WSJ: New China Leaders to Be Strongly Reform-Minded – Former Australia PM

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September 30, 2012 by Water Wisdom

The U.S. has sought to expand its influence in Asia to counterbalance China’s growing regional clout, announcing plans to increase its naval presence in the Pacific and sending top officials to canvass the region. Such moves have complicated relations between the two powerhouses, but Mr. Rudd─who said that when he was Australia’s prime minister, he spent much time with Mr. Xi─said he anticipates Mr. Xi’s rise will help alleviate such tensions.

‘Japan effectively took these islands from China in 1895 after the Sino-Japanese war. Then after the American occupation of Japan, Americans returned these islands to the Japanese,’ he said. ‘So there’s a large degree of international legal complexity underpinning all this.’ Still, while tempers have flared, he said he expects both governments to try to buy time to reduce tensions.

China’s incoming leadership will be strongly reform-minded on the economy and usher in a new era of diplomacy in the region, Australia’s former prime minister and longtime China watcher Kevin Rudd said Thursday.

As territorial disputes between China and Japan escalate, Chinese leaders also face numerous challenges, including the flight of capital among the nation’s wealthy and a slowing economy, Mr. Rudd told The Wall Street Journal. However, he expressed confidence in the ability of Xi Jinping, the presumed next leader, and his team to manage domestic challenges and foreign relations, calling him ‘the sort of leader that the Americans can do business with.’

The U.S. has sought to expand its influence in Asia to counterbalance China’s growing regional clout, announcing plans to increase its naval presence in the Pacific and sending top officials to canvass the region. Such moves have complicated relations between the two powerhouses, but Mr. Rudd─who said that when he was Australia’s prime minister, he spent much time with Mr. Xi─said he anticipates Mr. Xi’s rise will help alleviate such tensions.

‘I believe that Xi Jinping will want to work…with the Americans on a common road map for the region’s future,’ Mr. Rudd said in the interview, which came at the end of a two-week trip to China and Hong Kong. Mr. Xi’s ascension will allow the U.S. and China to ‘carve out a different period of strategic cooperation.’

Mr. Rudd said he expects further privatization of Chinese state-owned firms after the new leadership takes over, in part to address private-sector companies’ concerns about their business prospects, which has led to some capital outflows. He also expects further currency liberalization and said that change is necessary, because the current growth model can’t sustain full employment in China.

His comments on the leadership transition in Australia’s biggest trading partner come as speculation intensifies at home about Mr. Rudd’s own political ambitions. The 55-year-old former diplomat is fluent in Mandarin and has strong ties to the region, including a stint as a diplomat in Beijing. He served as Australia’s prime minister from 2007 until he was ousted by members of his ruling Labor Party in June 2010. He also served as foreign minister until earlier this year and remains a member of Parliament.

Mr. Rudd on Thursday also acknowledged the deep-seated historical debate over islands disputed between Japan and China, which have recently sent jitters through the region’s markets.

‘Japan effectively took these islands from China in 1895 after the Sino-Japanese war. Then after the American occupation of Japan, Americans returned these islands to the Japanese,’ he said. ‘So there’s a large degree of international legal complexity underpinning all this.’ Still, while tempers have flared, he said he expects both governments to try to buy time to reduce tensions.

Within resource-rich Australia, concerns have been rising about the extent of the influence of China, the world’s second-largest economy. Mr. Rudd stressed the strength of the two nations’ relationship, but also highlighted main differences such as China’s one-party rule.

China’s insatiable demand for resources has helped drive Australia’s economic boom in the past few years, but demand has faltered as China’s economy slows. Iron-ore prices have recently fallen to multiyear lows, raising the threat of a hard landing for Australia’s mining industry.

Australia is currently the largest destination for foreign-direct investment from China.

‘We’ve had a significant correction in commodity prices, but what we’re seeking to do in the meantime in Australia…is to broaden the base of the Australian economy,’ Mr. Rudd said, including expanding its agriculture and financial and health services to meet Asian demand.

In Australia, he remains popular in opinion polls even as he was again defeated in a challenge against incumbent leader Julia Gillard earlier this year. Mr. Rudd declined on Thursday to speculate about his future in Australian politics.

‘Polls go up, and polls go down. I’ve been around in politics long enough to know there’s a certain law of gravity about all these things….I made a very clear statement on this at the conclusion of the leadership ballot in February,’ Mr. Rudd said. ‘My position hasn’t changed.’

At the time, he said he would withdraw from front-line politics and not challenge Ms. Gillard again.

Still, Mr. Rudd’s supporters say he could reignite his feud with the prime minister if Ms. Gillard doesn’t significantly improve the Labor Party’s popularity ahead of the next federal elections, which will take place by the end of 2013.

TE-PING CHEN / JEFFREY NG

http://cn.wsj.com/gb/20120928/bas085836_ENversion.shtml

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