Change Of Leadership In China – What Does It Mean For Doing Business There?

When I visited Spain last year, a local Spaniard talked with me about his thoughts as he watched coverage of the presidential election in the United States. The U.S. presidential election received worldwide attention as a game changer with far-reaching implications for other nations. However, as the U.S. was embroiled in its own elections, less attention was paid to the perhaps equally significant transition of leadership in China. On November 8, 2012, two days after the presidential election in the U.S., the 18th National Congress in China selected its own new group of leaders.

Let's start with a broad overview of the political leadership in China. The Chinese Communist Party (CCP) - the ruling political party in China, is comprised of the General Secretary, the Poltiburo Standing Committee - consisting of 7-9 members, the Poltiburo - consisting of 25 members, and the Central Committee - consisting of 205 members. The Poltiburo Standing Committee is essentially the ultimate decision making body in China.

Change to the leadership of the CCP does not come often and does not occur widely. Therefore, when seven of the nine members of the Poltiburo Standing Committee are slated to depart (due to the CCP's term limits and unofficial retirement age of 68), it's a very significant change. In November 2012, the CCP completed a sweeping transfer of power, to be helmed by the new General Secretary, Xi Jinping and the new Prime Minister, Li Keqiang. While this transfer is not technically official until the annual session in March 2013 of China's parliament, for all intents and purposes, this new leadership is in place.

What will this change likely mean for the nations outside of China? While China's economy has thrived in recent years on a diet of infrastructure investment and exports, its growth has inevitably waned due to weaker global demand. The new Chinese leaders have already spoken of reform, including rising labor costs in China in the...