Trot On
leftistEnergetic, likable, and good with money – the Horse may be just the zodiac sign China needs in 2014. As the 2013 snake slithers out, it leaves in its trail a slate of new leaders, a slowing economy, and a populace with more and higher expectations than ever. The Year of the Horse trots in at a momentous time for China.
At Ogilvy PR, we look forward with great anticipation to what the Year of the Horse has in tow; despite the challenges there are a number of encouraging signs ahead. Where the snake schemes, the horse labors. Last year was focused on the leadership transition and agenda setting. This year we predict 2014 will be less setpiece, more action. We expect to see the development and implementation of new policies that will put China on track towards achieving the “Chinese Dream”: building a mod-erately prosperous society and rejuvenating the nation.
In our annual Chinese New Year review, we present you with a look at the economic, political and social themes currently dominating discussion in China, and we offer our view on what to expect over the coming twelve months.
Reform 2.0
On November 11, the front page of the state-run Global Times special coverage of the Third Plenum of the 18th Central Committee read “‘Reform 2.0’ to be unveiled” under a colorful red banner proclaiming “Deeper Reforms Ahead.” Sure enough, the Plenum unveiled the most sweeping reform agenda we’ve seen in decades. This is the blueprint the leadership hopes will address the imbalances created during the last 30 years of “Reform and Opening Up.”
The Plenum’s official communiqué called for the “properly handling the relationship between the gov-ernment and markets” which can be seen as the newest iteration of Reform 1.0. The call to “ensure that the government properly handles the relationship between develop-ment and stability” is an emerging theme that reflects the challenge of balancing slowing growth and the push for a higher quality of life.  Included in the plan are encourag-ing measures such as granting licenses to private banks, increas-ing competition by removing barriers to entry for private firms, liberalizing interest rates and the exchange rate, as well as land reform.
The announcement that the market would play a “decisive” rather than “basic” role in the allocation of economic resources is one of the strongest signs of Reform 2.0 and will have an impact on all aspects of production, from land to labor and capital. We expect to see less protectionism, lower barriers to entry, and the development of national standards.  China’s extremely successful e-comme
rce industry offers potential: it has thrived in part because of minimal government regulation and involvement. If traditional indus-tries go the same way, as the eco-nomic reform blueprint suggests they will, China will be well on its way to a mature and vibrant market economy.
As part of that mature market economy, China will continue to improve the foreign investment environment in China. The com-muniqué states that foreign invest-ment will have “wider access; domestic and foreign laws and regulations will be unified; and the foreign investment policy will be stable, transparent, and predict-able.” The document also intro-duced the “negative list” which opens up all industries and eco-nomic activities to foreign invest-ment with the exception of those included on the list.  This is an inversion of the previous model which singled out industries eligi-ble for investment and is expected to ease restrictions and simplify the process for foreign companies. Significantly, Xi has taken a very hands-on approach to economic reform.  One example is his leader-ship of the newly formed Leading Small Group for the Comprehen-sive Deepening of Reform. This represents a marked departure from previous administrations, where the Premier has always been responsible for the economy.  By doing so, Xi sent the message that getting economic restructuring right is a priority, and he is willing to stake his reputation on it.
The Xi Combo
Xi’s outward image is that of a modest man. He dresses casually, plays soccer and speaks plainly. Recently he showed up unan-nounced at a local Beijing restau-rant and had a simple $3.50 meal of steamed pork buns, pork liver stew, and a vegetable dish now called the “Xi Combo” by masses of people ordering the same.  When it comes to Xi, the real combination as we see it is his leadership style: an economic reformer and
hard-nosed politician, with a side of leftist idealism.
In just one year, by initiating multiple anti-corruption cam-paigns, ascribing more official responsibilities to the Presidency, and strengthening the military, Xi has consolidated more power than any other leader since Chairman Mao.  With this kind of authority, Xi is in a good position to usher China through the challenges of the next decade.  To do so, he will need to restructure and reshape the Communist Party and restore the public’s trust in its ability to govern and serve the people. Already Xi has introduced cam-paigns within the Party targeted at just that.  His mass line campaign, a Mao-era tactic, calls for cadres to get closer to the people and warns against the “Four Winds” of formalism, bureaucracy, hedo-nism and waste. The highly publi-cized campaign to rid the Party of corruption by catching “tigers and flies” has seen a number of top-ranking officials go under investigation. A recent govern-ment report stated that more than 182,000 cadres were pun-ished in 2
013. This administra-tion has reclaimed properties gained illegally by officials and seized cars being used improper-ly.  Xi has ordered that state ban-quets, even funerals, be simple.  A year ago the party was verging on caricature with salacious scandals being exposed weekly.  This Chi-nese New Year the lavish gifts and big bonuses – thought to be perks

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