China’s Xi gets chance to tighten hold on economy at meeting

By JOE McDONALD
AP Business Writer

BEIJING (AP) — President Xi Jinping, China’s most influential figure in decades, gets a chance to install more allies who share his vision of an even more dominant role in the economy for the ruling Communist Party and tighter control over entrepreneurs at a party meeting that starts this weekend.

The only question, economists and political analysts say, is 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 that generate jobs and wealth.

The congress will name a new Standing Committee, China’s inner circle of power, and other party leaders, not economic regulators. Those will be appointed by the ceremonial legislature, which meets in March. But the leadership lineup will highlight who is likely to succeed Premier Li Keqiang, 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 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 try 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 will set economic, trade and technology goals for at least the next five years.

Investors will look for signs of “a more private sector-led economy. 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 war with Washington, curbs on access to Western technology, a shrinking and aging workforce, the rising cost of Beijing’s anti-COVID strategy and debt Chinese leaders worry is dangerously high.

Economic growth slid to 2.2% over a year earlier in the first six months of 2022, less than half the official target, sapped by a crackdown on debt in China’s vast real estate industry and repeated shutdowns of major cities to fight virus outbreaks.

Loyalty to Xi is regarded as key to promotion. One potential candidate for premier, a post that usually goes to the No. 2 or 3 party leader, 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,” said Willy Lam, who researches elite Chinese politics at the Chinese University of Hong Kong. “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, aerospace and other industries.

Private sector success stories including Alibaba, the world’s biggest e-commerce company, and Tencent, a giant in games and social media, are under pressure to align with party plans. They are diverting billions of dollars 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.

Under the 1950s propaganda slogan “common prosperity,” Xi is pushing entrepreneurs to help narrow China’s wealth gap by paying for rural job creation and other initiatives.

Li, the No. 2 leader, is due to step down as premier next year but at 67 is a year below party retirement age. It isn’t clear whether he might stay on the Standing Committee and take a different government post.

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 Vice Premier Liu He, a Harvard-trained reform advocate who is Xi’s economic adviser and the chief envoy to trade war talks with Washington. Yi Gang, governor of the central bank and a former Indiana University professor, Finance Minister Liu Kun and bank regulator Guo Shuqing also are due to go.

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 in an email.

“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 didn’t 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.”

Possible candidates for premier include Wang Yang, who already is a Standing Committee member, according to political analysts. Others are Hu Chunhua and Han Zheng, both deputy premiers, a role that is seen as training for the top job.

Wang, a former party secretary of the southern manufacturing powerhouse province of Guangdong, and Han, who was party secretary of the business capital Shanghai for many years, are seen as politically close to Xi and might represent little change in economic direction.

Hu might represent a potential change. He is seen as politically closer to Xi’s predecessor, Hu Jintao.

Hu Chunhua, 59, lobbied for the job by citing Xi in every sentence of a July 27 article about farm policy in the main party newspaper.

That showed Hu is “very eager to get that position,” said Lam. He said Hu has less economic experience than Li, the premier, “but at least he comes from a different faction” than Xi, which would add to diversity of views.

Potential dark horse candidates include party secretaries Li Qiang of Shanghai or Chen Min’er of the populous city of Chongqing in the southwest.

A potential “economic czar” to succeed Liu, the vice premier, is He Lifeng, chairman of the Cabinet planning agency, the National Development and Reform Commission. A friend of Xi, he is seen as a politician, not a technocrat.

A party statement in August reinforced the dominance of politics by calling for “party building.” Last month, the party magazine Seeking Truth published a Xi speech that emphasized the party’s need for “self-revolution” to fight corruption and other problems.

That suggests Xi will tighten party control, “further narrowing the space for liberal approaches to economic policy,” Neil Thomas of Eurasia Group said in a report.