Yesterday’s post by Professor Patrick Chovanec (click here if you missed it) led me to thinking about the implications for the metals and raw materials industries. My thoughts were helped along somewhat by a seminar that I attended here in Beijing this morning, on the same subject.

For those of us who are buying raw materials from China, or competing with China for raw materials in other countries, or indeed looking to sell to China, a couple of key issues and potential problems lie ahead.

The first, chronologically, is that the current leadership is not likely to institute any new reforms or take drastic measures between now and the end of their rein in 18 months time. If history is any guide, their focus is more likely to be on preserving their place in history books, and seeing that their anointed successors are groomed for future success. The pattern in China is for the existing leadership to focus on the successor’s successor, thereby ensuring that leadership roles have candidates ready at least 10 years out.

While the transition to the new leadership is likely to be relatively smooth, things will start to get interesting in 2014 and 2015. That’s about the earliest we are likely to see any change of direction start to manifest itself. Part of the problem is that a change of direction will be very hard to predict, since the next crop of potential leaders has almost to a man avoided saying anything that could be controversial. A key performance criteria for rising through the ranks of the Communist Party is to NOT rock the boat. Liberal thinkers do best by not revealing their hand, but so too do hardliners.

One reason why the next wave of policy direction could be fraught with danger is that the next crop of leaders comes with all the wrong credentials. In the group of people who are likely to be in the top 9 jobs (the Politburo Standing Committee), there will be no economists, and nobody with any foreign policy experience. Indeed, the present Foreign Minister is not even a member of the Politburo, much less the Standing Committee.

More worrying for us foreigners will be that the next crop of leaders is likely to include former senior executives of China’s major SOEs (State Owned Enterprises). Any chance of liberalising of competition laws, reduction of corruption or significant effort to reduce piracy, is likely to go out the window once those people start to have more influence.

A lot of economists and commentators talk about China’s economy, and whether it will suffer a hard landing as inflation starts to cause increased problems with labour unrest and spiralling wages. With a group of people moving into the top jobs with no economics skills amongst them, a hard landing is more likely to come from mis-management of the economic levers.

To his credit, Wen Jiabao has steered the economic ship adroitly. He is a geologist by training, and Hu Jintao is a civil engineer. They have pretty much taken an engineering approach to the economy to date, and whether by luck or design, they have been relatively successful.

But the next batch of men (with at most one or two women) will come from a much more diverse background, with some princelings (sons of previous leaders, who usually enjoy poor respect from the masses), proteges from the Communist Youth League (Hu Jintao’s breeding ground), former captains of industry, and the “New Red”, a group of people who have been re-energising old Mao songs, often with cynical disregard to their own heritage (Bo Xilai’s mother was tortured to death by Mao, yet he embraces Mao ideology in his TV appearances).

With such a motley group, perhaps the biggest challenge facing the next generation of leaders will be simply to maintain enough unity to get on with the job, or at least to maintain some semblance of unity.