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Last Updated:  Wednesday, 5 March, 2003, 11:27 GMT
China's mounting challenges
Outgoing Prime Minister Zhu Rongji
Mr Zhu highlighted a string of problems
As China's National People's Congress prepares to approve a new generation of leaders, BBC correspondent Francis Markus looks at the challenges they face.

It was the perfect metaphor for China today, and the achievements and problems that Hu Jintao and his leadership team will inherit.

Zhu Rongji, the man reading his last report as prime minister under the bright lights of Beijing's Great Hall of the People, launched into a full flow of truly impressive statistics.

He conjured up visions of motorway networks rapidly expanding, massive hydraulic engineering projects taking shape, mobile phones in the palms of more and more Chinese.

The image of China's dazzling growth and modernisation, rising living standards and a changing society, is easily recognisable to anyone ensconced in an affluent big city neighbourhood or an agricultural area within easy reach of prosperous markets.

Wealth gap

Yet that is only part of the picture. As Mr Zhu progressed through a sweeping summary of China's economic progress, pointers to the serious problems lurking beneath the surface began to emerge.

"In the last five years, urban disposable incomes have risen by an average of 8.6% a year. Rural disposable incomes have risen by 3.8% annually," he said.

As he went on, Mr Zhu - a man with a reputation for bluntly addressing the issues - singled out a whole catalogue of problems including:

  • insufficient demand in China's domestic market
  • slow growth in the income of farmers
  • rising unemployment
  • continued inequalities in income distribution
  • problems in reforming state-owned enterprises
  • the need to bring greater order to the market economy
  • law and order problems
  • environmental degradation in some areas
  • bureaucracy, extravagance and conspicuous corruption among some government officials.

For the next generation of leaders to be endorsed by the NPC in the coming days, it was a sobering balance to contemplate.

Addressing many of these issues already forms the centrepiece of China's economic blueprint for the years ahead.

No easy answers

But many ordinary Chinese are impatient, citing such issues as the wealth gap, a sense of economic insecurity, and a feeling that society is more unequal and harsher than it was a decade or two ago.

There is no easy answer to how the new generation of leaders under Hu Jintao will be able to deal with these challenges, many of which are interlocking.

The sprouting road networks, water projects and communications that Zhu Rongji described are bringing huge improvements to those rural areas which they have touched.

But those still left out are feeling all the more left behind.

Hu Jintao(r) and Jiang Zemin (l)
Hu Jintao(r) will take over from Jiang Zemin (l)
For the government to be able to spread the economic growth, and attract investment to the underdeveloped inland provinces, it will require much more of the same.

The market of 1.3bn people - which some foreign entrepreneurs salivate over - is currently far from a reality.

It will need the creation of many new enterprises to generate the purchasing power to bring it to fruition, and open up new jobs for those made redundant from overmanned state industries.

That in turn will need more serious efforts to remould China's banking system, languishing under the burden of decades of politically-directed lending, running up a crippling burden of non-performing loans.

Getting credit is still relatively difficult for private business people - despite the fact that ordinary Chinese are depositing money in their bank accounts at ever greater rates, prompted by concern to provide for their welfare in a climate where they can no longer depend on the state.

The new Chinese Government knows that external factors will play a part in determining how effectively it can carry out its objectives.

Some economists have predicted that the instability which could be brought by a Middle East war will make China seem even more attractive as a safe haven for foreign investment than it is now.

On the other hand the economy remains heavily dependent on exports, making it vulnerable if the economies of its main trading partners sink into gloom.

Yet considerably more will depend on whether the new leadership line-up can fulfil its promise of being more educated and more technocratic than its forbears.

Because, although China describes its blend of economic reforms and authoritarian government as "socialism with Chinese characteristics", it is plain that ideology is becoming increasingly irrelevant as a mobilising force in people's daily lives.

Ever more ideology is likely to fall by the wayside in the years to come, which will leave the success of economic reform as an ever more important measure of legitimacy for Hu Jintao and his team of ministers.

Q&A: China's new leadership
15 Nov 02 |  Asia-Pacific

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