Can China handle the crises to come?

April 26, 2013, 2:24 PM UTC

FORTUNE — Less than a month after the completion of China’s leadership transition, Zhongnanhai’s new occupants are facing two difficult tests: a destructive earthquake on April 20 that killed about 200 people and affected 2 million residents in Sichuan, and an unfolding bird flu epidemic spreading across the country’s most prosperous eastern seaboard.

Judging by Beijing’s handling of the aftermath of the earthquake, the new leadership headed by Xi Jinping seems to have passed its test with flying colors. The government responded quickly and effectively. In the three days after the trembler ravaged Lushan county, a remote and impoverished region, more than 20,000 soldiers, policemen, firefighters, and medical personnel were dispatched to the area. The timely and well-organized rescue effort was responsible for minimizing the loss of life and reducing the suffering of victims.

Of course, observers are tempted to compare the performance of Xi’s administration with his predecessors’ response to the far more devastating earthquake of May 2008, which occurred also in Sichuan and killed more than 70,000 people. Such a comparison would not be fair, because the magnitude of this earthquake was much smaller than the last one (7.0 vs. 8.0). Nevertheless, it’s clear that the new Chinese leadership has learned valuable lessons from the experience of 2008 and avoided some of the mistakes made five years ago, such as poor logistics, slow response, and lack of proper equipment and trained personnel.

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In all likelihood, Xi will receive high marks for managing the consequences of the earthquake. However, his administration’s reputation will be determined by its handling of another, and arguably far more dangerous, unfolding crisis — the H7N9 bird flu spreading across the eastern part of the country.

As of April 23, this new strain of the bird flu virus had infected 108 people in Shanghai, Beijing, and five provinces (Shandong, Zhejiang, Jiangsu, Henan, and Anhui), with 22 fatalities. Compared with H5N1, another strain of the bird flu that has killed 371 of the 622 infected in China and other parts of Asia since 2003, H7N9 has a more complex genetic structure (combining genes from three other flu strains found in birds in Asia) and seems harder to detect and track (because infected poultry show no visible symptoms).

Fortunately, there are no signs that this virus has mutated into a strain that can spread from one human being to another. So far, the Chinese public has remained largely calm (in sharp contrast with the mass panic after the outbreak of the severe acute respiratory syndrome, or SARS, 10 years ago). The economic fallout was modest. The only victim seems to be YUM Brands (YUM), the American fast-food chain and parent company of KFC, which reported a 20% fall in same-store sales in China in the first quarter.

To be sure, the H7N9 bird flu could quickly morph into a far more deadly public health disaster. But for now, Xi’s administration is apparently handling the crisis competently — again as a result of learning from the painful lessons of the SARS outbreak in 2003. When the SARS virus emerged in late 2002, the Chinese government concealed the epidemic from the public. As a result, the virus spread to the rest of the country through “super-carriers” (highly infectious individuals).

Beijing also kept the World Health Organization in the dark. Eventually, when Chinese authorities could no longer hide the epidemic, the public panicked. Daily life across much of China was severely disrupted. Hong Kong, which was hit hard by the virus, nearly shut down. In retrospect, the mismanagement of the SARS outbreak fatally undermined the political authority of Jiang Zemin, who had just retired from his position as the Communist Party chief but kept his post as commander-in-chief.

Jiang’s successors seem to have learned how to deal with a public health crisis. Beijing today is far more transparent about the spread of the H7N9 bird flu, offering updates on the situation daily. China has also become more communicative with the WHO, sharing information with the group and inviting its experts to come to China and participate in inspection tours.

Beijing has adopted more decisive administrative measures as well. Shanghai shut down its live poultry market. Trade in wild birds is suspended across the country. Large numbers of chickens have been culled. And the central government has appropriated nearly $50 million to provincial disease control centers so they can strengthen their monitoring systems.

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Clearly, the Chinese government is capable of learning from past mistakes and averting potential political and humanitarian disasters. This is certainly good news. But it would be premature to conclude that China’s government is a consistently adaptable and flexible system. These two cases are excellent examples of the Communist Party’s tactical adaptability — it can adopt sensible and effective measures that address specific challenges.

But the real challenge facing the party is existential, not tactical: It is whether it can adapt to a fast-changing Chinese society and turn itself from a Leninist party into a democratic one. In another 10 years, Xi’s legacy will not depend on whether he saved more lives in Lushan or contained the H7N9 bird flu in his first year in office. It will hinge on whether he can make China far more open, democratic, and livable than it is today.

Minxin Pei is the Tom and Margot Pritzker ’72 Professor of Government at Claremont McKenna College and a non-resident senior fellow at German Marshall Fund of the United States.