No Change At The Top

THE QUINQUENNIAL CONGRESS of the Chinese Communist Party has, by recent convention, set the course of the Party’s future leadership. The 19th, just concluded, is no exception. The future leadership of the Party is for the foreseeable future, general secretary Xi Jinping.

Two signs of Xi’s sway are, first, that his ‘Thought’ has been written into the Party’s constitution by name. That not only elevates him to the level of Mao Zedong but makes any challenge to his authority a challenge to the Party as a whole. Second, he has been able to avoid installing a Politburo Standing Committee — the seven men (and it is all men, as seen above) at the apex of Chinese affairs — that contains any obvious successor.

That may be his most important achievement of all at the Congress. It avoids him being seen as a lame duck during the second of his two five-year terms as president, and leaves him the most flexibility in putting in place whatever arrangements he wishes for when that five years are up.

His options then are:

• to hand over the presidency to a loyalist who would perform the role as a ceremonial head of state (like a queen in a constitutional monarchy) while he exercises executive power from a post such as Party general secretary or head of the military commission (as Jiang Zemin did);
• to ensure that a hand-picked successor takes over the presidency and general secretary positions while he exercises control for behind the scenes as ‘core leader’ (as Deng Xiaoping did as ‘paramount leader’). That successor would be promoted from the Politburo without the customary five-year preparation period of being on the standing committee, though, as that is meant to be a time for the successor to establish his authority, that would not be needed as the authority would stay with Xi anyway;
• or he could baldly amend the national constitution to allow himself to continue as President for a third term.

In the meantime, Xi will embark on his second term with a Politburo standing committee that contains some allies but no fierce opponents, and all of an age at which they can have no expectation of taking the top job before they retire.

Five of the seven members of the previous standing committee have retired, leaving Xi and prime minister Li Keqiang as the only two carryovers. Among the newcomers, the two most important factions within the Party, Jiang’s Shanghai faction and the Communist Youth League of Xi’s predecessor Hu Jintao, have got places at that highest of high tables, notably Han Zheng for the Shanghai group and Wang Yang for the Youth League, which can also count Li. But both factions have been considerably weakened by Xi’s anti-corruption-cum-political-purge campaign.

To say that Xi has established his own faction may be over egging the pudding. If he is at the centre of one it is the amorphous group known as princelings, which has many cross-overs with other groupings.

However, jockeying for power is part of the warp and weft of China’s elite politics. Xi now has two firm allies. One is his former chief of staff and long-standing associate, Li Zhanshu, who will head the rubberstamp parliament, the National People’s Congress, in which role he would be critical if Xi did want to amend the natonal constitution to permit a third term as president. The other is the former head of the Party’s Organisation Department, Zhao Leji, who will head the Central Discipline Inspection Commission in succession to Wang Qishan, who led the anti-corruption operations that were instrumental in consolidating Xi’s power.

Yet, apart from supporting Xi, the overriding characteristics of the new standing committee, however, is experience and competence. These are people who know how to run a large operations as well as operate at the highest levels of the Party.

Xi also knows the importance of snuffing out factional struggles. In Hu’s last term, Xi and Hu spared over how quickly the outgoing president would successively yield his Party, state and military offices as he attempted to cement his legacy and power behind the throne.

Below the standing committee, the 25-member Politburo is broadly pro-Xi. The same can be said for the 200-member Central Committee beneath them.

Perhaps most critically, Xi loyalists now control all the key provinces and provincial-level municipalities that matter — Beijing, Shanghai, Guangdong, Chongqing and Tianjin, for example, and those where the could be unrest, notably Xinjiang. The mountains may be high and the emperor far away, as the old proverb has it, but Xi has his loyalists in place to ensure there is no repeat of city bosses like the disgraced Bo Xilai and his recently purged successor Sun Zhengcai getting uppity.

Our man in Davos sent word of how he remembered seeing a somewhat hesitant Xi being unveiled to the world at a World Economic Forum meeting a decade or so back and contrasted that with the assured, commanding figure that was seen at the 19th Party Congress. This Bystander also remembers some words penned here about Xi back in 2012 just ahead of the 18th Party Congress that would bring him to power:

Cunning, calculating and ambitious Xi plays politics like a chameleon playing poker.

He has played a winning hand, and still holds most of the aces.

China Formally Switches Monetary Policy To What It Already Is

The newly announced switch from the current “moderately loose” monetary policy to that old favorite, “prudent”, next year is no more than a formal anointment of what has been going on for months: the withdrawal of the 4 trillion yuan ($600 billion) monetary stimulus to combat 2008’s global financial crisis to be replaced by the 2010 focus on the battle against inflation. The statement followed a Politburo meeting reviewing the new 5-year plan that starts next year.

Easy credit led to a lending boom that the central bank is now striving to rein in through reduced loan quotas, interest rate hikes and increases in banks’ reserve requirements. At the same time it has been introducing measures to reduce the demand for property, the final destination of much of the new lending. Yet inflation hit a 25-month high of 4.4% year-on-year in October and is expected to have been higher in November, way above the target of 3% and despite moves to reverse food price rises which account for about a third of the inflation number.

The brakes are being applied but not too abruptly. Growth has been slowed to 9.6% year-on-year in the third quarter, down from 10.3% in the second and 11.9% in the first. Beijing won’t want to see the economy decelerating for much longer, and will want to see it remaining robust enough to absorb further interest-rate rises and increases in banks’ reserve ratios. The Politburo left policymakers plenty of room to fine tune: macro-regulation should be more “targeted, flexible and effective” while fiscal policy  should be “proactive”, the statement said. Proactive fiscal policy might just mean the introduction of a property tax, as a new IMF Working Paper recommends.

China’s Domestic Leadership

A Kim Jong Il birthday day discussion about how the isolation of North Korea’s leaders shape their country’s reactions to the rest of the world in what often appears an irrational way turned to China’s worldview and how it presents itself to the world. It was pointed out to this Bystander that in most countries to be foreign minister is to hold one of the Great Offices of State, yet in China the official with the greatest responsibility for foreign affairs, Dai Bingguo, is a State Councillor who ranks below 50th in the Party’s hierarchy while the foreign minister, Yang Jiechi, ranks around 250th. A little subsequent research reveals that at the apex of that hierarchy, the nine-man Politburo Standing Committee (and it is all men), there is a paucity of foreign experience. None of the nine has lived, worked or studied abroad for any significant time if at all. None, as far as we could find out, speaks fluently or has studied a foreign language, though we understand there is some ability to read in English. All built their careers as domestic politicians in jobs that had no involvement with the rest of the world until being promoted to their current posts. All politics is local to some extent, but the experiential distance of China’ leaders from the rest of the world may amplify the roughness of relations with the U.S. and the E.U. in particular at times when, as now, they are going through a rough patch.

Another Point Of Hu

Oxford Analytica offers a contrarian take on the recently concluded 17th party congress. It argues that the new line up of the politburo will limit President Hu Jintao’s power, rather than consolidate it. Not sure I agree in this case, but I like OxAn’s work, so this piece is worth the read. (Link is via Forbes magazine site; OxAn requires registration,)

Hu Rolls On

The party congress went much as scripted. The surprise would have been if it hadn’t.

President Hu Jintao got his “scientific concept of development” enshrined in the constitution, continuing the tradition of each leader adding his own embellishment to the country’s guiding principles. He also cleared the way for reshaping the party’s politburo standing committee — the nine people who really run China — by removing Vice-President Zeng Qinghong and two other senior politicians Luo Gan and Wu Guazheng from the party’s central committee, making them ineligible for reelection to the standing committee for further five year terms.

Zeng was both a princeling (offspring of a revolutionary veteran) and an old associate of Hu’s predecessor, Jiang Zemin. So was Wu, though he buttered his bread with the times, acting as the enforcer for both Jiang and Hu in the role of overseeing party discipline. He turns 70 next year.

Luo, who is 72, oversaw national security and was responsible for implementing the anti-crime campaign that has led to an increasing number of executions. He was a long-time ally of Jiang’s prime minister Li Peng.

Two vice premiers, Wu Yi and Zeng Peiyan, and defense minister Cao Gangchuan have also been put out to pasture.

This is being portrayed in western media as Hu tightening his hold on power, though after five years in office and the likely halfway point in his term, he already has a pretty firm grip. The clearing out of the Jiang old guard has been underway for some time.

Monday sees the secret ballot for the all-important politburo. Two names to look for are Shanghai party chief Xi Jinping and his counterpart in Liaoning, Li Keqiang. Both men, who are 54 years ofd and 52 years old respectively, are talked of as being successors to Hu when the 18th party congress meets in 2012.

None of this jockeying for power, though, is likely to make much difference to business. China’s economy will next week under the new leadership look much the same as it did last week under the old.