Xi takes China's helm with many tough challenges
Chief among the problems Xi and his team will have to tackle is the economy. Though Hu pledged more balanced development, inequality has risen and housing costs have soared. Over the past year, the economy has flagged, dragged down by anemic demand in Europe and the U.S. for Chinese products and an overhang from excessive lending for factories and infrastructure.
With state banks preferring to lend to state-run companies or not at all, private entrepreneurs have had to turn to unofficial money-lenders.
‘‘The bank just asked me to wait,’’ said Deng Mingxin, who runs a zipper factory with 10 employees in Jiangsu province. ‘‘Maybe it’s because I didn’t offer enough ‘red envelopes'’’ — a reference to bribes.
The World Bank warns that without quick action, growth that fell to a three-year low of 7.4 percent in the latest quarter may fall to 5 percent by 2015 — a low rate for generating the employment and funding the social programs Beijing holds as key to keeping a lid on unrest. Analysts and Beijing’s own advisers have said it needs to overhaul its strategy and nurture consumer spending and services to meet its pledge of doubling incomes by 2020.
‘‘China will need a very different economy in the next decade,’’ said Citigroup economist Minggao Shen.
In foreign policy, the U.S. and other partners are looking for reassurance that China’s policy remains one of peaceful integration into the world community. Tensions have flared in recent months between China, Japan and the Philippines over contested islets in the East and South China Seas. Mistrust has also grown with the U.S. as it diverts more military and diplomatic resources to Asia in what Chinese leaders see as containment.
Fresh in office, Xi can ill-afford to bow to foreigners, crossing a nationalistic public and a military that may still be uncertain about his leadership.
‘‘The leaders can’t look like they are being soft on the U.S. or foreign policy because they will lose power in terms of people,’’ said Robert Lawrence Kuhn, a business consultant and author of the book ‘‘How China’s Leaders Think.’’ Kuhn expects more tough rhetoric than action in the months ahead, but expects Xi’s leadership to develop a more nuanced foreign policy as it consolidates its authority at home.
Of all the knotty long-term challenges, few threaten to derail China’s march to a more prosperous society more than its rapidly aging society. Baby boomers whose labor manned the factories and construction sites are starting to retire. Meanwhile fewer Chinese are entering the workforce after a generation of family planning limits and higher incomes led to smaller families.
If left unchecked, the trend will further stress already pressed social security funds.
Scrapping the rule that limits many families to one child would help in the long run, and is being urged by experts. But the leadership for years has delayed change, in part because it sees smaller families and fewer births as having helped raise incomes overall.
‘‘China has wasted some time and opportunities partly because its growth over the last 10 years was so spectacular,’’ said Wang Feng, director of the Brookings-Tsinghua Center for Public Policy and an expert on China’s demographics. ‘‘Now it no longer has that luxury.’’
Associated Press writers Didi Tang, Gillian Wong, Alexa Olesen, Joe McDonald and Louise Watt and researchers Flora Ji and Zhao Liang contributed to this report.