Priority because you are not likely to get to the third. Uc obama facing that now with climate change, the fiscal deal, emigration, etc. The issue is not whether he supports those, what is he willing to go to the mat for . I think what we face and the Standing Committee may be people in favor of reform but we do not have a clue as to whether they are prepared to go to the mat for the same reforms and whether they can Reach Agreement on tough decisions with an agreed upon priority for those decisions. The candidates who did to their hands as to what changes they would like to see did not make it on to the Standing Committee. They fixed it ties they do not get you far in anticipating substantive positions and priorities. That does not necessarily get you to there. But the substantive positions and priorities are important for anticipating what the anticipation future is going to hold. Substantively, serious reform is a very complicated matter. Much more complicated in china than in the u. S. Given the array of reforms that are corte each countrys future. You need to take that complexity into account and you anticipate what is going to occur there. In china this requires changes in the Development Model that china is pursuing and basically changes from the former model to the least what they have anticipated in what they stipulated in the fiveyear plan. Something closer to what is in the World Bank Report that came out last spring. These are very complicated and wide ranging changes. There are deeply rooted vested interests that will oppose parts of the 12 fighter plan and these are powerful interests. Local, territorial, and political leaders. This is in part because they benefit from the current Development Model. They have a lot of power within their bailiwicks and a lot of flexibility. It is in part i have been startled as i get into this issue more. Many of these positions are bottom sold. This is not necessarily a meritocracy move. People did not handle themselves effectively. With five level political systems, in the thousand of these 40,000 territorial units. If you look at the top two people, 80,000 people youre talking about many of whom have purchased their positions and see them as a basis for future wealth. Not easy to carry out reform. It changes the options. The big National Level state owned enterprises are tied to the lead political families. None of the reforms will be resisted from them and many of the ministries resist reform and i think what we will see in the upcoming npc is the move toward the superministries and that is not necessarily going to help reform. You can argue it either way but that is my instinct. Tefra forms will require tough Decision Making on the politburo Standing Committee. This is a division of labor, you can tell what each ones responsibility is and the consensus Decision Making role. Not a majority but a consensus. You put this two things together and it is very hard to get decisions that run against the grain. Of any of the members of the Standing Committee. You can get decisions to spend more money. It is hard to get this is hard to get decisions that this advantage key groups. We will see if they alter that system. Surber reforms will require tackling sensitive issues. This is the commercialization of land, the scope of the states role in allocating scarce resources and permissions and so forth. These are not easy issues to handle politically in any kind of political system. Reforms are complicated. They touch a lot of serious and should interest and they run against the distribution of power. Finally, this is a transition period until the National Peoples congress in march. Beyond march, you have to assume there is some period of months before something is settled down. Youre not likely to get serious of reforms implemented before you have the state council settle down and the transition over. Therefore what should we expect from the 18th congress and i will move through this quickly . They may try to set a new tone. I just read his speech to the first study session of the new politburo and it was not encouraging in terms of moving away from jordan. It reminded me his graduate degree is in marxism. Preferences and is operational priorities i think will only be revealed over time. The record to date, the does not provide sure guidance on this issue. Let me conclude with some comments on each of broad categories and issues and what we might look for in each of we were to see significant reform take place. On restructuring the economy, again, we will have to wait until the latter part of 2013 at least before we can look for any of these things on a significant level. They indicate some things i will be looking for. First, there will reconfigure or have to reconfigure Interest Rates in the staid Banking System to provide substantial positive returns on household savings. That should be the easiest of the steps they can take. They need to adopt measures to separate the government from enterprises. I think that is very tough and it runs against recent trends. I think there will have to open up what are the monopoly or quasimonopoly sectors of the economy dominated by major Stateowned Enterprises and do so in sectors that are attractive for private firms to get into. Open up railways as they have done. You cannot make money in the railway system. There are private firms that have interest if you have finances where there is money to be made it will be a different thing. They will have to undertake tax structure reform in order to create a legal basis for localities to raise budgetary funds. That is a short list of what they will have to do. Even that is tough enough a short list that it may well take the perception of genuine crisis to produce steps toward the Major Economic structural reform with its attendant political changes. In dealing with society it is important there is important and low hanging fruit types of steps to take. Things that are so counterproductive that if they do not do these you wonder what they will do. My short list of that would be to abolish the system. This is the greatest Single Source of any quality of wealth. You cannot see how they will move the household savings, especially Household Spending has a major driver of the economy. If you maintain that system that prevents 300 Million People living in cities from making serious money, acquiring serious property and exercising their rights as urban citizens. They can substitute criteria for urban residents is but they have to change fundamentally the system as it exists. Secondly move to aid to child policy. One policy one child is a catastrophe. This will have a long term impact but if they cannot do this at this point, you have to wonder about the ability to take on anything that is politically sensitive. Third, establish a Legal Framework in which ngos can operate more freely. For example, environment is one of the issues they tag is one of the most important challenges. I agree 100 with that. I know no major country in the world that has made significant progress on environmental cleanup without a vibrant, Grain Movement. And ngo Grain Movement that can engage in political activism as well as political education. Systems are built around the interests of the leaders. You need some counterpressure. Not just pressure from above but from below if youre going to change that. Let me conclude with political reform. They need to reconfigure incentives for local officials. This is an enormously context complex task. I will lay out why it is impossible to change the model without changing the operational incentives. Otherwise their vested interests lead them to do what they are doing. Regardless of where beijing thinks it is putting its money. They need to strengthen the independence of the legal system hopefully what to wear top officials are also subject to legal constraints. They need to increase genuine political competition through the townships level and within five years to the county level. Leaving competition vega in detail. There are Different Things i could do but they need to move beyond what they have done today which is listening out somewhat the Peoples Congress legislative system. Fourth, they need to implement party rules on internal decisions and they keep talking about this but the progress seems to be limited. They need to seriously attacked corruption. One thing that being said in this speech the day or two ago, the one thing that he lit into was corruption and compared china to the middle east. He referred to other countries that had strong oneparty system that have collapsed recently and said we have to tackle corruption. He recognizes certainly that the scope and magnitude of the problem frankly i am not optimistic about this. But i certainly wish them well. My bottomline conclusion is that during the major crisis that creates leverage at the top, the odds of chinese reforms are well below those of u. S. Reforms in the coming four years and i do not regard those as good news either for china or the United States. Thank you. [applause] thank you. We have just had a very sobering presentation and an equally rich one by chung lee. We will post a transcript on the website so you should be watching for that. I will be looking eagerly for the transcript because i do not think you can get a better send set of presentations in chinas leadership transition then we have just received. Chung lee has lived in depth at the political alignments and biographies, down to the sub global that he did not get into at this time. He could discuss the sixth and seventh Generation Leaders and were trying to analyze the fifth generation. Commentsrthals reflected an indepth knowledge of the difficulties of pushing for reform in a country the size of china. This does not leave me a whole lot to say. I would try to tease out some additional elements that i think are important in thinking about china posing new leaders. First, oneparty systems function differently from multi party systems. One of the characteristics is that you do not know how leaders will behave until they are in the top spot. Because you cannot get to the top spot if you are taking a different approach from the predecessor leaders. Nobody identified deng zhao ping as a reformer. No one identified gorbachev as a radical reformer but he pushed through reforms a radical it ended up in the collapse of communist rule in the soviet union and the disintegration of the country. We have to be cautious in trying to assess exactly how they will perform as the top leaders. Theyre not supreme leaders. They have to preside over a collective leadership. And the ash attitudes of the other members of the collective farm important. But they are in the most influential positions to try to shape a sense of where the country should be moving. And if there is one thing that permeates the work report, it is the idea that there has to be fundamental reforms in china. I think this reflects the realities of the country. When you think about reform, ken went into this in detail but it is worth thinking about it at a higher oil. What are the influences that will affect the thinking of the leaders as they look at what needs to be done in china . The first thing is age. China has through this system of age limits, every time they have a significant change in leadership such as they just had, the age of the top leaders is reduced. In the case of the politburo, the average age is five years under for members than the outgoing 17th politburo. That produces a change in attitude. You also because of this assumption of a two term service for the top leaders, you have a situation where the top leaders are younger than the other leaders. There are some people younger in the politburo but in the case of paying and ping and chong, they are five years younger. This age matter . The answer is, it really does matter. China has gone through bigger changes over the last three decades than any other country in the world. I can remember, you may be able to remember the incredible change on the part of american young people between those who were part of the vietnam war generation and the media post vietnam war generation. Serving abroad, i could discover in meeting people in college how radically different their way of thinking is. In many ways [indiscernible] china has had changes that are similar. That is reflected in the fact that the general secretarys were purged in 810year period because the changes taking place for faster than china had a stable system for managing. That is the issue that can was addressing. We have had 20 years of destabilizing of growth at a the stabilizing speed. To maintain and nearly average of 10 annual growth has produced and curb a dramatic changes in china. It is not possible for a system. It has adapted the ideology over the last 20 years but has not adapted the way of managing things sufficiently to guarantee stability in the future and this will be an important factor. I would like to add chung lee has done some outstanding work in terms of establishing concepts such as the princeling group and the China Youth League group and these are important distinctions but there are other distinctions that need to be borne in mind. I think for example in analyzing ping, we need to look at his father. He was a princeling, he had impeccable revolutionary credentials. He was already a revolutionary and member of the Chinese Communist party when the long march ended in 1935. He rose to become a vice premier of china but he was purged in 1962 and he spent 17, 18 years in a political dog passed during 1962 through the opening of the reform and policies. This had a major impact on him. He had extreme difficulty in getting into the communist party. He had according to some of the accounts, he had to apply eight times before he found a party leader who was sufficiently courageous to be willing to move the papers forward and get him in. He ran into the same types of difficulties when he was trying to get into cheng hua elaris a. He has experienced being a political pariah during the appeals of the cultural revolution in china. His father when he was brought back became the governor of quandong province. He had the experience of being purged. He embraced the radical changes that were being introduced under the new circumstances china was facing. Is ping going to be similar . Is he going to feel radical changes are necessary or is he going to be cautious in trying to introduce reforms that need to be made . These are the sorts of things we need to wait and see. Not all princelings and counter the types of political difficulties that ping encountered so we need to keep this in mind but there are some bigger issues. China now has still an authoritarian political system in terms of the way that we americans look at political systems. It is almost unique among authoritarian systems in having a regular ice system for changing leaders. In democratic systems we recognize the change policies to change policies you have to change leaders. China now has a regular process for changing leaders. That paves the way for changing policies. We do not know exactly how they will be changed until we see how the new leaders perform. And this is important. Can address some of these issues but if you work your way through the report and the speech by hu jintao at the beginning of the congress, it seems when you see is a basic call for fundamental Economic Reforms and fundamental political reforms with broad concepts in terms of what needs to be done. On the economic sphere, there is language that clearly indicates the stateowned sector and the private sector should get equal treatment. There is no language suggesting a major decrease in the role of the state owned enterprises but there is language saying they should have equal access to the basically the capital necessary in order to thrive and at the same time, we do not know what the details will be. This reminds me of the financial reform legislation that congress has passed in which the argument is over how the regulations implementing the legislation are passed. I look at the report as setting broad guidelines for what needs to be done but what is done can vary quite radically within the framework. Even on the political sphere. As i read the political reform proposals, this is an effort by one party system to retain a oneparty system and only introduce the use the term delivered to give democracy, i would trans translate that as consulting democracy. I do not think it captures the idea for american mines as well as the idea of consultation. The idea is that there will be more input from a variety of people before decisions are made that they are implemented throughout a oneparty system. That has a long range. As was already detailed, the fact that they are introducing the concept of having more candidates for jobs and they may introduce at higher levels, you begin to get a winnowing out process in which people who push policies that are unpopular will have to pay the penalty in terms of how the system functions. I have not read literature addressing the question of how an authoritarian system functions when you have a regular turnover in leaders in which cheerleaders always replace the older leaders and that is something we need to watch in china as we progress. One final comment. Why did we end up with a seven person politburo . You could argue in terms of conservative policies verses radical reformers. The reformers supposedly did not make it onto the Standing Committee but there is another way of looking at it. The 25person politburo was down to 24 because of the purge. 14 of the members had to retire because of age restrictions. That meant you only had canned cat its to go under the Standing Committee. Previously for two terms in have been a nineperson Standing Committee. If you kept the committee, one person is excluded. That is embarrassing in any system. And so the sanction is you who reduce itslution is to