Economic reform hinges on party congress

The next ten years of economic policy in China will be based heavily on leadership changes announced during the Communist Party’s 18th congress, which kicked off today in Beijing, Bloomberg reported. The backgrounds of those chosen for what is expected to be a seven-man Standing Committee, China’s top decision-making body, will indicate to investors the country’s openess to policy change. The potential that Tianjin Party Secretary Zhang Gaoli could be promoted to the committee has alarmed analysts due to his reliance on debt-fueled stimulus. “Zhang … [as] vice premier would have to be considered a setback for much needed reform in the financial sector,” said Nicholas Lardy, a fellow at the Peterson Institute for International Economics. The agenda for reform includes privatizing previously state-owned sectors and opening up lending rates and the prices of natural resources to market forces. Xi Jinping is widely expected to succeed Hu Jintao as general secretary of the party. Li Keqiang is expected to replace Premier Wen Jiabao. The other seats are subject to a much higher degree of speculation.