China's leadership transition occurs at a critical juncture. Beijing's new leaders face an emerging governance crisis that consists of a decaying ruling party, deteriorating state capacity, and brewing regime-society tensions. This crisis originates in the fundamental incompatibility between the Chinese Communist Party's goal of perpetuating one-party rule and the market-oriented reforms it has pursued to achieve this goal. If left unresolved, China's governance crisis could lead to long-term stagnation and social instability. Beijing's new leaders must confront this crisis with long-delayed political reforms. Moreover, China's internal weakness poses a difficult challenge to the Bush administration and calls for a rethinking of the assumptions underlying Washington's China policy.

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About the Author
Minxin Pei is senior associate and codirector of the Endowment's China Program. He is the coauthor of Rebalancing United States—China Relations (Carnegie Endowment Policy Brief No. 13) and author of Future Shock: The WTO and Political Change in China (Carnegie Endowment Policy Brief No. 3).