One of the most important economic issues playing out in China today is the control of state enterprise profits. State firms have become very profitable over the last several years, so there is a lot of money on the table. At the same time, control over profit is a central component in a network of interlocking issues, including corporate governance reform, fiscal reform and even social security reform. The State Asset Supervision and Administration Commission (SASAC) has taken major steps in 2006 toward establishing a claim on these profits and advancing its own agenda for reform of the state sector.

It is often said that politics is about who gets what, when, and how. Since early 2004, Hu Jintao and Wen Jiabao have adopted a macroeconomic control policy to limit bank lending, land use, and fixed-asset investment. They have acknowledged explicitly that this policy does not treat all sectors and provinces in the same way. While allocating resources to support the agriculture, energy, transportation, and social welfare sectors, especially in the less-developed western and northeastern regions, Hu and Wen have strived to cool off the decade-long construction fever in Shanghai and the Yangtze River Delta. The fact that the central government can say "no" to Jiang Zemin's turf suggests that Hu and Wen have begun to take the offensive. Through macroeconomic adjustments and geopolitical coalition-building, Hu and Wen have consolidated their power. However, given China's daunting challenges, only time will tell whether the Hu-Wen administration can achieve a soft landing politically as well as economically.