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A Chinese paramilitary policeman stands guard next to a display showing four generations of Chinese leaders, from right, current President Hu Jintao, former President Jiang Zemin, paramount leaders Deng Xiaoping and Mao Zedong during an exhibition entitled "Scientific Development and Splendid Achievements" held ahead of the 18th National Congress of the Communist Party of China in Beijing, Nov. 5, 2012. (Andy Wong/AP)
A Chinese paramilitary policeman stands guard next to a display showing four generations of Chinese leaders, from right, current President Hu Jintao, former President Jiang Zemin, paramount leaders Deng Xiaoping and Mao Zedong during an exhibition entitled "Scientific Development and Splendid Achievements" held ahead of the 18th National Congress of the Communist Party of China in Beijing, Nov. 5, 2012. (Andy Wong/AP)

Never mind Washington, it's Beijing's leadership choice Canadians should watch this week Add to ...

The most important political selection in the world this week, the one most likely to affect Canada’s future, is not the one taking place on Tuesday.

It begins, rather, on Thursday. And the vital seat of power up for grabs is not to our south in Washington, but to on the other side of our western coast, in Beijing.

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The 18th National Congress of the Chinese Communist Party starts on Nov. 8 and will last about a week. At its conclusion, it is all but certain that Xi Jinping will have been “elected” to the party’s new central committee, which will then approve a fresh list of members of China’s supreme ruling body, the Politburo Standing Committee.

Mr. Xi, a so-called “princeling” who is the son of a former close comrade of Chairman Mao, will sit atop the group of Politburo members as the Party’s new general secretary. In March, he will assume China’s presidency from current leader Hu Jintao, concluding the once-in a decade power transition.

What Mr. Xi does next, as the political head of the world’s most populous country and second-largest economy, could prove more significant to global geopolitics than anything Barack Obama or Mitt Romney will do as president of the United States over the next four years.

If China’s new leader moves to implement the more liberal political and economic policies of its reformers, Canada and the rest of the West would likely benefit with increased trade, investment and closer relations. But if policy turns inward under the advice the Party hardliners, the free flow of capital to and from China as well as its diplomatic standing are both likely to suffer.

“The whole world is watching. It is going to essentially set the direction for China for the next five to ten years,” said Jia Wang, the assistant director of the China Institute at the University of Alberta.

“If there is any shift or change in the policy direction it is going to have a major impact on the people of China and the rest of the world, particularly the global economy.”

Following two decades of rapid growth that has pulled hundreds of millions out of poverty and conjured a new middle class, China is an economic behemoth. It is a hulking influence in the developing world, a rising naval and military power and a major player on the global political stage.

More than any other country, China, with its incessant appetite for commodities such as oil, copper and coal, has been the most significant driver of Canada’s resource-heavy economy. But it can cut both ways. Economic data released this week showed that Canada’s gross domestic product declined in August. The first economic contraction in six months was driven in large part by a drop in mining output, a direct result of a slowing Chinese economy.

If Mr. Xi can consolidate power among the new members of the Standing Committee he might be able to implement a series of economic reforms that would boost trade, increase China’s overseas investment and open up China itself to more investment from Canada.

His policy choices could include reducing the tax burden on Chinese families, forcing the country’s banks to be more competitive, and loosening the state’s grip on the economy. Possible political reforms such as health care and social welfare improvements, a freer media and more say for China’s citizens in choosing their government leaders.

Such changes would certainly help assuage international fears and reduce the anti-China sentiment that has coloured the debate erupting from state-controlled CNOOC’s $15-billion bid for Canadian oil and gas producer Nexen Inc. Rather than avoiding discussing it, Canada’s Conservative government might be more willing to promote the Foreign Investor Protection Agreement it recently inked with China if such political reforms were in place.

As with his recent predecessors, Mr. Xi’s top priority will be maintaining the economic growth that has increased living standards in much of China while also serving to quell potential social unrest. Pitman Potter, a law professor and HSBC chair in Asian Research at UBC, calls this China’s “development bargain,” – the acceptance of economic advancement in exchange for political submission to the ruling party. Suddenly, it’s a precarious balancing act.

Demand for China’s exports, the lifeblood of its investment-driven economy, has stalled just as fears about bad loans from China’s state banks has increased . At the same time, China’s emerging middle class is increasingly aware of and able to discuss the string of corruption scandals involving some of the country’s top officials on social media in hugely popular forums such as Sina Weibo .

Following former Chongqing Party boss and hardliner Bo Xilai’s very public downfall, The New York Times recently published a bombshell story showing the family of premier Wen Jiabao controls some $2.7-billion (U.S.) in hidden wealth. And in the city of Ningbo, plans for an expansion of a petrochemical plant were reportedly shelved after large-scale protests.

“To see these sorts of activities go on, it’s a legitimacy problem for the government. I think it will be likely coming out of this Congress that there will be some sort of clean-government campaign,” Mr. Potter said.

If Republican candidate Mitt Romney wins Tuesday’s election, U.S. relations with China will be tested. In sharp contrast to the softer stance of president Barack Obama and his “Asia Pivot,” the Republican candidate has vowed to label China a currency manipulator, a move that could spark a trade war.

“Both countries are at a very important juncture in their political paths,” Mr. Potter said.“China’s economy being as important as it is to Canadians, the decisions they make with regards to both short-term and long-term economic policy are very important for us to pay attention to.”

Andy Hoffman is the Globe and Mail’s Asia-Pacific Reporter.

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Follow on Twitter: @iamandyhoffman

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