of succession. Raul has repeatedly called for a "rejuvenation" of Cuba's Communist Party but seems to have struggled to find an appropriate mix of loyalty and reformist credentials, particularly within the generation born after the 1959 revolution.
Still, there is no guarantee that Diaz-Canel will be Cuba's next leader. Other would-be heirs -- most notably Carlos Lage and Felipe Perez Roque -- have been groomed for succession in the past only to fall from grace after demonstrating an excess of personal ambition or clashing with Raul and Fidel. Moreover, though Diaz-Canel has the legitimacy that comes with Raul's backing, his last name is not Castro, and any transition will likely be challenging, particularly given Cuba's deep economic troubles, tensions within the ruling party, and intense pressure from the international community to implement political reforms.
Still, promoting Diaz-Canel suggests that despite the Castro brothers' seeming immortality, the regime is truly committed to "updating the model" to ensure the system they built continues after Raul and 86-year old Fidel are gone. This also includes continuing economic reforms aimed at slowly and carefully expanding the size of the private sector and reducing state payrolls.
Whether these reforms can keep the regime in power beyond the Castros, however, remains to be seen.
Risa Grais-Targow is an analyst in Eurasia Group’s Latin America practice.
ADALBERTO ROQUE/AFP/Getty Images
Eurasia Group's weekly selection of essential reading for the political risk junkie -- presented in no particular order. As always, feel free to give us your feedback or selections @EurasiaGroup or @IanBremmer.
"China denies it is world's biggest
trader despite data showing it passed US last year"
By Associated Press, The Washington Post
With great trading comes great responsibility. For China, the bragging rights of being the world's #1 trader don't offset the perceived political obligations that come with it. What will this mean when China becomes the largest economy in the world overall?
"They Actually Plan to Mine Asteroids. Here's How"
By Daniel Bukszpan, CNBC
The space market is skyrocketing. First, take the black market that arose in the wake of the meteor striking Russia last week -- even space debris is subject to the corruption and supply/demand forces at play in Russia. This article outlines how Planetary Resources, Inc. aims to mine asteroids that travel close to Earth. Says the CEO, "a single 500-meter LL chondrite has more platinum on it than has been mined in the history of humanity."
Of the 1,223 billionaires in 2012, 102 have signed the Gates-Buffett pledge to donate half of their total worth over the course of their lives. Finding emerging market billionaires who'll contribute has proven a lot more challenging: one Indian (out of 48) and no Chinese (out of 95) have signed on thus far.
"No, Greenland does not belong to
By Martin Breum and Jorgen Chemnitz, The New York Times
How has Greenland's relationship with Denmark opened the door to foreign investment? What role will China play in the country -- and by extension, the Arctic? Can Greenland, with a population of 57,000, handle the potential influx of 3,000 Chinese workers?
"The Extraordinary Science of
Addictive Junk Food"
By Michael Moss, The New York Times Magazine
"Today, one in three adults is considered clinically obese, along with one in five kids." Read this piece for the science -- and the politics-behind junk food's overwhelming success.
"Bitter Pill: Why Medical Bills Are
By Steven Brill, TIME
In the Obamacare debate, the main question has been, 'Who pays?' Through meticulous research and reporting, this piece takes a step back and provides answers to a more fundamental concern: 'Why must anybody pay this much in the first place?'
The Call, from Ian Bremmer, uses cutting-edge political science to predict the political future -- and how it will shape the global economy.