March 15 (Bloomberg) -- Chinese Premier Wen Jiabao, set to leave office next year after a decade in power, said his nation must adopt political change to support an economic transformation that has produced rapid development at the cost of a widening wealth gap.
“Without successful political reform, it’s impossible to carry out economic reform,” Wen, 69, told reporters in Beijing yesterday in a three-hour press conference closing the legislature’s annual gathering. “There’s even the possibility of losing what we’ve achieved.”
Wen’s remarks reflect widening protests over illegal land grabs and discontent with declining purchasing power as China’s wealthy drive up housing costs. At stake for China’s next generation of leaders, scheduled to be selected in a process that begins later this year, is maintaining social order in the world’s fastest-growing major economy.
Wen’s remarks echoed comments he’s made in the past, including a speech in 2010 where he said reversing policies of reform and openness would be a “dead end” for development. The comments two years ago were directly refuted by an editorial in the Communist Party’s official newspaper, suggesting that other leaders did not share his views.
A former geological surveyor who became premier in 2003, Wen said at the press conference in the Great Hall of the People on Tiananmen Square that he had many regrets, felt guilty for problems in Chinese society and took responsibility for all that had occurred during his tenure. Tiananmen Square is where Wen and former Communist Party General Secretary Zhao Ziyang met student protesters in 1989, two weeks before the government crushed the demonstrations.
“What he said he’s said before, but he said it with a more tragic tone,” Yu Guoming, deputy dean of the journalism school at Beijing’s Renmin University, said in a phone interview. “He’s quite alone -- it’s not the consensus within the party leadership.”
In the briefing, Wen embraced greater private capital in China’s financial system, warned against relaxing controls on property prices, called for deeper Sino-U.S. trade and investment ties and said officials will allow greater two-way movement in the yuan’s exchange rate.
Chinese stocks slumped on concern that prolonging the government’s crackdown on real-estate speculation will deepen a slowdown in the world’s second-biggest economy. The Shanghai Composite Index closed 2.6 percent lower, the biggest decline since Nov. 30.
In the absence of political change, Wen said China risked a repeat of the 1966-76 Cultural Revolution, which threw the nation into chaos as Chairman Mao Zedong’s Red Guards attacked the party apparatus and persecuted millions of people.
“I’m deeply aware that we need political reform, especially the reform of the party and the mechanism of the leadership, in order to solve these problems,” Wen said.
While he oversaw China overtaking Japan as the world’s second-largest economy, and Germany as the top exporter, the success was accompanied by widening wealth disparity. The net worth of the 70 richest delegates in China’s National People’s Congress, which closed its session yesterday, rose to 565.8 billion yuan ($89.3 billion) in 2011, according to figures from the Hurun Report, which tracks the country’s wealthy.
China’s per capita annual income in 2010 was $2,425, a fraction of the $37,527 in the U.S. The country under Wen and President Hu Jintao has also seen violence flare in regions with minorities, from Inner Mongolia to Xinjiang to Tibet. Wen said he was distressed at some Tibetans immolating themselves.
Wen’s warnings on the dangers of returning to the chaos of the Cultural Revolution contrast with the policies of Chongqing Communist Party Secretary Bo Xilai, who has encouraged a resurgence of Mao-era songs and sayings to broaden his appeal to ordinary Chinese who feel bruised by 30-plus years of modernization.
Wen said the government was making progress investigating the case of Wang Lijun, the Chongqing vice mayor who went to the U.S. consulate in Chengdu last month. Wang’s visit led to speculation that he was seeking asylum and that Bo’s chances to join the Politburo Standing Committee, the Communist Party’s highest decision-making body, were now much lower.
“The current party committee and government in Chongqing must seriously reflect on the Wang Lijun incident and learn lessons from that incident,” Wen said. “What has happened shows that any practice that we take must be based on the experience and lessons we have gained from history.”
China’s democratic system will move forward in keeping with the country’s “national conditions” and no force can hold that back, Wen said, without offering specifics on possible changes. Wen said village elections, which China has been touting for a decade or more, had been successful and people had shown enthusiasm for the process.
Those comments come after a standoff in the southern village of Wukan between police and residents who ousted their leaders in a dispute over land grabs and election violations. Regional party heads later allowed Wukan to elect local leaders again.
Addressing social discontent also featured in remarks at the NPC gathering by Bo and another candidate for the Politburo Standing Committee, whose membership will change as part of the leadership transition.
On March 9, Bo said China’s Gini coefficient, an index of the income gap, had exceeded 0.46. The index ranges from 0 to 1 and the 0.4 mark is used as a predictor by analysts for social disturbances.
Shortly before Bo spoke, the Communist Party chief in Guangdong province, Wang Yang, said the region will hold a conference to share what it learned from Wukan.
“The leadership are quite aware of the immense socio-political challenges,” said Xianfan Ren, an economist at IHS Global Insight in Beijing. “When the government has made the choice of slowing down economic growth, they have to make tough decisions regarding political reforms at the same time, as high growth has helped to sweep under the carpet many socio-political tensions in the past.”
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