A legacy of 'Made in China'

One activist here said that Hu and Zeng would get along amicably, as would Hu and Jiang, because they share interests, and "this is not the China of the 1950s, when Mao and the generals plotted against each other."

A political scientist with China's Academy of Social Sciences (CASS) felt Hu and the younger new leaders are in a position of "learning new consultative skills, and how to handle the details of China's most sensitive issues, much as a son would learn from a father." But another CASS member said this is "what they [older leaders] always say when they want to stay in power."

Jiang is known to prize the good relations he has cultivated with the US, having visited Crawford, Texas, last October. Reports here suggest it is Jiang who is handling China's diplomacy on Iraq, taking calls from the White House as the US looked for Security Council votes.

Hu has been seen in recent months visiting rural villages in Inner Mongolia, mountain towns in Hebei, and developing a profile as a man of the people. Analysts say that, not yet having a solid set of allies in the inner circle, Hu's best move is to build trust in the countryside.

Very few real political changes in China's Communist Party system are planned. But further economic reforms are under way and were showcased at the People's Congress.

One of the key changes is the formation of the State Asset Management Committee. One of Zhu's chief legacies was his tough handling of massive Stalinist-era industries that pumped out steel and machinery, and in recent years have drained state funds. Zhu forced most of these to close if they were unable to turn a profit. But who owns the assets of closed industries, as well as smaller profitable concerns, is in question.

The function of the new committee will be a "sort of one-stop shop" for investors who wish to pick up the enterprises' assets, says Jonathan Anderson, executive director of research for Goldman Sachs in Hong Kong. "The question of ownership has never been solved. You must go through years of red tape and build consensus among players to buy in China. The focus of the committee is to deal with [this]. It is the most exciting thing to come out of the People's Congress, from the investor's point of view. It also sets up the possibility of consolidation and a great run of mergers."

Zhu has made China a manufacturing hub, built up Beijing and Shanghai, forced the economy to hew to international standards through the WTO, and helped China emerge from the 1997 Asian financial crisis with little damage.

Still, there are downsides that must be faced by new economic czar Wen Jiabao. Part of China's success was based on Zhu's focus on urban problems and the creation of mass construction jobs in cities. This has contributed to a partial "hollowing out" of China's rural areas, and created ever-larger tensions among peasants and laid-off state workers, of whom there are hundreds of millions.

Rural education has been ignored, and the gap between the rich and poor is the greatest today in modern China.

China will continue to spend heavily this year to address these concerns, say officials. Also, China still has not faced up to the banking reforms that will allow transparency and private investor confidence. Whether a new Banking Regulation Committee, another product of this week's Congress, will have the political clout to reform is an open question. A number of analysts - both Chinese and overseas - are pessimistic.

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