Editor’s Note:Transcripts are generated using speech-recognition technology. Therefore, Stratfor cannot guarantee their complete accuracy
Colin Chapman: Like an aging prelate handing over to a younger man, China's President Hu Jintao issued what looked to be a stern warning to his chosen successor: no big change, no reforms, stick to the script, root out corruption and control the commanding heights of the economy. And he said this: We must not take the odd path that is closed, nor must we take the evil road of changing flags and banners.
Welcome to Agenda with Stratfor's senior East Asia analyst Rodger Baker. Rodger, it sounded like a lesson for the man who takes over as party secretary next week, Xi Jinping.
Rodger Baker: I think certainly as Hu Jintao is coming out, he's trying to leave his legacy, he's trying to shape his ideas of what should be coming forward, arguing against too much of a change in either direction. And in many ways that's going to be the view of the entire Politburo, both the outgoing Politburo and the incoming Politburo. One of the things that we've seen over that past year or so was that what's supposed to have been a very smooth, easy leadership transition had a lot of chaos thrown into it, with things like the Bo Xilai scandal, and threatened in some sense the element of unity that the party has really sought to shape and to cultivate. And so this is one of the messages, I think, that Hu is giving — that that unity is very important. On the other hand, he also mentioned things like corruption, he mentioned things like the typical domestic economic problems in the country and he's trying to give a message that the Party is going to stay unified and the Party is going to reassert itself as the party of the people.
Colin: Yes, he admitted social problems had increased, and if China failed to curb corruption it could prove fatal to the Party.
Rodger: It was a very bold, very strong statement on corruption. I think because of the Bo Xilai issue it became a really important statement for the Party to be very definitive on that issue. To say, look, corruption is evil, corruption is bad, we're going to deal with it, we're going to take care of it, we're going to clean it out. So in many ways that message was for the people of China. And in some sense for people around the world who the Chinese know are obviously watching this very closely. Corruption is a big problem. Corruption is one of the things that triggers a lot of the domestic social unrest, a lot of the problems in rural areas, in some of the developing urban areas. And corruption is the thing consistently that has been seen as making the biggest gap between the Party and between the people. And so by coming in with the very strong and bold statement on that, I think again what he is trying to do is to solidify his sense of legacy but also the sense that he's giving a guiding vision for the Party going forward, in making sure that the Party is looking at the population and doing what it needs to be doing instead of worrying about itself.
Colin: But the Party knows that the Chinese public have great expectations, which are going to be very hard to fulfill. How do you think Xi Jinping is going to try and meet these expectations, in what are, after all, very tricky times?
Rodger: Well, I think it doesn't matter whether Hu stayed or whether Xi Jinping came in, the Chinese are facing some serious problems in their economic model. They're really reaching the end of this economic cycle that they've been in and it's not easy for them to shift to an interior-focused, domestic consumption model. It really just is going to be something that the Party's going to be slogging through. We've already seen hints that they're going to again repeat the same methods that they've used in the past — heavy focus on infrastructure development, heavy focus on urbanization — and then some talk about wage redistribution: putting caps on the wages of the wealthy, increasing the taxes on the wealthy and trying to shuttle that money over to people who are at the lower end of the income bracket.
Colin: Like Obama, Xi Jinping will have to focus on domestic policy first. But to both Beijing and Washington, the China-U.S. relationship is all-important. Who will be making the first move and what will that move be?
Rodger: Well it's interesting because we've had a U.S. election and we've re-elected the president. We're at the Chinese Party Congress right now, which is going to move Xi Jinping in as the secretary-general of the Communist party, but it's not until March that he will finally become the president of China, during the NPC session. And so in some ways we have until after the reinauguration of Obama and after Xi Jinping officially takes power before we're going to see this movement, this potential for the two leaders to come together again.
Colin: Of course, there's an issue coming up in the next few days when Secretary Hillary Clinton and Defense Chief Leon Panetta will be in Perth meeting their Australian counterparts, presumably to bear down and even extend defense cooperation — a move that certainly won't please China.
Rodger: The administration I think is going to be accelerating its attempts to, as it first called it, pivot to Asia. We're going to see a lot more activity in trying to increase economic cooperation within the region, as well as this further expansion of U.S. military cooperation in the region. And in this sense certainly the Chinese are going to be concerned. The U.S. continues to try to shape this as something that's not against China, but the Chinese are going to read it that way no matter what. At the same time, the U.S. and the Chinese are both in the same economic system. They both have a lot of interactivity and dependability upon one another in regards to their economies, in regards to trade. And so it's not the same as managing, say, the Soviet Union, when the U.S. is working with the Chinese and the Chinese are trying to manage their relationship with the United States.
Colin: President Obama has also announced that he's going to the ASEAN summit in Cambodia later this month, making a historic visit to Myanmar first.
Rodger: ASEAN is really in many ways a centerpiece of the administration's return or expansion of activity in Asia. Because ASEAN is an existing grouping, in some sense it's supposed to be seen as a neutral grouping, it's neither a strong U.S. ally nor a strong Chinese ally, and therefore it can serve in some sense as a buffer. It also sits between the sphere of influence of these two larger regional powers. So as we see Obama go down and work with ASEAN as he talks with the Southeast Asian states, this is an economic issue, this is increasing trade elements, it's increasing political relations, building it stronger with say Cambodia, Thailand is a traditional ally, Myanmar is one of the more interesting things. As Obama goes there, that's supposed to highlight the effectiveness of the administration's foreign policy. In other words, it drew a military government into the realm of democracy. So, those are places that, for Obama, are really important to highlight. For the Chinese however, it is seen very much as part of a containment right around China and Myanmar for them is probably the most sensitive of all of these, because that's a place where they really had a lot of influence, where they were looking at it as a major part of their energy security. And now they see it as a place where the United States is in some sense squeezing them off.
Colin: Rodger Baker, thanks for being with us today. I'm sure we'll come back to this significant visit in more detail. That's Agenda for this week, see you next time.