China - Domestic policy

One of Hu's tasks as leader of China will be to manage and sustain the country's growth. To accomplish this, he needs to encourage continued direct investment in technology, to promote the reform of an unprofitable state sector, and to continue to draw foreign investment into China. Another major goal is the alleviation of poverty, which is caused by inequitable distribution of benefits derived from economic growth and by poor performance of the agricultural sector in many provinces.

After years of rapid growth, the Chinese economy as of 2003 suffered from some significant structural flaws. In particular, glaring differences between the coastal and inland regions threaten the unity of the nation. These regional differences not only contribute to massive migrations into Shanghai and Guangdong, but also cause resentment by poorer provinces that view the richer regions as benefiting from excessive governmental attention at their cost. Alternatively, richer coastal provinces resent public spending in poorer regions. Hu needs to alleviate the severe economic differences among the regions without weakening the growth of the coastal areas.

Another serious domestic issue is the restructuring of state enterprise operations, which have become a severe budgetary burden. In the late 1990s and early years of the twenty-first century, the Chinese government began a major privatization campaign. The government has become concerned about a potential backlash against the government resulting from increased social problems related to economic changes. The government has cracked down on the religious sect, Falun Gong, resulting in increased international condemnation of the country's human rights practices.

It will be important for Hu to maintain the flow of foreign investment into China, and the government needs to promote investment in the interior of the country. In particular, agricultural productivity must be improved in many regions where gripping poverty and hunger are a way of life. The rush to industrialize has left interior regions largely neglected. Even though labor costs are low in these regions, the infrastructure is not conducive to large-scale foreign investment.