China's Rising Leaders

Beijing's next cadre is market-smart, business-savvyand perhaps even open to change

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A Communist Party Congress might seem like a throwback to an older, less dynamic China. What the public sees of these events, scheduled once every five years, are video clips of 2,000-plus bureaucrats in the Great Hall of the People, a monumental, socialist-realist edifice in the heart of Beijing. In a vast auditorium swathed in a sea of red bunting, they'll listen to hours and hours of turgid speeches and then cast near-unanimous votes.

Yet when officials from across the country converge on Oct. 15 for the Party's 17th Congress, it won't just be a ceremonial exercise. True, the faces at the very top won't change—President Hu Jintao and Premier Wen Jiabao will almost certainly rule for another five years. But below them, a new generation of leaders will likely be promoted into key positions.

Most important for foreign business and China's trading partners, this will be a new leadership that largely knows and appreciates the rules of the road for a market-based economy. Many of these up-and-comers have fought in the trenches of China's reform wars, have the skills needed to run complex economies, and have shed earlier generations' mistrust of foreigners. They certainly won't turn China into a replica of the U.S. system. But the dialogue they start with the West may be the most sophisticated yet.


In their 50s, this bunch came of age during the chaos and violence of the Cultural Revolution, and most began their careers after Deng Xiaoping introduced economic reforms in the late 1970s. "The prognostication is that they will be more progressive, pragmatic, and forward-thinking," says Scott Kronick, president of Ogilvy Public Relations Worldwide in China. Hu and Wen spent their formative years in remote Western China where they had little contact with outsiders. Yet many in this generation speak English and have traveled widely. Some have studied at Western universities, and most have advanced degrees in social sciences, economics, and law.

Case in point: Zhou Xiaochuan, currently head of the People's Bank of China. The former economics professor and fluent English-speaker is a strong contender for vice-premier in charge of finance. One of China's most sophisticated economic minds, he can hold his own with the likes of Alan Greenspan, Ben S. Bernanke, and other central bankers. He has already grappled with intransigent rivals opposed to his campaign to clean up China's notoriously shifty equity markets: His drive to crack down on stock manipulators earned him the nickname "The Flayer." He shares major responsibility for opening China's financial sector to big Western banks and brokerages.

Contrast Zhou's record with the current leadership team, and the differences are striking. Until now, China's leaders have "had a definite discomfort in dealing with the outside," says Kent D. Kedl, a China hand for the past two decades and now general manager of Technomic Asia, a Shanghai-based market strategy consulting firm. Most are career bureaucrats in their 60s who studied hard sciences or engineering. Few have graduate degrees and some have no higher education at all. Mao Zedong's comrades-in-arms are long gone. But Hu's cohort is from the first post-revolutionary generation and has not shed all the remnants of the old ideology.


More comfort with the outside doesn't necessarily mean a greater willingness to do what outsiders want. Commerce Minister Bo Xilai, for instance, may become vice-premier and take over as China's top trade official. Bo would be at home in Washington or New York: "He's stylistically very un-Chinese, a Mayor Ed Koch type," says Sinologist Kenneth G. Lieberthal of the University of Michigan. Unafraid of debate, he holds a master's degree in journalism from the Chinese Academy of Social Sciences—he has been a frequent critic of Washington on trade. "Bo Xilai won't be so accommodating," says Cheng Li, a senior fellow at the Brookings Institution, a Washington think tank. What's more, those who have seen Bo at work in negotiating rooms say his rhetoric is matched by his mastery of the issues.

Overall, however, this generation will deepen China's engagement with the West. Li Yuancho, 56, is a contender for Hu's job. Trained in economics and law, he runs coastal Jiangsu province and has helped turn it into a model economy, attracting record amounts of foreign investment from the likes of Emerson Electric (EMR ), Advanced Micro Devices (AMD ), and Sony (SNE ). Even the nationalist Bo took a backwater northeast town, Dalian, and turned it into an outsourcing center for Japanese business. That made it one of the hottest urban economies in China.

Some predict these new leaders, once they take over the top positions, might even start to dabble in democracy. Many, particularly those who attended Peking University in the late 1970s and '80s, participated in elections on campus. "There's much more appreciation of the plurality of interests in the economy and in society," says Joseph Cheng, a professor of political science at City University of Hong Kong.


The new leaders will begin to assert themselves over the next five years, though Hu and Wen will remain firmly in control until the following Party Congress in 2012. Many see a three-way race to succeed Hu. Besides Li Yuancho, there's Li Keqiang, the 52-year-old party secretary of the northeastern province of Liaoning, the heart of China's old industrial rust belt. He has a PhD in economics and a law degree but details of his performance are scarce. Perhaps most important when it comes to succession, he's a veteran of the influential Communist Youth League, Hu's power base—making him the leading candidate. The other apparent contender for the top job is Wang Yang, 52, who runs China's largest city, Chongqing.

As the nation's economy continues to surge, the emerging leadership will face a host of challenges. They'll need to craft a quick and firm response to this summer's tide of unsafe and poorly made goods from China's factories. They'll face growing pressure from Washington over their ballooning trade surplus. And to get a handle on everything from pollution to job safety to counterfeiting to corruption, they'll need to rein in local officials who often ignore Beijing's edicts and focus on economic growth, no matter the cost. The next generation of leaders will "have to be attuned to what's going on globally," says Yang Dali, director of the East Asia Institute at the National University of Singapore, and "willing to adapt, to learn, and also take decisive actions when needed."

By Dexter Roberts & Chi-Chu Tschang

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