China's rough start: 8 ways 2016 isn't going well

BEIJING -- Barely more than a week into 2016, Chinese President Xi Jinping is having a rough time of it, with challenges ranging from a plummeting stock market to new provocations from obstreperous ally North Korea.

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While none pose an existential threat to his administration, the world will be watching to see whether he has the sophisticated touch needed to find durable solutions and maintain stability.

Below is a look at eight key issues Xi is contending with:

STOCK MARKET VOLATILITY

China twice deployed its "circuit breaker" mechanism to halt trading as stock markets nosedived by 10 per cent in the first week of the year. Beijing finally abandoned the mechanism, and left the perception that regulators don't have a clue as they try to stabilize a market that more than doubled between late 2014 and June, then dived 30 per cent, causing deep pain among retail investors.

CURRENCY QUEASINESS

Meanwhile, China's currency, the yuan, has slid to a five-year low against the dollar, forcing the government to spend tens of millions of dollars from its foreign currency stockpile to defend it. The government last week guided the yuan 1.5 per cent lower to assist hard-pressed exporters, but the clumsy move sent shockwaves through world markets, further weighing on Chinese share prices.

SLOWING ECONOMY

Hiccups in the world's second-largest economy are expected to continue in 2016, with growth falling to a six-year low of 6.9 per cent in the July-September quarter and forecast by the International Monetary Fund to decline further to 6.3 per cent this year. That bodes ill for the economy's ability to generate enough new jobs for the more than 7.5 million students due to graduate from college this year, while also building momentum for a transition from an investment-based economy to one focused on services.

NORTH KOREA

Despite persistent calls for restraint, China's traditional ally North Korea staged what it claims was a hydrogen bomb test blast on Jan. 6 that sent actual tremors across the border into northeastern China and drew condemnation from Beijing. China now finds itself again under pressure to use any possible leverage with the North to tamp down tensions in northeast Asia, while facing the possibility of more robust security co-operation between South Korea and China's traditional rivals Japan and the United States.

TAIWAN

Voters on the self-governing island democracy appear set to elect a new president whose party opposes Beijing's goal of unification between the sides. Beijing's economic inducements have failed to persuade the Taiwanese public of the benefits of political union. If opposition Democratic Progressive Party candidate Tsai Ing-wen wins Saturday, as she is widely expected to do, Beijing may feel compelled to embark on economic and diplomatic pressure that could send relations into reverse. It's unlikely that Beijing would go so far as to back up its longstanding threat to use force to bring the island under Chinese control.

POLITICS

While Xi faces no such electoral challenges under China's one-party system, he does face resistance from political rivals and the vast bureaucracy. Xi shows no sign of abandoning his signature anti-corruption campaign blamed for creating a sense of fear and paralysis among the rank and file. His growing cult of personality exudes an exterior confidence. But with the economy slowing and no sign of political reforms, he may come under pressure from critics and rivals to show results on jobs, growth, good governance and addressing the yawning income gap.

SOUTH CHINA SEA

Since the year began, China has landed three aircraft on a new island it built in the South China Sea, drawing protests from Vietnam and the Philippines, which have competing territorial claims in the region.

China's robust assertions of its claim to virtually the entire South China Sea have long drawn complaints and sparked the occasional maritime confrontations in the area through which $5 trillion in global trade passes each year. The test flights landed on one of seven new islands Beijing has built by piling sand atop reefs and atolls. The U.S. is adamant that the new features don't deserve the legal status of actual islands, and the U.S. Navy has flown and sailed close to them, drawing a furious response from Beijing. Xi now has to defend China's actions while avoiding damage to its foreign relations.

HONG KONG

China faces continuing opposition from pro-democracy forces in Hong Kong, the former British colony that reverted to Chinese rule in 1997 while retaining its own legal and economic systems. Beijing's hand-picked chief executive, Leung Chun-ying, is deeply unpopular, and planned electoral changes stalled after massive street protests in 2014, leaving deep rifts in hyper-efficient Hong Kong's society and politicizing a generation of students. Now, the recent disappearances of people associated with a publishing company that specializes in titles critical of China's leadership have raised fears that Beijing is tightening its grip on Hong Kong's freedom of the press and other civil liberties.



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