At the crossroads
The People's Republic of China today marks its 54th National Day under a new frontline leadership team.
However, the country is at a crossroads. After two-and-a-half decades of spectacular economic growth, the people are clamouring for more equity, justice and democratic participation.
The challenge for the new leaders is to chart a course of more balanced development while meeting the expectations of society.
At the 16th Congress of the Chinese Communist Party last November, Hu Jintao became the party's general secretary, but the outgoing Jiang Zemin retained his position as chairman of the party's powerful central military commission.
The hybrid leadership structure is to ensure continuity but sets the stage for the centres to compete for political resources.
The National People's Congress in March this year appointed Mr Hu as president of the state and Wen Jiabao as prime minister. In short order, they established their style of governance, characterised by a strong populist touch.
They shun pompous ceremonies, pay greater attention to the needs of the economically disadvantaged and prosecute corruption more vigorously than their predecessors.
The new leaders are aware of a new dynamic that not only has economic growth proved inadequate in solving the country's social problems but it has often deepened conflict, says Mao Yushi, a renowned economist and chairman of private think-tank Unirule Institute.
Mr Hu and Mr Wen must grab the bull by the horns and put political reforms on the agenda, he says.
To enhance accountability, reporting on politburo meetings and its study sessions have lifted the veil of secrecy. Mr Hu has also made upholding the rule of law a central task and sought advice from leaders outside the Party.
The outbreak of Sars was a catalyst for a number of changes. Two senior officials were sacked and disclosure at local government level became mandatory.
Responding to an public outcry after a young graphic artist, Sun Zhigang, was wrongfully detained and beaten to death in Guangzhou, the State Council revoked outdated regulations on vagrancy.
The government this summer launched a sweeping reform of the party and state newspapers, seeking to control the number of newspapers, banning mandatory subscriptions and forcing papers to live or die by the market.
Although content control has not been relaxed, letting market forces decide how the media should be organised will have far-reaching consequences.
Hopes ran high that Mr Hu would ride on the momentum to push intra-party democracy, but he failed to use the occasion of the Party's founding day on July 1 to present any new ideas. Instead, he chose to follow a safe course by extolling the virtues of the Three Representatives, the brainchild of his predecessor, Jiang Zemin, as the Party's beacon.
The Three Representatives is set to be enshrined in the constitution, but public discussion of the constitution is not permitted. And Cao Siyuan, an advocate of constitutional reform, has been silenced.
Zhong Dajun, a social researcher and a friend of Mr Cao, believes that the progress of democracy in China should be marked by control and liberalisation. The authorities are aware of the need for people to let off steam, but they control the pressure valve, he says.
Despite periodic clampdowns on freedom of expression, the new leaders are listening more and more to the people and will continue to withdraw from many aspects of their lives, he says. Mr Zhong says the progress of the past two decades has not been easy, but he remains hopeful reforms will make headway. The new leaders have shown resolve over tackling the intractable problem of corruption. The government has put the Shanghai property magnate Chau Ching-ngai behind bars, prosecuted top provincial officials and sent discipline inspectors to provinces for probes.
Economic growth will continue to be a priority for creating jobs for the vast rural labour force as any significant slowdown could destabilise society and politics.
China's economy expanded 8.2 per cent in the first six months of the year, despite the impact of Sars. But behind the growth figures, sluggish consumer spending, rising inventories and uneven regional development have sent warning signals to economic policymakers.
The incipient property market bubble and the pressure to let the currency appreciate have presented the government with new challenges.
Chinese economists are divided over whether the economy is overheating, but they admit that rapid credit growth could lead to more non-performing loans when the expansion slows. The People's Bank of China, the central bank, issued more than 400 billion yuan (about HK$375 billion) of special central bank certificates to mop up excess liquidity. It also took the drastic step of raising the banking reserve requirement by one percentage point to 7 per cent to curb monetary growth.
It remains to be seen how effective these measures will be in stemming the rise of inflation, which, if unchecked now, could shoot up to 5 per cent next year, against this year's 2 per cent, according to a forecast by Peking University economist Song Guoqing.
The yuan, which has been pegged to the United States dollar for nine years, has weakened against other currencies as the dollar has fallen over the past year.
The US government has blamed cheap Chinese imports for causing the loss of millions of manufacturing jobs in the United States and a ballooning trade deficit.
Early last month, US Treasury Secretary John Snow travelled to China to put pressure on the country to liberalise the exchange rate and let the yuan appreciate.
China stood firm on the yuan, although it reaffirmed that a freely floating yuan was a long-range objective.
Other US officials continued finding fault with Chinese commercial practice in everything from the infringement of intellectual property rights to unfair currency manipulation.
US Commerce Secretary Donald Evans will visit China before year-end to strong-arm the country on trade issues. The tussle to narrow the trade gap is likely to become more heated before next year's elections in the US.
By joining the World Trade Organisation, China embraced a globalised economy and tried to live up to its image of a 'responsible major country'.
With the nation thus integrated into the world, China has no other option than to live by its rules.