Posts Tagged ‘Communist Party’

Why China’s Xi Jinping is unlikely to anoint a successor — “There can only be one Transformative Leader”

October 20, 2017

Hu Chunhua and Chen Miner unlikely to win promotion to Communist Party’s top decision-making body

South China Morning Post

Friday, 20 October, 2017, 12:28pm

The man once tipped to become President Xi Jinping’s successor, Guangdong party boss Hu Chunhua, is likely to become a vice-premier in March but his prospects of inclusion in the Communist Party’s top echelon of power, the Politburo Standing Committee, are fading, sources have told the South China Morning Post.

Credit Roman Pilipey/European Pressphoto Agency

Meanwhile, Chongqing party boss Chen Miner, another rising star who is widely seen as the president’s protégé, is expected to win promotion to the 25-member Politburo but will probably not make it into the seven-member Politburo Standing Committee, sources familiar with top-level party discussions said.

Hu is already a Politburo member while Chen is now a Central Committee member ¬– one rank lower in the party hierarchy. The Politburo Standing Committee sits on top, making it the highest decision-making body in Chinese politics.

If Hu, 54, and Chen, 57, do not win promotion to the Politburo Standing Committee next week, after the party’s national congress concludes on Tuesday, it would contain no putative heir in the position to take over from Xi after he completes his second five-year term as party general secretary in 2022.

Another contender, 54-year-old former Chongqing party chief Sun Zhengcai, suffered a spectacular fall from grace this year. He was expelled from the party last month and is now facing criminal prosecution for corruption.

 Chongqing party secretary Chen Miner (centre) at the opening session of the Communist Party’s national congress at the Great Hall of the People in Beijing on Wednesday. Photo: AFP

Such arrangements, if confirmed, will inevitably add to speculation that Xi plans to carry on beyond his second term. But sources said it was premature to draw such a conclusion.

Rather, they said, it reflected Xi’s dissatisfaction with the party’s present power transition mechanism. While it provides some certainty and stability, it also has some problems.

Leadership transitions in China have historically been a difficult and risky process. Mao Zedong changed his chosen successor three times, with the first two dying in controversial circumstances. Deng Xiaoping, after pushing aside Mao’s last pick, Hua Guofeng, ditched two of his own protégés before endorsing a third, Jiang Zemin.

Only in 2002 did the party leadership transition begin to have any resemblance to an institutionalised process. That year Jiang stepped down for Hu Jintao, Xi’s predecessor. Hu Jintao had been a Politburo Standing Committee member for 10 years by then, having been elevated to that position by Deng in 1992 as Jiang’s “designated successor”. Even then, Jiang only vacated the powerful chairmanship of the Central Military Commission two years later.

In 2012, Hu handed over all his party positions to Xi, who had been promoted to the Politburo Standing Committee in 2007 and became vice-president the following year. Xi publicly praised Hu’s “high ethics” for making a clean break possible.

Sources said that while the practice of having a “designated successor” waiting in the wings could give a sense of stability, it also put premature pressure on that person. Both Xi and Hu Jintao had to play the role of a cautious heir-apparent for years, taking care not to reveal too much of themselves or upstage their seniors.

 Former Chongqing party secretary Sun Zhengcai (centre) at a panel discussion on the sidelines of the annual meeting of the National People’s Congress in Beijing in March. Photo: AFP

“It also makes the heir-apparent an easy target,” one source said. “Other factions could set up traps to undermine him. People looking for advancement would seek to curry favour with him.”

There was a risk a strong candidate could end up competing with the incumbent leader for influence. A weak heir-apparent, on the other hand, would create openings that would encourage factional rivalry and jockeying for power.

“Sun Zhengcai’s case, and the timing of its revelation, is a strong indication that Xi wants to break away from the designated successor system and reform it,” the source said.

While details of Xi’s plan were not immediately clear, the general idea was to eventually choose a successor from several possible candidates in a bigger pool, based on their performance.

“Xi is in no hurry to settle on the issue for now,” the source said. “His priority and focus is how to make use of his second term to achieve his goals. A lot of things can happen in five years.”

The party’s 19th national congress opened on Wednesday and will close on Tuesday. The new party Central Committee it elects will have its first plenum meeting the following day and officially produce the new line-up for the Politburo and the Politburo Standing Committee – thus completing the party’s leadership reshuffle.

The party leaders will then discuss and decide on personnel changes at the state level at the Central Committee’s second plenum in the spring, just ahead of the annual meeting of the National People’s Congress in March, which will formally endorse the proposed changes.

 President Xi Jinping addresses delegates at the opening session of the Communist Party’s national congress at the Great Hall of the People in Beijing on Wednesday. Photo: AFP

Both Hu Chunhua and Chen are most likely to be in the 25-member Politburo when the new list is unveiled next Wednesday, but would have to wait until March to have their new government posts confirmed.

Hu Chunhua, who has been the party chief of Inner Mongolia and Guangdong, has already garnered rich experience at the provincial level, preparing him for the vice-premier role.

Chen has been praised for his work on poverty alleviation and innovation in his previous post of Guizhou party chief. He was transferred to Chongqing in July to steady the boat after Sun’s shock removal – a move seen by political pundits as a show of leadership confidence in Chen.

See also:

Ousted Chinese Official Is Accused of Plotting Against Communist Party

China’s Reform Hopefuls Watch
for Names. Only One May Matter.


China’s growth will benefit US, says Beijing’s top envoy to Washington

October 19, 2017

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A child holds a Chinese flag while tourists and pedestrians walk past a portrait of former Chinese leader Mao Zedong at Tiananmen Square in Beijing, China.PHOTO: BLOOMBERG

BEIJING (CHINA DAILY/ASIA NEWS NETWORK) – China’s continued economic growth and its efforts to ramp up international relations will bring “even bigger benefits” to the United States economy and its people, according to Beijing’s top envoy to Washington.

Speaking ahead of the 19th National Congress of the Communist Party of China, Mr Cui Tiankai, the Chinese ambassador to the US, said he believes the meeting promises to bring about win-win scenarios for China and for its global partners.

Citing figures and sources from the US-China Business Council and JPMorgan Chase, Mr Cui said in an article posted online by CNN on Monday (Oct 16) that China has made headway in its reform, while a booming Chinese economy has proved a boon to the US.

The congress, which opened on Wednesday, is expected to unveil a new leadership and set a blueprint for national development for the next five years and beyond.

“We expect the Party congress will illustrate that China’s unrelenting efforts in reform and opening-up has added further momentum not only to its own development, but also to that of the world economy,” Mr Cui wrote.”By strongly emphasising our outward-looking vision, this year’s congress promises to continue to bring about win-win scenarios for China and for our partners across the world, particularly the US.”

Mr Cui said that the twice-in-a-decade congress can be the beginning of tremendous determination and development, as previously shown.

For example, when the 18th CPC National Congress concluded five years ago, an ambitious plan was introduced by the current leadership to build a new, open economic system.

Since then, Mr Cui said, the country has turned those ideas into structural reform, economic growth and tangible institutions.

“China’s supply-side reform is actually kicking in,” the ambassador wrote, citing Ms Jing Ulrich, managing director and vice-chairman in the Asia-Pacific for JPMorgan Chase.

According to a Sept 14 CNBC report, Ms Ulrich said at the Milken Institute’s Asia Summit in Singapore that the Chinese leadership has been containing capacity growth and closing a lot of factories in the steel and aluminium sectors. “So now, reform actually has come to fruition,” she said.

Mr Cui said China has increased its contributions to international economic governance, especially since the 2012 congress. The country has done this through strong endorsements of globalisation and free trade in the international arena, and through ground-breaking endeavours like the Asian Infrastructure Investment Bank to address Asia’s infrastructure needs, and the Belt and Road Initiative to increase connectivity throughout Eurasia, he said.

Citing figures from the US-China Business Council, a private non-partisan, non-profit organisation of roughly 200 US companies that do business with China, Mr Cui said 2.6 million US jobs are supported by the China-US bilateral trade relationship.

The ambassador also quoted a report by Oxford Economics for the council in January that said US exports to China are expected to reach more than US$520 billion (S$707 billion) by 2030, as China is expected to continue to be one of the world’s fastest-growing economies.

However, Mr Cui cautioned that the mutual opportunities afforded by a globally engaged China are not always on the mind of the US, citing the recent investigation initiated by the US into intellectual property.

He said the probe “showed the overemphasised trade imbalance between the two countries, the misunderstandings about China’s debt, and the treatment of foreign investment based on each other’s appeals are all major concerns for the bilateral relationship”.

“Through dialogue, our two countries can address these concerns, which in turn will benefit the global economy,” Mr Cui added.


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China’s conflicted goals: Freer markets, more party control

October 19, 2017

By Joe McDonald
The Associated Press

BEIJING (AP) — China’s ruling Communist Party is expanding its role in business even as it promises freer markets and support for entrepreneurs on the eve of President Xi Jinping’s second five-year term as leader.

Party officials are tightening their control over state-owned enterprises and want a voice in how some foreign companies are run. State companies that dominate energy and other fields are being made even bigger through mergers. Some are forming ties with private sector success stories such as tech giants Alibaba and Tencent to draw on their skills.

Beijing’s conflicting goals are raising concerns that leaders might put off changes needed to reinvigorate a cooling economy that faces surging debt and trade tensions with Washington and Europe.

“There is no grand vision. There are parallel goals that are competing with each other,” said Andrew Polk, an economist at Trivium/China, a research firm in Beijing. “We are not sure which ones are going to win out at a given moment.”

No major policy changes are expected out of the twice-a-decade party congress that is due to re-appoint Xi as general secretary. The party also will name a Standing Committee, the country’s ruling inner circle of power, in preparation for installing a new government in early 2018.

The impact of those choices, by creating jobs and business opportunities or dragging on economic activity, will take time to filter down to ordinary Chinese.

At the opening of the congress Wednesday, Xi repeated official promises to support entrepreneurs and give market forces a “decisive role” but affirmed the dominance of state-owned industry.

“There must be no irresolution about working to consolidate and develop the public sector,” said Xi in a nationally televised address.

Data released Thursday showed economic growth stayed relatively stable in the quarter ending in September, buoyed by strength in consumer spending and exports. Output rose 6.8 percent, down marginally from the previous quarter’s 6.9 percent.

Investors are watching the congress for signs of where the party wants to go and how fast. A key indicator will be which posts go to Xi allies seen as reformers with the personal authority to overcome opposition from party or state industry factions that might lose influence.

One closely watched figure is Wang Qishan, a vice premier and respected problem-solver who oversaw China’s response to SARS and at age 69 is obliged by party tradition to leave the seven-person Standing Committee. If he stays in a leadership post, analysts say that would suggest Xi wants his help to carry out painful changes.

Reform advocates complain that since Xi took power in 2012, the leadership has dragged its feet on fulfilling promises to tackle debt that has soared to dangerous levels, curb the dominance of state industry and give a bigger role to entrepreneurs who create China’s new jobs and wealth.

Instead, Xi focused on an anti-corruption campaign and tightened political control, detained activist lawyers and stepped up internet censorship.

Foreign industry groups complain China is moving too slowly on promises to shrink state-owned steel and aluminum producers they accuse of threatening jobs by flooding global markets with low-cost exports.

“Generally speaking, there has been no major progress in economic reform,” said Sheng Hong, director of the Unirule Institute, an independent economic research group in Beijing.

Regulators closed Unirule’s website and social media accounts in a crackdown in January on liberal voices.

The party’s internal conflict is reflected in a 2013 declaration that promised for the first time to give market forces the “decisive role” but also vowed the party would intensify its control of state industry. Private sector analysts say this appears to be aimed at rooting out corruption and waste.

This year, some foreign companies say the party, which already has cells in all enterprises and controls agencies that regulate them, is trying to expand its authority further by asking for a formal voice in commercial decisions.

Some 32 mainland companies with shares traded in Hong Kong have proposed changes to their legal structure to make the party an adviser to their board. Financial commentators complain this might hurt shareholders.

“This is potentially a huge problem,” said the German ambassador to China, Michael Clauss. “Many foreign companies are very alarmed.”

Foreign companies already are frustrated by rules that give them little access to industries such as finance and technology, plans they say might limit their role in promising fields such as electric cars. That pessimism helped lead to a 1.2 percent decline in investment into China in the first seven months of this year, breaking a series of annual double-digit gains.

A business leader in Wenzhou, a southeastern city known as a hotbed of private sector activity, welcomed Xi’s pledge to do more to help entrepreneurs.

“If private enterprises succeed, China’s economy succeeds,” said Zhou Dewen, president of the city’s Association for Promotion of Development of Small and Medium-sized Companies.

Beijing is pushing entrepreneurs to support state-owned enterprises, or SOEs.

The party pledged in a Sept. 25 declaration to promote “entrepreneurial spirit” while also urging entrepreneurs to learn “socialist core values.”

In August, one of the country’s three major state-owned phone carriers, China Unicom Ltd., sold an $11.7 billion stake to private investors including Alibaba Group, the biggest global e-commerce company by sales volume; Tencent Holdings Ltd., which operates the popular WeChat social media platform, and internet search giant Baidu Inc. There was no indication they would get any voice in management.

In September, Tencent paid $366 million for 5 percent of state-owned investment bank China International Capital Corp. CICC gets access to Tencent’s marketing and other skills, but the private company gained no management control.

Other state companies have announced similar plans to bring in private shareholders.

Meanwhile, authorities are discussing taking a direct state ownership stake in Alibaba and Tencent, The Wall Street Journal reported this month, citing unidentified sources.

“Supposed reforms in state-own companies such as ‘mixed ownership’ can never be called a reform,” said Sheng. “Setting up party committees in companies not only is not a reform, but is a step backward.”

In August, the government announced the merger of Shenhua Group, the world’s biggest coal producer, and Guodian Group, a major power supplier, to form the world’s biggest utility by assets.

“They are being quite clear that they want bigger, bolder, better SOEs, with not just state but party leadership,” said Polk.

The pressure for action is building.

Economic growth has been propped up this year by a lending boom and government stimulus, but that sets back official efforts to build a consumer-driven economy.

Forecasters expect growth to cool as regulators tighten lending controls to rein in debt that has risen to the equivalent of 260 percent of annual economic output — unusually high for a developing country.

“Strains within the country’s banking sector are already glaringly evident,” the Economist Intelligence Unit said in a report.


AP researcher Yu Bing contributed.


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Xi’s Grand Vision for China Prioritizes Party Power Over Reform — “Deceleration in economic growth that leads to economic dislocation among workers could all of a sudden overwhelm the agenda.”

October 18, 2017


  • Speech has few clues on whether Xi will back painful changes
  • Xi confident in supremacy of one-party development model
What Xi’s Party Congress Speech Means for Investors
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Chinese President Xi Jinping delivers a speech at the opening session of the Chinese Communist Party’s five-yearly Congress at the Great Hall of the People in Beijing on October 18, 2017. Credit Wang Zhao – AFP – Getty Images

President Xi Jinping laid out a sweeping vision to transform China into a strong global power while guaranteeing Communist Party rule for decades. Investors are skeptical it will lead to any major economic reforms.

In a speech to party cadres that went on for more than three hours, Xi on Wednesday outlined a three-decade road map to entrench China’s great power status. By 2050, Xi said the country would be a global leader in innovation, influence and military might.

“Our country is approaching the center of the world stage and making continuous contributions to humankind,” Xi told almost 2,300 delegates gathered for the party’s twice-a-decade congress in Beijing. “The Chinese nation is standing tall and firm in the East of the World.”

Xi warned of the severe challenges faced by China. Bloomberg’s Tom Mackenzie reports from Beijing.

Source: Bloomberg

Xi’s vision to expand party control over all aspects of the nation revealed a greater certainty in the supremacy of China’s one-party system as political upheaval draws Western democracies inward and growth tilts toward Asia. Still, it provided no strong clue over whether Xi would embark on painful structural reforms in the next five years that foreign companies say are necessary to foster sustainable growth in the world’s second-biggest economy.

The stakes are high for Xi to strike the right balance, both at home and abroad. As one of the top global growth drivers, China’s ability to prevent an abrupt slowdown is crucial to maintaining the stability of the world economy. Any failure to deliver prosperity would also undermine the Communist Party’s legitimacy among China’s 1.4 billion people.

“Xi is now openly confident that China has its own development model, which is not capitalistic and not to be linked to democratisation,” said Steve Tsang, director of SOAS China Institute at the University of London. “The implication is that if the Party gets it right, China will develop well. But if the Party should get it wrong, then God — or, shall one say, Marx — help China.”

Much of Xi’s plan focused largely on fortifying the party, which he said “leads everything.” His remarks on reform — pledging to open up to foreign businesses, deepening state-run enterprise reform, strengthening financial sector regulation — hewed closely to language that has underwhelmed investors looking for a more decisive structural overhaul.

Xi’s team took steps to ensure against any financial-market disruptions in the run-up to the congress, with the stock market seeing its lowest volatility in 25 years. A last-hour surge by some of China’s biggest companies kept the nation’s benchmark stock index in the green on Wednesday, while the yuan was little changed.

Rising wages and a shrinking workforce are speeding automation at factories as growth settles at the slowest pace in a quarter century. Borrowing has soared as policymakers tried to meet growth targets, and the International Monetary Fund estimates that household, corporate and government debt will reach almost 300 percent of gross domestic product by 2022.

Notably, Xi didn’t explicitly state growth targets into the next decade, a sign that China may start focusing more on the quality of economic expansion. He also characterized the principal challenge facing the country as improving the overall quality of life of China’s citizens.

‘Big on Rhetoric’

Xi presented China’s one-party system as a “new choice” for developing countries. He touted signature policies such as his Belt-and-Road Initiative, in which China is seeking to sponsor trade and infrastructure investments across much of the globe.

“Xi Jinping’s speech as expected was big on rhetoric and vision,” said George Magnus, an associate at Oxford University’s China Centre and former adviser at UBS Group AG. “But we shall see in due course the messy nitty gritty of policy implementation, and the political/party sand in the gears of a modern state that is moving further away from the reform ethos that lifted China in the past.”

Xi, who already was seen as China’s most powerful leader in a generation, was expected to emerge from the week-long congress even stronger. The event gives him a chance to remake about half the party’s top leadership ranks, including potentially naming a successor or laying the groundwork to retain influence after his second term ends in 2022.

The road map presented by Xi stretched far beyond that milestone to the middle of the century, after the People’s Republic of China celebrates its 100th anniversary. He laid markers along the way: Build a moderately prosperous society by 2020. Join the most innovative countries by 2035. Achieve a first-class military by 2050.

Mao, Deng, Xi

Xi cast his tenure as a “new era” in China’s rejuvenation, elevating himself alongside lionized predecessors such as Mao Zedong and Deng Xiaoping. But his plan also assumes the Communist Party can manage host of vexing issues, from and aging population and the demands of a growing middle class to soaring debt and the administration of U.S. President Donald Trump.

“There’s a very good chance that Xi’s tenure may very much be defined by events external to China and to some extent outside of his control,” said Trey McArver, co-founder of research firm Trivium China, listing internal challenges that could also morph into a crisis. “Something like a faster than expected deceleration in economic growth that leads to economic dislocation among workers could all of a sudden overwhelm the agenda.”

— With assistance by Ting Shi, Keith Zhai, Peter Martin, and Enda Curran

Balance of Power: Xi’s Plans for China Are Big. Really Big. — China’s challenge to the U.S.-led international order

October 18, 2017


By Brendan Scott and Kathleen Hunter

We knew Xi Jinping had big ambitions for China. Today we learned how big.

In a three-and-a-half-hour speech to Communist Party cadres laden with historical sweep, Xi laid out a 30-year road map to solidify China’s status a great power. By 2050, Xi said the country would lead the world in innovation, influence and military might — a model for the “whole humankind.”

 Image may contain: 1 person, sitting, suit and indoor
Chinese President Xi Jinping delivers a speech at the opening session of the Chinese Communist Party’s five-yearly Congress at the Great Hall of the People in Beijing on October 18, 2017. Credit Wang Zhao – AFP – Getty Images

Xi’s plan assumes China can manage a bunch of issues: Soaring debt, the expectations of a growing middle class and the administration of U.S. President Donald Trump. He may choose also to avoid potentially risky but much-needed structural economic reforms at home.

Still, his comments made clear China’s challenge to the U.S.-led international order.

As political upheaval draws Western democracies inward, Communist China has become a surprising advocate for globalization. The president warned that China and the world are in the midst of profound and complex changes.

Clues as to how long Xi, 64, intends to guide that vision could emerge next week when the party’s new top leaders are unveiled. That lineup may indicate if Xi plans to anoint a successor or lay the ground to keep power after 2022.

Xi speaks at the Great Hall of the People in Beijing today.
Photographer: Qilai Shen/Bloomberg


— With assistance by Karl Maier


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China ready to ‘defeat’ Taiwan independence

October 18, 2017


© AFP | Addressing a twice-a-decade gathering of the Communist Party in Beijing, President Xi Jinping warned that China has ‘the resolve, the confidence, and the ability to defeat separatist attempts for Taiwan independence in any form’

BEIJING (AFP) – Chinese President Xi Jinping delivered a stern warning to Taiwan Wednesday, saying that Beijing has the will and power to thwart any attempts at independence.

Addressing a twice-a-decade gathering of the Communist Party in Beijing, Xi warned that China has “the resolve, the confidence, and the ability to defeat separatist attempts for Taiwan independence in any form”.

“We will never allow anyone, any organisation, or any political party, at any time or in any form, to separate any part of Chinese territory from China,” he said.

Ties between Taiwan and China have turned increasingly frosty since the election of Tsai Ing-wen as president last year.

Beijing cut off official communication with her government shortly after it took office due to her refusal to publicly accept the “one China” concept.

Tsai also angered Beijing when she called Donald Trump to congratulate him on his US presidential election victory.

Under Taiwan’s previous government the two sides had stuck to the “1992 consensus”, in which they agree there is only one China without specifying which is its rightful representative.

In his speech, Xi held out an olive branch to the island’s leadership, offering to restore communication with Taiwan if its government readopts the understanding.

Then “no political party or group in Taiwan will have any difficulty conducting exchanges with the mainland”, he said.

The two sides split after a civil war in 1949, and while Taiwan sees itself as a sovereign nation, it has never formally declared independence.

Cross-strait tensions were further exacerbated by a highly unusual call from Tsai to congratulate then US President-elect Donald Trump.

Xi made no mention of independence movements in China’s semi-autonomous city Hong Kong.

“We will develop and strengthen the ranks of patriots who love both our country and their regions,” he said, adding that “patriots will be playing the principal role” in governing the metropolis, which operates under its own system of laws as part of the “One Country, Two Systems” policy.

Beijing has tightened control over the city’s affairs in response to high-profile calls for democracy that have increasingly turned to calls for self-determination or even full independence.

Xi Jinping’s Power Plays Set the Stage for a Long Encore

October 17, 2017

China’s president is likely to emerge from a Communist Party congress with enhanced powers—but will he step down in 2022?

BEIJING—Chinese President Xi Jinping is set to emerge from a Communist Party congress that starts Wednesday with all of the allies and authority he needs to monopolize decision making for the next five years.

The affirmation of Mr. Xi’s political supremacy suggests he will double down on a drive to reassert party control at home,  and project power abroad, during a second term likely to be marked by a slowing economy and volatile foreign relations, especially over North Korea.

Beyond that looms the question: Will he step down come 2022?

The twice-a-decade congress is expected to endorse Mr. Xi’s rise to a level of political control in modern China comparable only to Deng Xiaoping or Mao Zedong. Both remained dominant figures till death.

As well as packing top party postswith Mr. Xi’s lieutenants, the 2,280 delegates are expected to enshrine his political theory in the party’s constitution and grant him even tighter control over China’s armed forces, political insiders and analysts say.

And the congress could go further, opening a window for 64-year-old Mr. Xi to stay in power after his second term expires, political insiders say, despite retirement norms to protect against one-man rule.

Expectations that he will break with precedent by blocking a potential successor from joining the Politburo Standing Committee, the top leadership body, have mounted since one of two leading candidates was suddenly sacked in July.

“The issue of potentially extending Xi’s tenure will be discussed,” according to one person directly involved in preparations for the congress. The person said the idea would be proposed by a senior party figure who would praise Mr. Xi’s achievements.

One Nation Under Xi Jinping

Another possibility is that Mr. Xi gets a new title he could keep beyond 2022, such as party chairman—which was most closely associated with Mao.

China’s government press office didn’t respond to questions on whether such discussions would take place or any other expected outcomes of the congress.

In recent weeks, Chinese authorities have gone to lengths reminiscent of the Mao era in lavishing praise on Mr. Xi’s muscular leadership and his “China Dream” to rejuvenate the nation.

That resonates with many Chinese, who saw his predecessor, Hu Jintao, as out of touch and unable to protect China’s international interests.

“Xi Jinping is different from other Chinese leaders,” said Zhai Yifan, a 32-year-old railway engineer visiting a Beijing exhibition focused on Mr. Xi’s achievements. “As a Chinese person, this makes me feel proud.”

A Beijing poster recently showed Chinese President Xi Jinping with a slogan reading “Chinese Dream, People’s Dream.” Photo: greg baker/Agence France-Presse/Getty Images

Still, that doesn’t translate into unanimous popular support for Mr. Xi staying on after 2022. There are no official public opinion surveys on that issue, let alone independent ones, but at the Beijing exhibition, views were mixed, with Mr. Zhai and several others saying they opposed the idea.

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Otherwise, it could signal a return to “lifelong rule,” said Du Jingqi, a 63-year-old retiree at the exhibition.

Internationally, Mr. Xi is expected to continue asserting China’s territorial claims and expanding its military activities, while positioning China as a champion of global trade through its Belt and Road Initiative to build new East-West trade and transport links.

U.S. officials hope Mr. Xi will take bolder action to help halt North Korea’s nuclear program and open Chinese markets, and will look for signals when President Donald Trump visits China in early November.

Back home, the challenge for Mr. Xi will be delivering the improvements many Chinese now expect in areas such as education, health care and the e nvironment.

Enhanced powers allow Mr. Xi, in theory, to make painful decisions needed to shift China to more sustainable growth, such as trimming excess in state companies.

China’s Leaders: Who’s With Xi?

The flip side of Mr. Xi’s emphasis on strengthening party control is a clampdown on dissent, which discourages officials and advisers from questioning policy or experimenting with new ideas.

Despite a 2013 pledge to let market forces play a “decisive role” in the economy, Mr. Xi has kept credit flowing to the inefficient state sector to meet a goal of doubling gross domestic product over 10 years, in time for the centenary of the party’s founding, in 2021.

Many political insiders say Mr. Xi is more likely to focus on bolstering the party’s role in society and the economy rather than unleashing market forces in his second term.

As the son of a revolutionary, Mr. Xi “sees himself on a historical mission,” said Sebastian Heilmann, president of the Mercator Institute for China Studies. “First, making party rule fit and resilient for the 21st century. Second, transforming China into a global power that reshapes the power balances and rules of the game in international relations.”

Those are expected to be the major themes Mr. Xi will lay out in a speech as the congress opens Wednesday.

Delegates will spend much of the next several days in discussions behind closed doors before selecting a new Central Committee, the party’s top 375 or so officials. That body then selects a new Politburo—the top 25 leaders—and the Politburo Standing Committee, the party’s inner sanctum that currently has seven members, up to five of whom are expected to retire.

Based on past protocol, Mr. Xi will lead the new top slate single-file onto a red-carpeted podium in the Great Hall of the People, probably on Oct. 25 or 26.

Despite tensions over economic policy in recent years, it now seems highly likely Premier Li Keqiang will stay on, although his decision-making powers have been severely curtailed, according to party insiders.

Recent speculation has focused instead on Wang Qishan, the 69-year-old anticorruption chief who by many is seen as China’s de facto No. 2 leader. The custom since 2002 has been that leaders over 67 retire at a congress, though last year a senior party official denied that such a norm exists.

If Mr. Wang stays on, that creates precedent for Mr. Xi to remain in power beyond 2022, when he will be 69. It also keeps a crucial Xi ally on the slate, though some in the party say Mr. Xi has grown wary of the credit given to Mr. Wang for the antigraft campaign that has punished more than a million people.

Add to the intrigue the distraction provided by a Chinese businessman, Guo Wengui, who has lobbed allegations of corruption and other misdeeds from New York against various Chinese leaders, including Mr. Wang. In 2012, the scandal surrounding fallen party star Bo Xilai loomed over the party congress; anxious to avoid a similar cloud, Beijing has sought to discredit Mr. Guo and is seeking his arrest.

Standing committee members used to be selected by outgoing and retired members, but Mr. Xi has curbed the influence of his peers and elders. He may still have to make compromises, political insiders say, but he should be able to block anyone he considers disloyal or a threat to his authority.

He could also abandon recent party practice, which suggests the new Standing Committee should include at least one person young enough to succeed him in 2022 and serve another 10 years based on current retirement norms.

Sun Zhengcai was one of only two people on the current Politburo who fitted the bill—until he was fired in July as party chief of the southwestern city of Chongqing, the same post held by Bo Xilai.

Mr. Sun, 54, was expelled from the party last month and accused by its investigators of a long list of misdeeds, including trading power for sex, according to the official Xinhua News Agency.

Mr. Sun was succeeded in Chongqing by Chen Min’er, who is 57 and widely considered to be among Mr. Xi’s political favorites, having worked under him in the 2000s in the eastern province of Zhejiang.

If Mr. Xi does have to compromise by allowing a potential successor to join the Standing Committee, political insiders say it could be Mr. Chen although he is not yet on the Politburo and leapfrogging over that step would be unusual.

Write to Jeremy Page at, Lingling Wei at and Chun Han Wong at

As Xi ascends, will economic reforms finally take off?

October 17, 2017


© POOL/AFP / by Julien GIRAULT | While President Xi Jinping has cast himself as a champion of globalisation as the United States retreats behind President Donald Trump’s ‘America First’ policy, foreign firms complain his words have not been accompanied by deeds on the ground

BEIJING (AFP) – As Chinese President Xi Jinping prepares for a second five-year term, foreign investors will be watching for any sign that he finally intends to follow through on long-promised reforms to further open the world’s second-largest economy.Xi is expected to signal his future economic policies when he opens a five-yearly Communist Party congress on Wednesday that will renew his tenure as general secretary.

While he is expected to fill top posts with loyalists, analysts are divided as to whether he will use his increased powers to let the market reign or keep the state firmly in charge of China’s economic future.

Xi has sought to cast himself as a champion of globalisation as the United States retreats behind President Donald Trump’s “America First” policy.

But foreign companies complain that his words have not been accompanied by deeds, as the state retains control over the economy.

US and European firms report getting barred from access to certain sectors and being forced to share their technologies with local competitors.

The EU Chamber of Commerce in China summed up the exasperation as “promise fatigue”.

Underperforming state-owned enterprises, which have saddled the economy with huge debt and overcapacity exceeding domestic demand, have been propped up or merged into massive companies.

– Premier sidelined –

Private firms, meanwhile, are being subjected to closer control by the Communist Party, via cells it deploys inside companies.

While the government is seeking to turn toward a consumption-based economy, the state has continued to fuel growth through an accumulation of debt that, according to the IMF, is on a “dangerous trajectory”.

“There has been general disappointment on economic performance and direction,” said Christopher Balding, economics professor at Peking University in Shenzhen, China.

“China is significantly more centralised than it was even five years ago. At this point, it would be very difficult for anyone to make a serious argument that China is seriously interested in opening up economically,” he told AFP.

When Xi took office five years ago, his premier, Li Keqiang, was seen as the man in charge of shepherding the economy.

Li had promised “fair treatment” to foreign firms, a larger role for the market and structural reforms in favour of the private sector.

But analysts say the premier has been sidelined as Xi has further centralised power around him.

Li “struggled to rally support around his reformist views” and cut state-owned enterprises, but he “has clearly not been a very influential premier”, according to the Economist Intelligence Unit.

– ‘ Tough decisions’ –

Supported by his economic advisor Liu He, Xi chairs the commission leading financial and economic affairs, as well as a powerful new committee, devoted to reforms.

In July, Xi called for “stronger financial regulation” to contain “systemic financial risks” — raising concerns among analysts that this could stifle much-needed reforms.

“Xi Jinping has increasingly stressed the importance of ‘stability’ on all fronts,” Louis Kuijs of Oxford Economics said in a note.

“Bold, potentially disruptive economic reform and forceful deleveraging are not consistent with stability.”

But some are optimistic that Xi will use his new mandate and increased powers after the congress to accelerate reforms.

“Mr Xi’s strengthened position will give his administration the authority to take the tough decisions necessary to tackle China’s debt overhang,” according to the Economist Intelligence Unit.

Julian Evans-Pritchard, China economist at Capital Economics, said the implementation of reform is “likely to accelerate” after the congress if Xi emerges in a stronger position.

However, the reforms adopted so far have failed to address the underlying causes of state sector inefficiency, with underperforming companies not allowed to declare bankruptcy and leave the market, Evans-Pritchard said.

“But given Xi’s reluctance to relinquish state control over key parts of the economy,” he said. “China’s structural problems are likely to remain unresolved.”

by Julien GIRAULT

China’s Factory-Gate Prices Hit Six-Month High

October 16, 2017

China’s September producer-price index rose 6.9%, above expectations for a 6.3% increase.

BEIJING—China’s factory-gate prices shot up to a six-month high last month, the latest surprise for an economy that has defied many economists’ expectations of a slowdown.

China’s producer prices in September rose 6.9% compared with the same period a year ago, according to the government’s statistics bureau. That pace was faster than a 6.3% increase in August and beat the 6.4% forecast by economists.



China September Producer Prices Jump Most in Six Months in Boost for Global Inflation

Oct. 15, 2017, at 10:26 p.m.

Image may contain: one or more people and people standing

FILE PHOTO: People buy vegetables at a fresh food market in Beijing, China June 9, 2017. REUTERS/Thomas Peter/File Photo Reuter

BEIJING (Reuters) – China’s producer price inflation unexpectedly accelerated to a six-month high in September as a construction boom shows no signs of abating and a government crackdown on air pollution triggers fears of winter shortages and frenzied jumps in commodity prices.

China’s strong demand for building materials has triggered a year-long commodities rally which is helping to buoy manufacturing activity and inflation around the world, even if it has yet to trickle down to the consumer level.

China’s economy is expected to grow 7 percent in the second half of this year, the country’s central bank governor said, defying economists’ expectations for a slowdown.

The producer price index (PPI) rose 6.9 percent in September from a year earlier, from 6.3 percent in August, the National Bureau of Statistics (NBS) said on Monday.

The gain – the strongest since March – signals continued resilience in China’s economy and industrial sector profits, welcome news for Communist Party leaders two days ahead of a twice-a-decade party congress.

Analysts polled by Reuters had expected September producer inflation would be steady from August at 6.3 percent.

On a month-on-month basis, the PPI rose 1.0 percent in September.

China’s commodity futures prices have seesawed wildly in recent weeks as the government embarks on its biggest environmental crackdown yet to reduce the country’s notoriously thick winter smog.

Some steel mills, smelters and coal companies have cranked up production ahead of expected official curbs on output or outright shutdowns in coming months. Environmental inspections have disrupted some supply lines and added to uncertainty in the market.

Shanghai steel futures surged nearly 7 percent on Friday, spurring a similar rally in raw materials iron ore and coking coal.

Iron ore and coal prices had tumbled sharply in September on fears of weaker demand for raw materials, but traders are confused as to how the winter supply and demand picture will play out and how much of the impact will ripple through into global commodity markets.

Top steelmaking city Tangshan became the latest to enforce production cuts this month, ahead of the previous deadline of Nov. 15, when winter heating systems in China are switched on.

Bolstered by manufacturing and a hot property market, China’s economy grew by a faster-than-expected 6.9 percent in the first half of 2017.

China will have no problem meeting its economic growth target of around 6.5 percent this year, and may even beat it, the head of the Statistics Bureau said last Tuesday.

Analysts still predict producer prices will start to soften in the fourth quarter due to a high base of comparison last year and as overall demand moderates along with economic growth.

China’s consumer price index (CPI) rose 1.6 percent as expected in September, versus 1.8 percent in August and well within Beijing’s 2017 target of 3 percent.

Food prices, the biggest component of the consumer price index (CPI), fell 1.4 percent from a year earlier.

Non-food price inflation quickened to 2.4 percent in September from 2.3 percent in August.

(Reporting by Cheng Fang and Sue-Lin Wong; Editing by Kim Coghill)

China’s Next Five Years—Squeezing the People to Feed the State

October 15, 2017

To support Communist Party rule and fend off a debt crisis, China needs to shore up state-owned companies’ weakened foundations

Chinese President Xi Jinping is set to consolidate his authority at the Communist Party congress this month. TRYONE SIU/AGENCE FRANCE-PRESSE/GETTY IMAGES

China achieved its economic miracle by unleashing the entrepreneurial private sector. With President Xi Jinping poised to further consolidate power at the Communist Party’s twice-a-decade leadership shuffle kicking off Oct. 18, the narrative of the next five years is becoming clear.

The state is pushing back.

The logic is straightforward. Nominally communist China relies on its vibrant private sector for growth, but state-owned companies are indispensable tools for political patronage, social control and economic policy. Any financial rot in the state sector could weigh on the economy and weaken the Communist Party’s grip.

The Heard on the Street team is doing a series of columns on investing in China ahead of the country’s every-five-year leadership transition.

  • Six Reasons Why China Matters
  • Say Goodbye to the China Bid
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With private business already commanding around 70% of the economy, Mr. Xi and his allies have decided to strengthen key state-controlled companies by boosting their market power and easing their debt burdens.

For investors, the implications are significant: higher global goods prices because state-owned companies are notoriously inefficient, and a smaller chance of the long-feared Chinese debt crisis. Corporate debt, which is largely in the state-owned sector, ticked down as a percentage of GDP in the second quarter, according to J.P. Morgan—the first decline since 2011. The trade-off is slower Chinese growth. Chinese banks, whose shares are currently on a tear, will need to keep subsidizing bloated state enterprises. And those enterprises’ need for a deep pool of capital inside China means a free-floating yuan will remain a distant dream.

Overburdened Giants

State-owned businesses have been struggling because of their unique role. They benefit from cheap bank loans but give lots in return: Some still run hospitals and schools. Nearly all support more people than they need. PetroChina —the listed arm of the flagship state-owned China National Petroleum Co. (CNPC)—had seven times as many employees as Exxon Mobil last year, yet produced only marginally more oil and less gas. Little wonder its return on equity in the 12 months to June was a dismal 1.7%, against nearly 7% for Exxon.

CNPC does have one ace card: It is one of only three significant upstream oil companies in China, all state-owned. Prices are regulated, but CNPC’s dominance often allows it to strong-arm customers and the bureaucracy.

Most SOEs, with less clout, have found themselves fighting nimbler private rivals over a slower-growing pie in recent years. Their margins have cratered in keys sectors such as steel, flooded by private capital during the boom years. The aggregate return on assets for the state-owned industrial sector, as high as 6% in 2007, now is barely 3%—not only well below the 7% average for all industrial companies but the average bank lending rate of 5%. SOE debt has mushroomed to threaten the entire financial system. A bond-market plunge in April 2016 was triggered by defaults at big state-owned coal and steel companies.


There are two ways to deal with the debt. The government could pay it off, or the companies could, either through higher returns or by selling assets to the private sector.

Mr. Xi, apparently believing private companies already have too much influence, has opted to boost the market power of remaining key SOEs.

Mergers between state-owned giants like Baosteel and Wuhan Steel and, more recently, power and coal behemoths Guodian and Shenhua are the most obvious result. China’s much-ballyhooed industrial “capacity cuts” are another. Forced steel-mill closures this year, a big factor behind higher global prices, have primarily affected privately owned mills.

Remaining state companies may enjoy fatter profits from the higher prices for basic goods, but they mean higher costs for downstream industries where the private sector is stronger. The average profit margin for state-owned industrial companies was 6.3% in August, up from 3.8% in early 2016. For private companies it was stuck at 5.7%, nearly exactly where it was a year ago.

Forced steel-mill closures this year have primarily affected privately owned mills.Photo: Thomas peter/Reuters

China’s private sector remains dynamic, and profits in some areas—like tech—are growing rapidly. But the state is encroaching even on the internet giants, such as when it recently cajoled the likes of Tencent and Alibaba into purchasing 13% of struggling state telecom company China Unicom for $4 billion. State media lauds such “mixed ownership reform” as a way to boost efficiency at state enterprises, but these deals look more like a new type of tax on successful private companies.

For investors, the tilt back toward the state means that innovative privately owned tech and consumer companies may continue to outperform—but probably less so than in the past. Hulking state-owned titans, enjoying newly privileged market positions, may reward investors more reliably: The state-dominated Shanghai stock market has roundly outperformed the technology-and-consumer-focused Shenzhen market this year.

Deng Xiaoping, the grandfather of China’s economic reforms, famously said that it was acceptable to let “some people get rich first.” The people are far richer than they were three decades ago. Now it’s the state’s turn once again.

Write to Nathaniel Taplin at