Hi, good morning everyone. My name is Chris Johnson. I'm the Freeman Chair in China Studies here at CSIS Thanks to all of you for coming. I'm really honored to be hosting this panel here today at CSIS with such distinguished guests And very thankful to Richard McGregor from the Financial Times for joining us today to moderate today's session And I'm going to kick it over to Richard to start us off Thanks Just get a start. I mean I think it's often said that if you want to get people to fall asleep You simply mention the words third plenum of the 18th Central Committee, but that in fact if you interject then well What about the third plenum of the 11th Central Committee? Sorry because Transformational plenum so This is We're going to start with Doug Paul, formerly the NSC and just about everywhere we decided inside the Why don't you start by giving us an overview of what you think the There's already a lot of debate about that you've got more than a hundred and forty characters But you've got to brief somebody in three to five minutes about this Was it a box ticking exercise Was it as grand as some of the headlines of Have led us to believe Where they're going through the motions? Give us your sense as a long-time China watcher Can you hear me If you go to China a lot or follow it closely you would have been Hearing over the last five years about heads up need for reform Social reform right across the board. There was a growing sense of frustration that whatever the good start was under the previous leadership of Fujian power and one job It had petered out the last years It's often like a more assertive foreign policy exercise growing military capabilities increasing crackdowns Increasing crackdowns on political dissents A lot of people who are calling for modest political reform are arrested and jailed So there's been a pent up need for some relook at things under the new leadership and the desire Above all in the circle that I interact with to have strong leadership And I think what we've seen from this reform document is an attempt to answer the mail With a strong demonstration of leadership in an effort to get that reform The document that was produced which comes in six sections and sixteen sub-branches and sixty items Sixteen I Would not describe as a revolutionary document You wouldn't expect a group of people who Said at the top of the Chinese system and have been arresting a lot of folks and clamping down on Public dissents over the months since they've been in power starting last November To to do that sort of but as a reform document It's rather sweeping it touches on all those categories of public concern that I mentioned earlier Two things that came away just to wrap up quickly two things that everybody wants to talk about in China Are the new small group for deepening economic reform? Have a very high level to oversee the economic reform and a new policy body on foreign and domestic security And if you read the document carefully As they've been revealed up to now And as we speak there are expositions going on with ministers are now laying out what they understand to be their new instruction K-by-day that is unfolding But if you read the stuff on the new state security commission or committee The translation keeps varying You get the pressure that's all about domestic security And if you saw the press recently and We were We were Mouth the dog picture Maybe you would think that's all about that But in my private conversations in Beijing I heard over and over again It's as much about that and foreign policy Even though foreign policy does not get a large Dose of the coverage in the actual document and that may be because it's a domestic party document that we're looking at But you think it's a big document, right? This is not you don't think reform but it's not revolution It's what I would characterize it Well, let's unpick some of that starting with the economy Nick starting with you From the Peterson Institute for International Finance A long time watch for the Chinese economy Going through the document there's all sorts of things which are listed in there Deposit insurance, hookah, rural land reform Interest rate reform, flexible capital account and exchange rate Private banks, local government finance These are all incredibly familiar issues For anybody who's followed the Chinese economy for any length of time I mean, was it a box ticking exercise in the economy? Is there any important dragging together into one single document? How did you read it? Because I know you've been very critical of, you know, Chinese economic policy lagging In the last government Well, I certainly agree with what Doug said We saw very little economic reform I'm not sure it ever even really petered out They never really got started on an economic domain So we've had ten years of very little fundamental economic reform I think this document is potentially revolutionary You could say it's box ticking But the scope of what is covered in the economic domain is really unprecedented I can't really think of anything that's left off Obviously implementation will be critical So I think we're going to have to wait quite a bit of time to go by Before we know whether or not the potential of this document To really be revolutionary on the economic front is, you know, realized or not But I would just highlight several things The fact that they say over and over again That markets are going to play a decisive role in the allocation of resources I think that is a major, major change It's an elevation of the role of the market Substantially beyond anything we've ever seen before in a party document You know, they used to talk about the market playing a supplemental role To the plan and things like this And the market is front and center And the market is to decide everything that can be decided through the market I think the second thing that is very important is the Let me just say related to the market Obviously very explicit discussion of price reform for the key factor prices That have been controlled by the government Whether you're talking about the interest rate, the price of land, energy and so forth Water, all of those things are going to be reformed Then the second thing is the significant discussion of increased competition So I think these framing issues about having markets being playing the decisive role And having more competition, a level playing field Now some people are saying that, you know, the document, the decision In particular doesn't say very much about state-owned enterprises And where it does mention them, they say they're still going to have a main role But state-owned enterprises have been the main beneficiaries of underpriced capital Underpriced energy and so forth So if they follow through on these reforms And if the hint about more competition implies that private firms Are going to play a greater role in some of the sectors where state firms Are still in a very strong monopolistic or oligopolistic position This will have a very dramatic effect on the way the economy operates So those things to me are the highlight Potentially revolutionary on the economic front Just one follow-up question, we're going to come back in the panel To the issue of implementation more broadly But all the sorts of things you talk about Particularly reform of pricing This document looks like a massive defeat to ask a sort of China geeky question For the NDRC, the sort of the old sort of state planning body Is that right? Because they're the ones which have kept many parts of the financial system And the pricing system under wraps Well, I certainly think this is a con... Again, if they follow through, this will be an erosion of the role of the NDRC And particularly, as Doug mentioned, this oversight body is apparently Well, we don't know for sure, at least I don't know for sure, maybe Doug does Is going to rank above the NDRC So I would say that this is, you know, we've gone from the planning commission To the state development and planning commission and now the NDRC So this is a continuation of the reduction over time And the sphere of the economy that they try to directly control Downhill slide I want to come to Chris now and to another aspect of the document Which I think maybe has got a little bit less discussion in the media Perhaps not in China There's two aspects to the sort of broader security focus of the document There's a sort of so-called Chinese NSC being set up Something which has also been discussed for years and years and years And you also noticed what stood out for you also was the potential The start of a potentially massive reform in the way that military is structured So could you just drag that out of the document? Sure, sure I mean on the former, I just like to echo what Doug said I think that people are misunderstanding the focus of this new body It was made very clear to me when I was in Beijing That it's going to have a very strong focus on external as well And that while that part is not being particularly publicized It has been interesting, you get the sense that there may be some friction Actually within the system over the writ of this thing Because it was initially translated into English as state security committee Even though of course the Chinese is the same that they use to describe the U.S. and Russian national security councils And the foreign ministry was very quick to come out and say that it was focused on extremist terrorists and separatists And so they seem to be trying to define its focus as very much domestic And then very interestingly when the full plenum decision was released And more importantly Xi Jinping's companion explanation And there interestingly suddenly there was a lot more talk about the international role of it And also now the English translation seems to have shifted to national security commission Although it does seem to be bouncing around in the central media But what are they trying to do that they're not doing now? Well coordination is going to be the key I mean this has been a fundamental issue now for some time They've been talking about this for two decades They know they need it I think that the fundamental driver in this case is Xi Jinping has been able On the economic side also on this side to be able to argue that there is a pressing sense of need That has not existed previously in all of these areas for better coordination For some kind of supra entity that can crack the heads and so on And if you look at what amazes me about this document And what we're seeing here is Xi Jinping's mastery of political stagecraft And his ability to sort of line these things up in a very artful way within the system In particular it seems to me that he started this process on at least the domestic side Some time ago by removing the Zhengfa way system The politics and law commission from the standing committee kicking them down a peg Going after Zhou Yongkang and the security services There's a clear pattern moving in this direction Because of course that oxen is going to get gored the most On the PLA stuff again to me it is potentially revolutionary We're going to have to see a lot more But my impression is this is the most public they've ever been This discussion has also been going on within the system for many many years About changing the PLA's command structure away from a sort of ground focused territorial defense model Where the primary threat was the Soviet Union and domestic enemies quite frankly I mean that's what a military region system is designed to do If they go toward this operational theater it's going to be externally focused With a much heavier emphasis on joint command And what's really interesting is how they're in the document anyway How they're marrying those two concepts So there will be a joint command system at the CMC Central military commission level companion with these war zones at the theater level And it's a fundamental change They will have to massively downsize the military especially the army And you'll lose a lot of general officer billets in that process And also it will make them a much more capable fighting force If they're able to execute With the hardware piece they've made tremendous strides in the last decade Plus I think it's fair to say on the software side Their ability to do command and control combined joint operations and so on Has been lagging this if they follow through on it will be substantial And it's also the first time that I can recall that any plenum document Has mentioned major military reform in a very long time So it's like the economy in some respect All sorts of things they might have wanted to do have been massively accelerated Yes, exactly Now of course there were two documents, there was an initial vague communique Then there was the 21,000 character document so called The Decision Which came out, it made it sound like a John Grisham novel or something And it goes far beyond just the sort of your meat and potatoes macroeconomic reform The kind of military and security issues And there's all sorts of other things that Robert, you wanted to talk about I should have introduced you to Robert Daly who's the head of the Kissinger Institute On China and the US at the Wilson Center The environment, stuff about the rich poor gap Hints at a new or expanded or slightly liberated role for NGOs Can you tell us what you took out of the sort of Yes, I think this was all part of the political stagecraft that she is demonstrating his mastery of And I think we need to look not only at the two documents you mentioned But at some of the documents and the announcements that had preceded it Including Xi Jinping's discussion of Chinese history And what he called the two-undeniable Liangabukou for Ren In which he set up his justification for his new reforms Which couldn't be criticized either by the people who were Maoists or Dungists And he did that very cleverly And of course he also wrote the document that followed the Decision document So we tend to focus on the economic reform, the political reform To parse out what the individual policies are going to be But I think we also have to look at the Decision document in its entirety And understand it as a public document, as propaganda As Xi's announcement to the Chinese people And as a piece of rhetoric What else is in there? A tremendous amount about improving the environment in China What they call Shuntai Wenming is throughout the document Concerned for the rich poor gap One of the phrases that actually Madame Liu Yandong has highlighted Since she came here is this line that says Improving the welfare of the Chinese people is our setting off point And the point at which we land It's the entire arc touches at great length on corruption On issues of social justice There are about 23 uses of the word gung ping or fairness But also gung zheng, zheng yi, justice Throughout and a great deal of emphasis on social governance What they call shohui zhili Instead of the old phrase social management And this would seem to imply a little bit more space for participation On the part of NGOs or the nascent civil society organizations That at least is the hope Broadly speaking I think that what Xi has demonstrated here Is that he is in fact listening to almost all of the concerns Of the common people and not just to party members These in fact are the concerns that you find Down on the street in China And he's demonstrated in contrast to his predecessor That he is actually listening He's setting himself up not only as a strong man within the party But very importantly as a man of the people What they call ping yi jinren Provides the entire document And he has also demonstrated that he's not only listening But he's communicating Prior to this plenum I think very importantly Xi Jinping himself, Li Keqiang, Yu Zhengsheng Were signaling in a way that they don't usually That this was going to be a deep comprehensive Perhaps even revolutionary document In general the party would keep its own council And announce what it wishes to announce in its own time And not try to manage the message which they're doing And I think that that confidence that she is showing That man of the people style combined with his The strong man, that persona that he's been projecting Makes this not just a plan but in effect a promise Almost in the western style He's really staking a lot putting all of his chips out there And I think that for that reason There's a lot of excitement about this In China internationally Perhaps some irrational exuberance actually Because the documents also I think reveal Two major weaknesses in Xi's approach Yeah, well on the point of you know We're talking moving from management to governance Giving civil society much more space I often feel this is a very two things It's a very fuzzy in China because obviously We're going to come to implementation It's the execution of it is radically different Depending on where you are But also the fact it seems to be a lagging indicator Not a leading indicator It's dragged by economic reform And it's done because of economic reform Not necessarily to bolster it I'm being a bit cynical No, no, no, you're not being cynical at all Actually in most of these sections of the document As with some of the wording on SOE reform There's an attempt to sort of give with one hand And then pull back with the left And in every paragraph there's always the statement That of course this will all take place Under the leadership of the Communist Party Which we might think is a weakness But they would think is a strength Well in this I would say is one of the weaknesses Of the plan, the plan and plan Even in Chinese terms Not because we would like to see constitutional democracy But Xi Jinping has clearly listened to the people's Concerns about social justice, the rich poor disparity The environment, crime, corruption But he doesn't seem to have heard their desire For more information and more participation And this is a potentially very dangerous weakness For Xi even though there's a lot of talk About innovation, culture Some about education in this document There's no sense that as more people move into the cities They are going to have modern internationalist Urbanists' demands for information There's very little sense that Chinese now Want to be, participate more fully in the world So I think that there's still a deaf ear A blind spot there And the other thing I think is missing from this document That'd be interesting in your views of it Is that I think it's This is a comprehensive deep As they have said in transformative reform In its intentions, potentially revolutionary in its effects And yet it doesn't contain any new vision After these 35 years It talks about better means and improved means To the same old vision But no sense of what is China's place in the world What is China's international Obviously this is a domestic document But China no longer has the luxury Of having purely domestic documents Or purely domestic policies So there's no new vision And this I think is why Baotong Describes this Xi as the Mao Zedong style Very into the Deng Xiaoping program And I think this may be It's because he hasn't moved beyond those visions Let's, a couple of you have mentioned Xi Jinping's stage craft leadership His ability as a politician And that of course goes to the issue of implementation And of course in theory It's meant to be a leadership team Of Xi Jinping and Li Kechang And we really haven't heard much of Li Kechang In recent days And in theory he's responsible for the Massive economic program So you can choose who goes first I mean there's been lots of grandiose headlines About Xi Jinping being the next Deng Xiaoping and the like Equally transformative I mean is he as powerful As he seems from the outside Or to use that much misuse phase Is it too early to tell? Just on my week there In every conversation You try to get a sense of that And Li Kechang is just Not part of the discussion He's either criticized Or known for being absent Or just that wait a week And then to see him Nothing, just don't know I think a lot of people have been left By this effort of Xi Jinping To put himself forward as the missing strongman That there's no room really But right now My personal guess And this is not based on anything other than experience Is that when we have the Central Economic Work Conference in December He'll be there presiding And I'll compensate for a lot of his I don't think his position Has been dismissed Or somehow lowered But he'll still be there playing his role But what they want to convey is strength And leadership And incontrovertibility And this came before the documents Earlier in the year We had some unprecedented Film coverage on TV Of the Politburo medium Xi Jinping was speaking Freely to the other 22 people Assembled there We're all thinking those like crazy It was not intended to show A dynamic group interaction In the top-down kind of structure How the cuts can go pretty well in the documents Chris, what's your view on that? On Li Kezhan? Yeah, on Xi Jinping Oh, on Xi Jinping Whether he's as powerful I mean, if we could Whether he's as powerful He took up the military Immediately, unlike Yeah Who's in power, for example? I think he's Pretty quickly emerging As certainly the most powerful Top leader in some time And I would just echo what Doug Just said In terms of I think what's going on With Li Kecheng is not Says nothing really About Li Kecheng's position Or power And in fact, you know My sense is There's no daylight Necessarily between the two Of them That's what a lot of people Are speculating It's rather that He's the decider Everybody else Even the number two In the system Is an implementer And I think that's A very strong message That comes through Repeatedly Rate from him All the way down through And spent some time Since the number one Has chaired The drafting committee Of a plenum document So that's really interesting Also, I think We've just seen him Move so quickly What I see with him Is that he has grasped The sort of core principle Of the regime That his predecessor Never did Which is You must control The key levers of power To be effective Inside the system And he has moved rapidly To get the military The security services And the party machinery Under his control And that's very, very important Even though, of course, Over the years The word strongman In China became Increasingly contradictory Like China can't have a strongman Right, right, right Well, I think His role also Frankly gives the lie To the institutionalizing model That has been so dominant In the last couple of years But that's my own sense Nick, I want to ask you On economic policy And the leadership relationships I mean Jurong Ji used to Infuriate Jiang Zemin The Jiang Zemin I think, nonetheless Let you Gave him his head And protected him I'd never had that sense With who and when I mean, they were They were Nominally a leadership team But they didn't seem To feed off each other At all or anything like that I mean, could the fact That Xi Jinping Is so powerful In the system at the moment Is so decisive In fact Help leak their tongue Because if he's got to Get a lot done He's going to need Backing behind him I agree with that Hypothesis I don't think Li has been Marginalized By the events Of the last ten days After all, it is A party meeting You expect the party leader To be front and center He was more so than usual But most of this document Is the decision document In particular Is consistent with the The themes that Li has been Talking about since Since he assumed office As premier At the NPC last spring Particularly the role Of the market That is something That he has championed Over and over again So I would agree that I don't see much daylight I think They have the potential To be a very strong team Pushing the economic agenda forward Robert More a question For you than a comment Doesn't she also Potentially need Li Keqiang Once they start Actually implementing reforms And we know Whose oxes are going to Get gored And who's going to pay The price He needs Li to absorb Some of the criticism And absorb some of the blame If things go wrong If that potentially part Of Li Keqiang's role As well in this Maybe there's some of that But remember she has also Taken the leadership Of the finance And economic Leading small group Which is something Hu Jintao passed off To Wen Zhao Bao So I thought Early on that signal That she was going to have A dominant role At least in setting The overall tone Now one of the key things Will be what the structure Of this overall Reform body is Who's going to be on it What role she will have In that What role Li will have In that I don't know how soon There will be visibility On that Let's just come to one issue That a number of you Mentioned in passing And that is corruption Anti-corruption campaigns And also the issue That Chris mentioned about The whether or not There's an institutionalization Process going on Which in theory would Undermine the party The first year Under she is in a big Anti-corruption campaign Mainly directed at the So-called, I love this Term, petroleum mafia And it seemed to me Whenever these things get going People say, oh gosh They're taking corruption Seriously in China now But of course this Really seemed to be What Chris was saying Is this is a political move To grab the levers of power And just punish a few people On the way to make sure Everybody else knew it Am I being a bit cynical there? Do you think this was A real campaign? Everything I've heard Over the last week Had really good access This is a serious campaign But the officials feel The heat from the people On this one But it can't be too serious Where does it stop? It's serious What I found fascinating Of course we'll have to see How implementation occurs Was a discussion of trying To move this exercise away From the party And into the courts And to make the legal system Be telling a force behind Showing people one after another For this corruption I don't think there's Necessarily a contradiction Between the campaigns being serious And being selective It has to be selective For reasons of capacity If no other now Being selective obviously Politics is going to enter in But the selectivity doesn't Mean that it isn't serious It's not selective because Of capacity It's selective because You can't If you were really serious You can't go after everybody But that's a capacity You can't close down The government Nor do you have the judicial Means even to go after everybody So the selectivity of it Which is inevitably going To have a political character I would agree it doesn't Mean that it isn't serious But a lot of it's out of their hands It's stuff that gets revealed By the wave war So there's a photo Of the corrupt guy doing it That's the little guys though Well not always though Because they've found several Instances where they start With the little guy And suddenly the whole Sweater starts to unravel And they hit a big guy Pretty quickly as they Look at it I would just echo something That Doug said too On this thing with the courts I think that's very real I mean it's very interesting That we've seen just in The last few days Much more talk about The Shuangui system And how they might seek To reform that They know that this is Unpopular with the public And so on So embedded in this whole idea Of embracing the state Constitution as well And the legal means And there's something cooking There we're going to have to Watch it and see See what it's all about So okay now reform Doug's reform is always Reform and opening It's not just about internal Reform even if this is A domestic document Do you see Nick You might have some Thoughts on this This is not only about Internal reform But China continuing To open to the world And the US and many Countries have been very Frustrated on many levels In the past ten years On various market opening Issues and the like Is it an outward looking Document as well as An inward looking one Well there's certainly Some small sections of it That have an outward Looking component I mean most importantly The Gaiga Kaifeng phrase Is in there several times I think I can't remember How many times There's specific discussion About free trade zones There's specific discussion About the negative list Which the Chinese have embraced Now in there supposedly And their negotiations on Bilateral investment treaty First with us now Probably with Europe as well And as I said before There are hints of more Competition on protected Sectors which could include Allowing a greater role For foreign firms in some Of the monopolized state Sectors. Now that seems to be the Signal that's in there But I would say that It's pretty positive on The international side Although it's a small segment Of the document. I'd like to make a point That hasn't been made this morning That I don't think people Here would make it But I'm hearing it a lot And that is that this is Going to doom the state sector The state F-owned enterprises Have been put on notice That this is time to Migrate into a kind of private That's not the message I'm picking up. People in China really think This is going to liberate Some of the state Enterprises And some of their social Obligations Some of the limitations That they've put on them And they expect to come out Of this much stronger Now they acknowledge Everybody acknowledges There are some state Enterprises that ought To be allowed to go Recurring the zombies And the Japanese model And they shouldn't be Convinced. But there's a lot of Trust that they're going to Come out with some World-reading corporations That are the state champion By the state I totally agree with that I would just add that I think that's very clear In this document The goal is not a fire sale Of the state-owned enterprises And privatization But rather creating competition That does indeed strengthen The state-owned enterprises That's abundantly clear And that's really been The game plan since they Started to reform an Opening process. Just before we go to Questions from the audience I mean is that we often Read about how the Communist party is Deeply worried about maintaining Power, deeply worried about Stability, paranoid about Its enemies at home And abroad and the like. This document strikes me as Free of a lot of that Paranoia. In other words, much Quite confident. Do you find it a Confident document? I find it a document That strives to project Confidence. And it projects it Fairly successfully. But I think that behind it Lies the same concerns about Stability and the same fairly Secretive and paranoid style Throughout. There's a lot of Wizard of Oz quality to this. Right. And we haven't had the curtain Fold. But lies behind it quite Then. I was just going to say This also I think really Highlights the whole Anti-corruption campaign piece. You know, to people abroad Four dishes in a soup And these things sound Absurd. But it identifies a problem And that is what the Common people see every day The rapaciousness of local Officialdom and so on. That's why they're the target Of the campaign. And things that might sound Silly to us with the numerology And the phraseology and so on Is actually very meaningful In their system. When you talk about Being a potentially revolutionary Document, that simply means That China will become a much Stronger, richer, powerful Country under a strong Communist party. Doesn't it? It's not revolutionary In another sense. Well, this is where I say Reformist, deeply reformist In its intentions, Potentially revolutionary In its effects. You know, you open a window, You let in a few flies, As Deng Xiaoping said, And here you're potentially Blowing down one side of the House. The notion that despite This confidence, they can Control all of the outcomes Or anticipate all of the Outcomes of these reforms. That's simply not true. It's going to be a very Complex, exciting process. But I think it could be Revolutionary in its effects Meaning with reference to The power of the Communist Party. It will have effects that They don't anticipate. Our beginnings seldom know Our ends. I've got a lot of work for A whole range of time to watch. That's right. But that is a very Important underlying element To it, is that throughout The document, I see places Where they're effectively Saying, we realize we've been To use football terminology, Scoring own goals in a number Of these areas, and we're Going to stop doing that. Now, obviously implementation Will be the key. They have to fix these Problems. But if they're successful, They will be much more Capable and powerful. And influential. Okay, so going to, I think about time for Questions, is it? Sure. Yeah. Anybody like to ask questions? And yes, from Brazil. Wait for the mic, please. And identify yourself. Hi, my name is Cláudia Trevisã, a Brazilian Journalist from the Newspaper Stado de São Paulo. The reform seems to have A medium to long-term goal. But the Chinese economy Is facing now some Pressuring issues like The shadow bank expansion, The inflated housing market, The overinvestment. Like how this reform is Related to these issues, And how concerned are you With them? Thank you. Nick, do you want to try that? Well, I think if they carry Through on some of the things That they talked about, Some of these pressing issues Will recede in various ways. For example, if they liberalized A domestic deposit rates, Banks are going to have to Pay more to depositors, Banks are paying more To wealth management products, So we know there's upward Pressure on deposit rates. A lot of that will get passed Along to borrowers. So the real cost of capital Will go up. And one of the reasons that Investment has gone up so much In the last decade is that The real cost of capital has gone Down quite a bit compared to What it was in the 90s Or the first part of the last Decade. So that will, And that's very important Because most investment these days Is being undertaken by private Firms and they're very sensitive To the cost of capital. So if you liberalize deposit rates Interest rates will go up On the lending side and Investment will go down as a Share of GDP. And similarly you'll get A structural shift. The industrial sector is very Capital intensive. It's enjoyed the subsidy Of cheap capital for a decade. When that starts to phase Out, the service sector will Do much better because it Doesn't rely on capital so much. So it'll grow faster. It employs more people. Wages are higher in the Service sector than in Manufacturing. So that'll contribute to a Growth of the wage share of GDP. That will lead to more Consumption which can help to Offset the decline in Investment and still keep the Economy going. So there are a lot of aspects Of the reform that will address Some of these underlying Problems. I'd like to just add to what Nick has said by saying This is intimately connected To regional, local finance Mechanisms as well. They're really in trouble in Local parts of the country Because their income is not Equal to the mandate they have To provide services, take care Of housing and all of that. And there's going to be a big Shift of income from the Center to the provinces and The localities right out of The fiscal accounts. But they're also going to Try to use these various Mechanisms of Nick's Outline to try to strengthen The local economic health of The fiscal system so that There's less demand on the Center for that kind of support. This is really deep running stuff. And I've been trying to say Contrast my colleagues up here But I think this is a Documentary reform intent. Not revolutionary intent. But when you get down to How the local officials raise Money and allocate access to Land to put properties on And you're potentially denying These very officials the income They get from the transaction. And they're seeking that goes on At the local levels. That could change the way Cadres perform and the Relationship between the Cadres And the people as opposed to The Cadres as a party. So there's a lot that's really Bubbly below the surface that Could come through the surface Frax of it. There. And yes, the microphone. And please state your name. I should have said before. John Verano, Covington And Burling, question regarding The anti-corruption campaign. How do you expect foreign Companies to fare in that? Will they be a particular focus Or just sort of part of a Level playing field focus? Well, there has been a particular Focus over the past year. Not just the campaign against Foreign companies from the Government side, but in the Media as well. There have been against Starbucks and others a whole Series of accusations. I think it's going to be Incumbent upon foreign companies To wait and to watch a process Of reform that is going to Probably be one step forward, Two steps back. There are going to be Demonstration projects. There are going to be laws And quasi-laws promulgated And withdrawn. And there are also going to be As all of us are in China. In Chinese they say There will be policies. And then there will be the Local response and the Corporate responses to those Policies that attempt to Get around them. And that is something that The foreign companies are Going to have to try to respond To and move to quickly could Easily get caught up in corrupt Practices. It's going to be even tougher For us to know what the Environment is over the next Few years as this shakes down. My advice to foreign Invested corporates in China Would be to engage proactively With the internal council. Make sure that you're done Things well within the Boundaries of the law as we Understand it rather than out Here on the edge. Because those people on the Edge are going to be feeling Pretty uncomfortable. Thank you. Jane Tom from Taixin Media. First question is for Mr. Bao. Since you just came back from Beijing, do you think there's Any misunderstanding or something That you need to clarify for Washington? And second of all for For an expert. Since Ambassador Gary is Resigned earlier next year And what kind of Assessor do you think Mr. Obama should look for? Especially he got a lot of Impact on China for his Work ethic. And who do you think he can Take this job and maybe help To build a major big country Relationship? I'm sure we could arrange some Pictures of Doug in a Starbucks Somewhere. I wouldn't carry my own bag For you. No, the question you asked me Is something I don't think People here, and we haven't Discussed really that much About the role of the National Security Council. I think it's going to make a Big difference. One of the things that China Confronts in the 21st Century institutionally The needs to fix is the fact That the military operates in One C-tool, one system, and The foreign policy apparatus Is a whole host starting With the Foreign Ministry, With the Ministry of Commerce And all the big trading firms And all the mess on the Foreign policy side. And the military, which moves One voice from the top. And they don't interact. They don't talk to each other Before things happen. We go back to the example, The famous example of shooting Down an anti-satellite Creating an international Fuhrer, the Foreign Ministry Was left with nothing to say For several days. I don't think they want that To happen again.  That mechanism, I believe, Logically, must reside above The Foreign Ministry and above The Foreign Affairs Office Of the Central Committee, Which means it's probably going to be A new czar. And it was an assumption Among my conversation With partners about that being A political member presiding over The process. This is a big change for China. For the military to talk to a Civilian about what they're Going to do is not going to Come easy in the Chinese system. But it's something that China, I think, Institutionally can't avoid Confronting them. This document sets out A mechanism to do that. Chris, anything to say on that? I would just add to that by Saying that it would be Interesting to watch the Membership of the National Security Commission because My sense is the PLA, of course, Is quite comfortable in the CMC, where there's ten of them And one of, with shiny Things in one person without Them, right? And so I would assume That a serious deal has been Made, so I would expect to see Some senior PLA officers serving In positions in the commission. I actually think it's going to Be possibly chaired by a Standing committee member Because if it is commission Level, that means it's a Dashline, you know, off of At least the pull of your own Maybe the standing committee. So we'll have to watch Structurally where it sits. But I agree with Doug. It will be very important. And those first few Conversations are going to Be awkward between that Civilian person and his Military counterparts. Anybody got any comment on A replacement for Mr. Locke? I don't know whether we Can say anything. Anybody want the job? Raise your hand. Okay. Over here, front row. Where's the man? There we go. Hi, my name is Mike. Most recently with the U.S. Army Pacific And now a consultant. I'd like to ask you about A particular thing that Intrigues me. How is the Communist Party The 60 or 70 million people Going to recruit, nurture And promote the next Generation of party members Both rank and file, middle Managers and more Importantly looking forward 10 or 15 years to the Leadership as they give up Control over the economy And liberalize, move to Market forces. All the elites that are Going to arise all over China, small and medium Businesses, the presidents Of small companies, Presidents of banks And large companies Aren't going to come through The party structure anymore And how is the party Going to lead when a Large segment of Chinese Society is going to grow up Outside party confines? Do you see them Starting to recruit These sorts of people Into the party at the Bottom level? They grew up to 80 million Now, actually. Robert, do you want to Have a word? Do you, Mike? So far, I think they're still Recruiting very successfully With getting top university Graduates from out the country, Most of whom want to go Into the civil service Into the party apparatus As soon as they possibly can. Much of what's in this Document, these changes, It's still highly aspirational. And for now, and I think For some time to come, There's still going to be A strong belief that jobs Within the party are going to Be one of the most stable. They're going to remain Very, very prestigious, Whatever the content might Be, and there are still Opportunities to enrich Yourself, or at least if not To get rich to do relatively Well, and so having worked And continuing to work closely With Chinese graduate students, This remains more than ever The place that they want to go. They have family pressure, Social pressure, pressure From their faculty members To do precisely this. I wouldn't see that changing Soon. I think they're on Pretty solid ground. Thank you for that Question, Mike. I think the boards, I carry away, I think, Singapore. Recruitment of the Leeds, Co-optation of potential Decidence, emphasis on quality. I did hear very explicitly That the people who were Promoted under Janice and Mary Because they were rich Are not going to get promoted Because they're rich And they're not going to Cut the round with them. But entrepreneurs are Still encouraged. The rich people are Still encouraged to become Party members, though. I heard that is not Where they want to go. Oh, really? Interesting. Okay. There. Second row there. Hey, good morning. My name is Jorge Guajardo. I'm with McLarty Associates. And I wanted to ask a question Regarding this narrative of Xi Jinping being the strongman In the tank shopping model. To my knowledge, He's the first Chinese president That has to govern with two Living former presidents, A number of former premiers And all the interests they represent. How does this strengthen him Or weaken him? I'd like to hear your opinion. Thank you. Chris, I'll take a stab at it. I think that fundamentally what's Interesting to watch about What's happened in that space Is that when his predecessor, Hu Jintao came in, He never got rid of his predecessor. Xi Jinping and Jiang Zemin Quite clearly have come To an accommodation. I think that's seen in a number Of ways throughout the system. I think Jiang still is influential Within the system. But it's interesting how some of These corruption investigations Have been sniffing around The broad coterie of his Interest group within the system. Hu Jintao is virtually invisible Since stepping down. And although it's interesting, Much of what Xi Jinping is doing In this document, A lot of that was talked about During Hu Jintao's administration. And in fact, Some of it came from Hu himself. He just wasn't successful In implementing it. And Xi Jinping is trying to be More successful. So I think that's true. The worst example of what you Are talking about happened Really in the run-up to The last party congress. You know, they allow all of those Former standing committee members To have a say in terms of Who's going to be the new Promotee and so on. It creates a tremendous log jam. You know, now there is no Recognized arbiter, A la Deng Xiaoping, Who can cut the knot. And so they have to go through Round after round after round Of this stuff. And then sometimes they have To come up with ways to destabilize Certain competing interest groups And so on. So it's going to be more dynamic, I think. But I also think Xi's going to Try to sort of trim the number Of people who are involved in Those discussions going forward. And I think he has a consensus Among several retired people to do so. I've got two observations on that. One, the esoteric communication To me is extremely clear. And that is, you know, Appearances on stages and the like. None of those old leaders were on The stage in this meeting. They were acknowledged in the Document as having been President in the audience. But that's a big step down from Where they were just in last November. That suggests to me something Very strong about his Relationship to former major Power holders. Secondly, he has really Infiltrated the central Government with people who are Very personal close to him. I could put on a long list Of people who have taken Important responsibilities in the Last year, who went to school. They will have long standing Connection that is intimately Trusted by people. You can just see that his influence Has been placed in important Notes of power in the system. Also, Chris has alluded to Several times. The emergence of she is a Strong man. This isn't simply something That he's imposing. There's a demand for this. It's a response to both Elite demands and demands At the street level. And this notion of a Strong man, the sort of Changran. It's different than the cult of Personality. You said that this was, you know, That there had been a lot of Statements opposing Strong Man in China. There's a lot of reticence About a cult of personality, Alamau. But the Strongman, per se, Responding to a demand, I Think he stands in pretty Good stead with the party And the people right now. Okay. Wait a second right there. Hi, my name is Tenzin Kwon Sang. And my question is about The implication of the Pilferna Mon. Regions like Tibet, Especially with regards to Domestic and foreign NGOs. Just wondering if the Implications are different for The domestic and the Foreign NGOs. So, yeah, domestic and Foreign NGOs? Well, there's very little About nationalities in the Plenum documents except the Usual boilerplate about Representing all of the Nationalities of China. And there would appear to be Very little concern for these Questions. I think that the Implications, not so much Of the plenum itself, but Of the past year, would be That there won't be much space For domestic or foreign NGOs Operating in Tibet or in Xinjiang or other sensitive Areas. I'd be quite pessimistic about That. I attended a conference on Philanthropy in China last Year. And all the key people in This area were there. And I didn't hear a word on New scope for NGOs, Anything like that. And I would subscribe to What Robert said about the History of the last year Where the institution is Enforcing itself in trying to Prevent alternative sources Of societal organization and Power from emerging. That's all right. Second right there. Peter Sharfman, Minor Corporation. You spoke of the changes In the organizational Structure to deal with the External world. Was there any hint of a Change in the substance of External policy? It's not on the document. But prior to the publication Of the document, there was an Important party meeting Shared again by Xi Jinping In which he talked about Peripheral policy in China. And I outlined this for a Friend and he said, well, I Was at the meeting and I Didn't see you there. They've announced what they Wanted to start over again. And it's been a long, long The last five years. Chris said earlier, scoring Goal and goals. That was really true throughout The original Howard Joining China. And they tried to have now Realized we got to fix it. We saw this effort to Improve behavior again early When Obama couldn't go to Southeast Asia and we sort Of didn't pay attention to it. But in Asian ASEAN Infrastructure Bank, which I think Is going to be extremely important In short order. So there's a new effort across the Board to improve foreign policy And significant adjustments In how they're dealing with Countries like Japan and Philippines and Vietnam. Where are they kind of The toughness of showing to the Norwegians over the Nobel Peace Prize over the last Five years. And trying to tell the people of Japan and the people of the Philippines that the Chinese are Their friends. How this will play out, you see, That's the message that started About a month and a half ago. Was the initial announcement of Just $100,000 for the Philippines After the typhoon? Was that An own goal? This is the media award. People don't follow China For $100,000 fund. It was right to do right away To show concern. But they corrected it. They had a Very small amount and there was an outcry. We were then moving up, escalating What we offered and others were escalating What they offered because our systems Were a little more responsive. The Chinese system sort of followed Its normal pattern where they came Over the $1.2 million worth of RMB I think about a week later. I'm told the Chinese offered the $900 debt hospital shift. Quite a while back, the Philippines A long time to respond. As soon as the Philippines is posting Earlier this week, the Chinese Will move the shift together. We're just talking about a system That operates differently. A lot of the journalism is saying Why are these people trying to stick it To the Filipino? Isn't that entirely the point? The system has to operate more Quickly. I just would add one point On the foreign policy question. I think what's interesting about this Conference that Doug referenced is That my understanding is there was One held immediately after the Establishment of the regime and there Hasn't been one held since then. It's quite significant and we see Xi Jinping doing this in a number Of places going back to Touchstone events and redoing Them in his own style. That's a very interesting thing I think there's a lot of More issues going on around the President's position last year, The Boshi-Li affair, all that Stacked up together. They never really took the time to Sit down and do a fundamental Assessment in particular of what the U.S. strategic rebalance means for Their external security environment. Hu Jintao, the departing president Didn't want to tie the hands of His successor, Xi Jinping, as the Understudy wasn't about to stick more carefully and if you look at things such as the preference of the most recent defense white paper where they again acknowledge that China is in this period of strategic opportunity that runs through 2020 but they're also saying that that period of strategic opportunity is under unprecedented stress and they blame the rebalance effectively for that unprecedented stress. So that's an interesting thread to watch going forward to see how that might get pulled. I just want to go here first.  Thank you. I'm Dan O'Flaherty with the National Foreign Trade Council and I apologize I came in a few minutes late so this may have been addressed but I'm wondering if you see in this document any change in the mercantilist policies such as indigenous innovation and other constraints on foreign investors? Well I think what's in the document is a continuation of what we've been hearing about for months. They're talking about more flexibility on the currency. They're talking about more liberalization of capital inflows and outflows. They're specifically talking about two-way flows so they're still welcoming investment into China but they want to invest more broad and obviously they're signaling things about that. Then if you look at the document that the People's Bank put out the other day, as Doug mentioned every ministry is now putting out its gloss on what this means for our domain. There was a very, very clear statement quoting Governor Joe about the goal of reducing the degree of intervention in the foreign exchange market, having a much more market determined exchange rate so kind of filling in some of the blanks that weren't in the decision document itself which was not that detailed at least as I mentioned before the international aspects are covered with relatively short amount of space. So I think it's basically positive but a continuation not a discontinuity continuation of the direction that they've been moving in over the last several years. I want to ask you about the one you talked about Governor Joe, one of the great survivors he's been kept on beyond retirement age I think. What does that tell you? Well I think the decision to keep him on last spring just before the NPC I think was a very important one. I think it was a recognition of his role domestically. I think he's managed the central bank very well. Monetary policy has been a lot of stress, a lot of international stress but China has done very well and I think it's also a recognition of the role that he has internationally. Representing China in meetings of Treasury and finance ministers around the world and IMF World Bank meetings and things like that. So I'm expecting him to not step down until five years, I mean at the end of the five-year period.  You two fight it out there. Thank you. The question is, this morning you are describing China as in some way a positive example of transition and I would ask you, what about Russia? Why the transition in Russia apparently is not working as China and what is the impact in your opinion on the U.S. foreign policy because this that you are describing is really very interesting. I would just say his name is Putin but I think Doug has some comments. I did the unwritten script that you could sort of dip the text in, pass it in, the written script emerges below. It would be, don't do it, Gorbachev did a fair stroke. All about don't do fair stroke. Toughen everything up, discipline, strong leadership, suppressed dissent, no real control over the Internet and all these other potential sources of interference in order to carry out the reforms that are needed. I think they studied this to death from the last few years and it's the unspoken agenda.  Okay, I can one from TVAA. Xi Jinping, he's talking about China's dream but from this document, it looks like from economical they're going to go to the extreme right and from political side they're going to extreme to the left. And if this happens continuing, they do the economic without politics, right? How do this China's dream ever come true? As soon as right and left, very loaded in China. Right, the China dream, of course, it's still very vague and this language is being mimicked not only in China and often in the United States as though this were a serious form of discourse. I must say for me so far I find a lot of this dream-dream-dreamer talk, what is your China dream? It may get fleshed out but it seems kind of infantile. But on the question of this, is this sustainable? I think that this is the contradiction that hasn't been resolved by Xi Jinping. Can you really tighten down politically, tighten down on communication, tighten down on information while modernizing, while creating national champions, while developing worthwhile patents, while having an innovative society? I think that the answer is that they probably cannot. There's room at the margins to develop for a while but over the long term probably not and there's no evidence in these documents that they see this. Say there's a lack of vision and there's no attempt here to really take on modernity in its totality. It's very clear that they still see modernity as dung did as consisting of increases in standards of living and increases in level technology. But do you mean modernity is essentially genuine political reform? Modern, integrated, open institutions and free flow of information and more innovative educational constitutionalism. Well, I don't want to seem to be imposing too many of the Western systems on that. I think there's a way of describing aspects of modernity that are essential that are not necessarily just Western and I see no evidence that they've really started to deal with them. Again, it's better means to the same ends. Chris, I was going to say but the contradiction that Robert talks about in theory is the eternal contradiction under reform and opening and so far the Chinese have managed it. Yeah, well that's sort of what I was going to say and I actually think the problem may be even worse than Robert just stated in terms of. I think they've actually convinced themselves that they can do it this way for a sustained period of time and that the global financial crisis and other things tell them in their quiet moments that they have found some kind of a third way. It's the only way when I talk to rational Chinese that I can square the circle of the massive contradictions in those two approaches that you have to believe, you have to get into their mindset and understand that they believe they found a direction that they can do this. I personally, I think everyone on the panel would think it's unsustainable and even they may think it's unsustainable but for now they seem very convinced that this is the right right? Yeah, yeah. Singapore is four million people. Thank you, Dong Gui Yu with China's Real News Agency. I have two questions. First one, a couple days ago when the National Security Advisor Susan Rice made a speech, she said that this is an opportunity that the United States must seize. So how? What's your advice or recommendation for President Obama or even the next president? The second question is if this reform plan is fully implemented, do you think it would strengthen the so-called Beijing consensus or even China model? What's the implication for U.S.-China relations? Thank you. Let me just say on the last part of the question, I think that if they follow through on the various dimensions of the reforms that they talk about, they're going to move China much more strongly in the direction of a market economy and I'm not sure that we're going to be talking about a Beijing consensus, we're going to be talking about an even more market-driven economy than we've seen over the past couple of decades. We could talk about national champions and there are some very strong companies emerging, but many of them are in the private sector now. In the manufacturing sector, the state has almost completely faded away with the exception of a couple of highly protected sectors. State companies are only producing a fifth of output in the manufacturing sector. 35 years ago they were producing 100 percent, so it's collapsed and it's all been driven by market forces. On the issue of opportunity for the U.S., first I think Susan Rice's speech was a fully coordinated statement of U.S. intention from the top down and I think it follows on the remarkable initiative that Obama took earlier this year to invite Xi Jinping for a short sleep conversation over two days out in California. The Chinese are presenting us with opportunities to deal with some of the things that really trouble us on the economic front. We'll have to do that part of the form bit by bit out of the investment treaty and other things we'll have to move forward on. The test for America is whether we can sustain our end of the week to work on this. We've got leaders who are being driven to all ends of the world decide they need it. Fortunately, it's still scheduled to Vice President Biden will be in China in a couple weeks and we've just had Jack Lew there and the Joint Commission on Commerce and Trade is due off next month. So there's already a lot of interaction the question of painting some direction on the American side so we can keep China moving toward what I hope will be reforms that will fit. I did take China toward where it's reformed overlap with the requirements that are of a new era of trade between us that will be I hope identified within the defense specific partnership agreement and that China will compare itself to be a full-fledged member of that trans specific partnership not today and tomorrow but a few years out when they've gotten through some of these reforms. There's a lot of potential but again there's a lot to play the way to step on a banana scale and thank you for that. I would agree with Doug that this is going to happen bit by bit and it's going to be an unfolding as opposed to what some seem to be calling for with this new model of major power relations having a master plan. Both sides are sort of crossing the river by feeling for the stones it's going to happen as Doug describes in terms of this new major power relationship obviously it expresses both sides desire to avoid major conflict to avoid the facilities trap but other than that negative content it doesn't have very much positive content so I think it will be either we already have a new type of major power relationship or we never will and we're going to figure it out as we Yes on that point in my Twitter feed in the last few days I keep being up and it's been a long time to work it out it's a new theory of great power relations. The acronym is now the new model of major power relations a major country sometimes it's a country something like an NT. Chinese is insane. So but that's that's a Chinese form of words isn't it? I'm not sure that the US has brought into that have they? We haven't we haven't formally but Ms. Rice came quite close very little this is it's she said operationalize it she said work together when we can but be clear about our goals and it's as you imply this is a Chinese exercise we don't christen or name our relationships prescriptively we've some every once in a while is with the special relationship we will do it retroactively as a description but it's not formalized so this very mode of naming this aspirationally and then filling it in I think this is is foreign to us and it's not that we don't share the starting point of wanting to avoid conflict but I'm not confident that the many discussions about this are going to yield what the Chinese side would see as real fruit as a model and I think there's plenty of examples in Latin American history that they could assign we've had these empty state that we never fulfilled. I think what she was doing and I think one American official to regularly acknowledge that China is trying to say something positive about our relationship right we don't reject that language we don't identify with it so we give it to like lip service. Thank you I'm Jeanine Wynne with Voice of Vietnamese Americans I follow up with a question and ask for the your points of view for the implications of the area the Indo-Pacific area because of the peripheral diplomacy that presidency has put out to all the border nations to China especially Vietnam and the South China Sea ASEAN and India Japan and South Korea especially with Japan but whether you see the next year and the next five years the tension would be in the area in the maritime sovereignty between the East China Sea the South China Sea and all that region. Thank you. But the but the party congress Hu Jintao's address to the party congress does and identifies China as a maritime power going forward for the first time in the history of the regime and an official document so that's a very important that's a very important statement about what they're thinking I mean you know this there's this whole debate now right within some elements of the system should we be moving west staying east doing both you know there's a lot of that discussion and I think in the authoritative documents they keep highlighting that maritime is a very important direction for them Xi Jinping's held I think two pull-up euro study sessions on this now where he's made some pretty interesting remarks about the direction and and there's a lot that there's a lot to see in it that's cooperative and there's a lot to see in it that that suggests that you know they have a game plan with regard to what they hope to accomplish in both of those areas. Yes I want to tell you maritime that ideas marry the idea of the maritime power with these very difficult sensitive relationships and sovereignty issues on both sides with six or seven nations. I think that the leadership and deejay has the belief in the level of defense that they can keep the heat on the blossoms of st. castle islands and on the abbey government without it boiling over. They can send four or five maritime surveillance vessels and overhead aircraft from time to time to assert their claim on the territory and that this will not lead to incidents that will get out of control. I think my sense of the Japanese leadership has a sense that they almost managed to set a low level of tension without having to involve it so that they'll this will go on for a long time. To look to the South China Sea you know kind of look at the geography and say well they kind of used up all the places where they can start getting into crisis. So maybe we'll have a period of quiet. There's two issues one is China's navy is kind of nearly they were out of business for six hundred years and they've come back and I can't count on them having to do count on the Japanese military to hold crisis. They've shown it for 60 years but in the case of China this is new accidents are quite likely to happen. And secondly another wild card is whatever the UN does the most of the tension over these islands has emerged in the last 10 years 15 years have come from functions of the people who work and ministers in the UN law of the sea would declare you must tell us what your disputes are by accident. Suddenly we have disputes all over the country and then people have to show their publics that they're acting on those disputes by deploying their on-services here. So hopefully we'll have much more activity. Can I just throw in there that that I actually think this is the big risk is that the top leadership does think they have a very defined flame control over this and I don't agree at all. You have in Mushengli the head of the navy a self-described Mahanian figure you know I think there's a lot of potential there for danger. Okay, Ben. London Brooks earlier in your and I can't remember which one of you was thinking about you Doug you spoke of concerns and one of them was income inequality and I heard nothing that you have described that is likely to make that better and several things that could well make it worse so is this a slogan they're not doing anything about did I misunderstand the breadth of what they're doing and and if they're not really doing anything does it matter I mean there are international relations theories that there comes a point of income inequality where it's seriously destabilizing is that is that relevant to the discussion and do they think it is. Distortion what I heard you said this is about incomes in China inequality and equal okay there's a tremendous amount of discussion on this subject and after carnival a big conference of all at the implementation level not the top policy level and you know the giny coefficients which is the word you use when you really don't understand economics um it was used a lot and people talked about it they really need to address this problem of the top one percent getting richer and richer and find ways to and a lot of the discussions therefore then turns to um both empowering the peasantry with the land that they're occupied but can't really so big much marketized and getting them urbanized into smaller cities and a whole host of things which are intended to get people into a better position to be the structure of the national no I think you know when they don't have a progressive tax system that's going to do anything on this and I don't think they're likely to implement one they're just too few people for example paying an income tax but the kind of things Doug is talking about if you can realize the value of your assets if you're poor peasant by being able to sell the land at a market price or get some return on the land other than just having it you know stolen by government officials and then resold at a market price that will have a very substantial effect on rural incomes and so I think that would have a big effect you know we have a very large part of this genie coefficient is this very large gap between urban and rural so to the extent to which you actually implement a serious reform on land ownership and and sale rights and use rights that'll help to close that gap I think this brings us back to a very fundamental point that Doug raised a few minutes ago as well which is this whole issue of fiscal reform this is this is huge how they manage this is going to define a lot of this you can't do hookah loosening if you don't manage the fiscal piece right I actually think this is an area where they might have blown in the the what they're saying about the the relationship between the center and the localities is that it's largely going to stay the same and yet they're going to the plans they're rolling out will deprive the localities of serious you know forms of revenue the land sales forcing them to move away from the local government financing vehicles and toward these you know bond issuances and so on you're going to have a lot of local officials who are really worried about revenue and I think we could have a two to three year period while Beijing gets its ducks in a row to do the fundamental fiscal reform they need to do where it could get a little bumpy in the in the localities and it gets a real risk I have a different interpretation of the of the paragraphs on fiscal and there are some ambiguities but they are talking about redefining central fish central local fiscal relations and when you when you look at what they're saying I think they're talking about giving more money to the localities that they're going to get a larger share of the taxes that they collect than giving more money more not more taxing powers no more transfer or transfer payments well no I think they're going to keep you know they're they have all these complicated arrangements on how they share revenues from various sources I think localities are going to get to keep a larger share the transfers will continue particularly to poor poor regions of China but they're going to be more regularized rather than negotiated and they're going to be less earmarked so I think localities are going to have more fiscal resources more discretion and spending yeah so I mean as Chris says I mean if you don't do that this business on the land reform is never going to work and so they are very much interrelated but the localities are also going to have some new obligations that to build a social safety net in particular if they want to bring more people into the cities there have been vague promises to have a better social safety net somewhat funded by SOEs but most of that is being financed from the central level the cooperative health care system in the countryside is being financed almost entirely from the central government but not from localities and I think that's the direction they've been moving in and I think that will continue so we're going to run out of time soon I just want to ask each okay one more question right at the back and then a reporter from The Voice of America I have two questions here first is about the anti-corruption campaign and earlier we're talking about the Chinese anti-corruption campaign and talk about its seriousness and it's been like selective and I know that there is a thing that the New York Times just run a story about Wenjia Bao's daughter getting involved in their international company so I'm just wondering do you think that Xi Jinping will go after Wenjia Bao or will he not and why and the second question is about the upcoming visit of Vice President Joe Biden to Asia so what kind of message he's going to send to the that kind of that area that region thank you who wants to make take that one isn't it a question of where she says why would they do that it's more why not about going back about pursuing this issue of Wenjia Bao's daughter well I think there are answers to why not yeah yeah if the unraveling of the sweater I think that the the issue there is that the thing to watch in this space is that Xi Jinping whatever you may conclude happened with the Zhou Yongkang investigation there's wide-ranging views about its target and so on seems to have defied some long-standing regime rules of physics by doing that and so any retired pull-up bureau standing committee member and their family members are going to be a little more nervous than they may have been the one family may be particularly nervous given their relationship with Xi Jinping's a lot of Prince Ling's are not big fans of Wenjia Bao and his family so I don't think there's any risk that they're going to be brought to book anytime soon but you know his ability to weigh in on issues this sort of thing may be maybe damaged. To close I wanted to ask each of you a question if there's all sorts of things you've each talked about in the document if you look down say one two years from now not five years one two years from now how would you benchmark the implementation of this. Nick you want to go first? Well in the economic domain I would my my metric would be do they get a deposit insurance scheme in in place sometime within the next year do they follow that up with interest rate liberalization on the deposit side and do they have what they've talked about which is quite potentially revolutionary do they have this plan for you know winding down failing financial institutions this shi chang hua which is which is in the document and has been talked about before so that's do they have those kinds of plans for dealing with failing institutions which means that shareholders investors in those institutions are going to lose money not everyone is going to have a hundred percent government bailout has been so often the case in the past so this is focusing very much in the financial center but I think sector but I think that's really critical so I think within as I said within a within a year for the deposit insurance scheme shortly after that deposit rate liberalization and this you know what what we call living wills for financial institutions in the US which is basically what they're talking about. Chris? Yeah I just would echo real quickly on the financial sector stuff I actually think it's it may be one of the things we can track the most easily because it's so clear what they have to do and you and as Nick pointed out earlier they got the right people in the jobs to be able to to drive it through that's important since we talked about the military thing earlier I I'm not sure we're going to see any benchmarks in the next one to two years this is going to be extraordinarily wrenching and controversial the indicator in my mind on joint command though is they need to establish a separate army headquarters you know right now the the green is is the whole PLA you know they need to if they establish a separate army service command then you know they're moving in a very different direction than they have historically. You really need a good CPU to sort of lay out all of the things that are in the document and then we'll have their own benchmark benchmark and time frames involved but I'm actually just to single one of them on the foreign policy adjustments I would expect to see rather fast but they don't happen fast all the rest of it's going to get shaky because of the assignment or something wrong with the authority effort to implement something as important as a better coordination of the military and diplomatic activities that are related activities that China needs to be outside China. More broadly I think the real test of Xi's will and skill will be whether he is clearly willing to harm some of the vested interests within two or three years there's this attempt throughout the document to give back with the left hand what you seem to be taking away with the right and to balance while claiming that this is transformative and deep reform so whether it's local governments or princelings or SOEs it seems to me we're going to clear signals within about three years that he's really willing to take on some of these people then he probably is. It's going to pick some fights right and just finally China has evolving sort of institutionalizing of succession political succession do we think this is a 10-year term is that is that is that for sure I mean it seems to have been the case with Zheng and then who and when is this is this have they got 10 years yeah built into this in every conversation he's got a the challenges to see are coming from the five members of all of their standing committee who are not really with him they're on the committee but they're not reformists of their nature they're going to be there for the duration of the five-year term but the real opportunity for him to shine will come replace them and in fact that's what's so interesting too about establishing these supra bodies right if they move some of the personnel that they're saying they're going to move from their current positions to staff that body it remains tremendous opportunity for future bullet bureau level slots where he consults his own individuals into position and I think that's his game plan because the standing committee will turn over yeah although even there I mean it's this is one thing that's interesting it's important to note that you know the party constitution actually has very few actual rules people talk about rules there aren't that many they've changed the age restriction multiple times to suit political expediency so let's see what happens okay on that note thank you nick lardy christ johnson doug paul and robert daily thank you very much