China faces crucial year as President Xi Jinping's pushes ahead with reform plans
An economic slowdown expected in 2015 as the president pushes ahead with sweeping change, including efforts to promote 'rule by law'
As President Xi Jinping heads into 2015 - the Communist Party chief's third year in the top office - he should be more comfortable with his status, having emerged as the most powerful leader in the post-Mao era.
He also bolstered his credentials as a world leader at last month's Asia-Pacific Economic Cooperation summit in Beijing.
That event came after two crucial meetings of party leaders in which Xi set out his vision of how he will rule during his two five-year terms in office. At the Third Plenum of the 18th Party Central Committee in November 2013, the leadership mapped out comprehensive reforms to restructure the social, economic and government system. And at the fourth plenum in October, the leadership agreed to massively overhaul the country's judicial system to promote "rule by law" and "constitutional rule" in the communist-ruled nation.
Analysts said next year would be crucial for Xi and his administration as they put all the major plans from these meetings into practice.
Chinese horoscopes for 2015 indicate that next year will be a time of newly gained faith in stable economic growth, but most economists predict something the world's second-biggest economy has not seen in decades - a slowdown.
The Central Economic Work Conference ended on December11 with the government saying it would strive to keep economic growth steady in 2015 by sticking to a proactive fiscal and prudent monetary policy. But it also warned of large downward economic pressure. The economy might fail to meet the government's 7.5 per cent growth target in 2014 and mark the weakest level of expansion in 24 years.
The biggest fear among economists is that China, once the world's fastest growing major economy, is on the verge of dipping below 7 per cent annualised growth - a rate rarely seen in the past three decades.
Finance company UBS Securities Asia's "China Economic Outlook 2015-2016" report, released in November, forecast that China's annual gross domestic product growth for the next two years would be 6.8 per cent and 6.5 per cent, respectively.
Last month, the People's Bank of China surprised the market with a cut in lending and savings rates - the first in more than two years - in an apparent effort to halt the slowdown.
In a report on China's economy in 2015, Bank of America economists Ting Lu and Xiaojia Zhi said that given Xi had consolidated his power after two years of anti-corruption campaigns, his administration would increasingly shift its focus next year towards economic growth and structural reforms.
Zhiqun Zhu, a professor of political science and director of Bucknell University's China Institute in Pennsylvania, said achieving stable and more sustainable growth remained the government's top priority.
The era of fast growth was over as China had to focus on the quality of growth, Zhu said. A key challenge would be how to deal with environmental degradation.
"For ordinary people, empty talk is meaningless; the party's performance will be judged by whether they can breathe in clean air and eat safe food," Zhu said.
In recent speeches, Xi has called for a "new normal" pattern of slower growth, with greater focus on structural reform and environmental protection.
Edward Friedman, a sinologist at the University of Wisconsin-Madison in the United States, said Xi and his administration had to reach agreement on the delayed economic reform agenda to move the economy away from one where special rights and subsidies were given to construction and industrial exports, to a model focused on domestic consumption.
"[Otherwise] growth will slow precipitously and the economy will be vulnerable to a hard landing, leading to stagnation when the financial bubbles burst," Friedman said.
The debate about slower growth has centred on its impact on the job market, which affects social stability.
The good news is that recent slower growth seems to have had less of a negative impact on the mainland's job market than feared. The labour market remained stable this year despite the obvious slowdown. The government met its annual target of creating nine million new jobs by the end of the third quarter.
Wang Tao, chief economist at UBS, said China could tolerate slower growth "as the economy is larger and new labour supply is dropping".
Wang estimated that 6.5 per cent growth could generate as much new urban employment as 10 per cent growth in 2008.
Analysts said a stable job market would give policymakers and economic planners more room to push on with badly needed structural reform. UBS expected China "to accelerate pro-growth service sector reforms and widen the social safety net to promote consumption and investment in services [next year]".
In domestic politics, Xi's top priority is to consolidate his power through his anti-graft and rectification campaign.
On December 6, the party's leaders announced that Zhou Yongkang , former security chief and Politburo Standing Committee member, had been expelled from the party and handed over to prosecutors. Analysts said the handling of Zhou's case by the leadership and judiciary would be the first test of Xi's ambitions to promote rule by law and judicial independence.
"Xi's top 2015 priority is to consolidate his position and power vis-à-vis Jiang Zemin and other retired top leaders … He must have made a fair bit of progress in getting them to agree to putting Zhou before the judicial system," said Steve Tsang, head of contemporary Chinese studies at Britain's University of Nottingham.
Zhu said it would be interesting to see how many "flies" and "tigers" were caught next year. Many people had questioned how far the anti-corruption campaign could go, he said. "Is it enough just to punish some corrupt officials [no matter how high-ranking they were]? Is the party serious in abiding by the constitution and following the rule of law? Recent debate about whether the party is above the law will remain alive in 2015."
Next year will see the government start to overhaul the judicial and law system as Xi moves to institutionalise one-party rule. October's fourth plenum reform outline promises changes to the judiciary to aid the long-term fight against rampant graft among the rank and file, and promote justice for ordinary people. Analysts said observers would watch closely to see how serious the government was about the overhaul.
Zhu said unexpected developments in Taiwan, Hong Kong, Tibet and Xinjiang might also pose serious challenges for the government. Externally, maintaining peace in the East China and South China seas would be the government's top priority. The international community would monitor China's ties with neighbours that had territorial disputes with Beijing.
"Given Xi's active diplomatic style, one is interested to see how China will defend its national interests while maintaining good relations with neighbours and major powers," Zhu said.
Friedman said Xi's administration faced many challenges. Greater repression at home and support for an imperial Russia abroad could alienate Europe; an assertive policy in disputed Asian maritime territories could alienate its neighbours, moving them closer to the US military; and investment in greedy African tyrants to obtain cheap resources would only foster debt crises and fragile states.
