China

The ruling Chinese Communist Party (CCP)'s 16th National Congress in late 2002 is already casting a long shadow over the domestic political scene. Senior figures, including Jiang Zemin and Li Peng, are preparing to step down from their party and later government responsibilities to make way for the fourth generation of leaders. Members of the third generation are increasingly preoccupied with positioning their proteges to maintain their own influence over policy. Much of the maneuvering will take place at the annual party retreat in Beidaihe this autumn.

The new leadership, likely to be spearheaded by current vice president Hu Jintao, will inherit a growing public order problem. Divergent economic growth rates in different regions and social strata are generating social tensions that prompt rural and urban protests. Accession to the World Trade Organization (WTO) will exacerbate these trends by accelerating the collapse of state-owned enterprises and further diminishing rural incomes.

Relations with the U.S. can be expected to begin stabilizing late this year when President Bush no longer feels the need to strongly differentiate his stance from that of his predecessor, who was perceived to be too accommodating towards China. Any moves by Japan to strike a more nationalist tone will meet stiff criticism from China.

Japan

The unexpected rise of anti-establishment Prime Minister Junichiro Koizumi in April 2001 has reinvigorated public interest in politics and prompted speculation about the fracturing of the monolithic ruling Liberal Democratic Party (LDP). The challenge for Koizumi will be to maintain public backing for the government when promised tough economic restructuring starts to bite. Koizumi anticipates that the economy won't return to robust growth for another two to three years.

Koizumi will also have to contend with the LDP's old guard, which has the most to lose in the wake of the the demise of the kind of opaque, pork-barrel politics that Koizumi is seeking to root out. Members of the powerful Hashimoto faction will seek to ride Koizumi's popularity, while watering down his economic and political reforms. Koizumi's nationalist leanings may come to the fore as he struggles to maintain cohesion within the party and the governing coalition, causing relations with China and South Korea to suffer. The U.S. will find its ally increasingly headstrong and troublesome to manage.

India

The stability of the National Democratic Alliance (NDA) government has been coming under increasing pressure with regional threats appearing from opposite ends of the country and increasing discontent appearing within the coalition.

The northeastern state of Manipur suffered a spate of violence midyear in protest against a central government decision to extend a ceasefire with separatist rebels. Local activists are likely to have incited violence to highlight the government's inability to guarantee law and order.

In the southern state of Tamil Nadu, the controversial, heavy-handed arrest on corruption charges of the former chief minister prompted central government intervention to prevent his party withdrawing support from the NDA. The episode reinforced the impact that state-level political disputes can have on central political stability, and the growing inability of the central government to bring the situation under control.

Relations between coalition partners will come under increasing pressure, particularly when state elections take place in Uttar Pradesh in late 2001/early 2002. At present the NDA has followed a relatively secular policy path--despite the fact it is headed by the right-wing Hindu Bharatiya Janata Party (BJP)-but pressure on the BJP to win this election could see it revert to type and start to inflame communal tensions, which could prompt other parties to withdraw support from the government.

By Control Risks Group, which provides a range of services including political and security risk analysis, confidential investigations, security consultancy, and crisis management planning and response. For more information please see www.crg.com or email crwashington@control-risks.com.

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