11/26/2012 05:48 pm ET Updated Jan 26, 2013

China's New Leaders: Dimmed Hopes for Reform

China's conservative new leadership line-up, announced last Thursday, has disappointed those hoping for a more progressive government. Xi Jinping, the new president-designate, has his work cut out for him. He is tasked with steering the economy towards a more sustainable growth model, as well as with keeping the country's growing public discontent with endemic corruption under control. But the conservative character of China's top decision-making body, the Politburo Standing Committee, puts the likelihood of much-needed reforms being launched in serious doubt.

China's political system is built for continuity. The process of selecting the highest echelons of new leaders starts years before the planned transition. The chosen ones are then groomed by the governing administration before finally taking over the reins. The system puts a heavy emphasis on long-term planning: development roadmaps are issued for the national economy, as well as for specific sectors and regions, over timeframes of five or more years. And the top decisions are made by consensus, not individual members.

As such, when Xi Jinping takes the reins next March, he is unlikely to make a significant departure from the policies of the current administration. Items listed in the current national five-year plan, which covers from the period from 2011 to 2015, will remain on the agenda. These include reducing income inequality, moving industries up the value chain, and boosting domestic consumption.

Beyond that, it is difficult to ascertain what, if any, changes to China's overall direction will be pushed through by the new president. Mr. Xi has revealed precious little on his vision for the country he will soon lead. Neither a reformer nor a conservative, his governing experience in Zhejiang and Fujian suggests that he looks favourably on private entrepreneurship, but he has not thrown his support behind more controversial reforms the same way the new premier, Li Keqiang, has done. Mr. Li is believed to have backed a recent World Bank report highlighting the need to overhaul the country's dated state-owned enterprises and support private sector development.

Mr. Xi appears to have started off on a stronger footing than his predecessor, Hu Jintao, did ten years ago. He will rank first among seven members of the Politburo Standing Committee. The number has been cut from nine, which should make building consensus easier. He has also been handed control of the country's military, a move that took Mr. Hu two years to accomplish after assuming the presidency.

However, the conservative slant of several new standing committee members dampens the likelihood that wider liberalising measures will be carried out. Optimistic projections for the new leadership line-up had included Li Yuanchao, who introduced new criteria for judging the performance of local officials beyond economic growth, and Wang Yang, who opted for a public and conciliatory approach to social unrest. Unfortunately, neither of them made it to the top tier. The third known progressive, Wang Qishan, did make it. But despite being held in positive regard for his long-standing efforts to liberalize China's financial sector, he has been relegated to a role relatively low on the totem pole in terms of economic responsibility.

Instead, the third most powerful position was handed to Zhang Dejiang, a loyal ally of Jiang Zemin, a party elder. Mr Zhang is known more for keeping major problems under wraps than for fixing them. The fourth was given to Yu Zhengsheng, the ageing party secretary of Shanghai, long Jiang Zemin's main power base. And the fifth was given to the propaganda chief, Liu Yunshan, handing him a mandate to maintain the heavy-handed approach to the media and the Internet he has taken to date.

This is worrying, as the need to carry through difficult reforms is becoming more urgent. China's continued economic expansion will rely on achieving real productivity gains instead of the wasteful investment binges that have characterized much of the past three decades. This will require restructuring the state sector and strengthening the regulatory environment. And addressing widespread public anger with official corruption will require greater accountability, ideally through stronger rule of law. Short of that, allowing media, both mainstream and social, to serve as a watchdog against local abuses would go some way in discouraging some of the most serious transgressions.

But the message sent by these promotions is clear: The party is in no mood to rock the boat. Their elevation illustrates the triumph of political patronage over merit, sending a strong signal to lower-level cadres that risk-taking will not get them very far. This is a dangerous message to send, as China needs officials willing to make politically-difficult changes in order to move forward. Not much more can be wrung from the old model of excessive investment and high GDP growth rates, and the party will find it increasingly impossible to effectively "guide public opinion", and in turn, public reactions, with its version of events. China risks missing a window of opportunity to address its most pressing issues. The dogmatic adherence to old ways may, in turn, undermine the party's efforts to maintain its top priority -- stability.