Chinese President Xi Jinping (習近平) is on the verge of installing more allies who share his vision of tighter control over entrepreneurs and a more dominant role in the economy for the Chinese Communist Party at a congress that starts this weekend.
Economists and political analysts have said they are most concerned about whether China’s economic slump might force Xi to temper his enthusiasm for a state-run economy, and include supporters of the markets and private enterprises.
The congress is to name a new Standing Committee, China’s inner circle of power, and other party leaders, not economic regulators. Those are to be appointed by the ceremonial legislature, which meets in March.
Photo: REUTERS
However, the leadership lineup is likely to highlight who is likely to succeed Chinese Premier Li Keqiang (李克強), the top economic official, and take other government posts.
Xi has called for a “great rejuvenation of the Chinese nation” by reviving the party’s “original mission” as an economic and social leader.
During his term, the emphasis has been on politics over economics, and on reducing reliance on foreign technology and markets.
Xi is expected to break with tradition and award himself a third five-year term as party leader. A report he is due to deliver at the congress is to set economic, trade and technology goals for at least the next five years.
Investors are looking for signs of an economy led more by the private sector, “but with President Xi in place, there won’t be much change,” said Lloyd Chan of Oxford Economics. “Any reforms will be carried out in a way that it will be state-led.”
The party faces an avalanche of challenges — a tariff dispute with Washington, curbs on access to Western technology, a shrinking and aging workforce, the rising cost of Beijing’s COVID-19 measures and debt Chinese leaders worry is dangerously high.
Economic growth slid to 2.2 percent from a year earlier in the first six months of this year, less than half the official target, sapped by a crackdown on debt in China’s vast real-estate sector and repeated shutdowns of major cities to fight COVID-19 outbreaks.
Loyalty to Xi is regarded as key to promotion. One potential candidate for premier declared his allegiance by publishing a newspaper article in July that invoked Xi’s name 48 times.
“Xi Jinping prefers to appoint party apparatchiks, cadres who are loyal to himself, rather than technocrats,” Chinese University of Hong Kong political analyst Willy Lam (林和立) said. “This is a big problem if we look at future financial and economic advisers to Xi.”
Beijing opened its auto industry to foreign ownership and carried out other market-oriented reforms, but it has failed to follow through on dozens of other promised changes. Meanwhile, the party is pouring money into creating computer chip and aerospace industries.
Private firms including Alibaba Group Holding Ltd (阿里巴巴) and Tencent Holdings Ltd (騰訊), a giant in games and social media, are under pressure to align with the party. They are diverting substantial sums to chip development and other political goals.
Xi’s government wants manufacturers to reduce reliance on global supply chains and use more domestic suppliers, even if that raises costs.
Apart from Li, other regulators and policymakers, some foreign-educated and experienced in dealing with foreign markets and governments, are due to leave office over the coming year if retirement ages are enforced.
They include Chinese Vice Premier Liu He (劉鶴) — a Harvard-trained reform advocate who is Xi’s economic adviser and chief envoy to trade talks with Washington — and Yi Gang (易綱), governor of the central bank and a former Indiana University professor.
Also due to go are Finance Minister Liu Kun(劉昆) and bank regulator Guo Shuqing (郭樹清).
When their successors are picked, the big question will be “whether Xi has unlimited decision-making authority over the economy and technology,” Derek Scissors of the American Enterprise Institute in Washington said.
“Is Xi forced by party elites to listen to someone?” Scissors said. “If it’s a bunch of toadies, we get more paranoia paraded as policy.”
Xi’s decision to go abroad for last month’s summit with Russian President Vladimir Putin and Central Asian leaders suggests he was confident he has a third term locked in and did not need to stay home to make deals.
“Financial markets are hoping for some evidence of internal resistance to Xi” to change course on policymaking, Logan Wright and Agatha Kratz said in a report for Rhodium Group.
If Xi strengthens this authority, that would suggest “elevation of the party’s priorities above those of China’s economic technocrats.”
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