Chinese President Xi Jinping Gets Chance to Hold Economy Amid Slump

President Xi Jinping, China’s Most Influential Figure will get a chance in decades 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 rally starting this weekend.

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The only question, economists and political analysts say, is whether the economic slump in China could force Xi to dampen his enthusiasm for a state-run economy and include supporters of the markets and private enterprises that generate jobs and wealth.

Congress will appoint a new standing committee, China’s inner circle of power, and other party leaders, not economic regulators. They are appointed by the ceremonial legislature, which meets in March. But the leadership lineup will make clear who will succeed Prime Minister Li Keqiang, the top economic official, and fill 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 tenure, the emphasis was on politics over economics and on reducing reliance on foreign technology and markets.

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Xi is expected to try to break with tradition and grant himself a third five-year term as party leader. A report he will present at Congress will set economic, trade and technology targets for at least the next five years.

Investors will look for signs of “a more private sector-led economy. But not much will change with President Xi in power,” said Lloyd Chan of Oxford Economics. will be run by the state.”

The party faces an avalanche of challenges: a tariff war with Washington, restrictions on access to Western technology, a shrinking and aging workforce, the rising costs of Beijing’s anti-COVID strategy, and Chinese leaders’ debt concerns are dangerously high.

Economic growth fell to 2.2% from a year earlier in the first six months of 2022, less than half of its official target, undermined by a debt crackdown in China’s massive real estate sector and repeated closures of major cities to fight virus outbreaks.

Loyalty to Xi is considered the key to promotion. A potential candidate for prime minister, a post that usually goes to the No. 2 or 3 party leader, declared his allegiance by publishing a newspaper article in July in which Xi’s name was called 48 times.

“Xi Jinping prefers to appoint party apparatchiks, cadres who are loyal to themselves, rather than technocrats,” said Willy Lam, who studies elite Chinese politics at the Chinese University of Hong Kong. “This is a big deal when we look at Xi’s future financial and economic advisers.”

Beijing opened its auto industry to foreign ownership and implemented other market-oriented reforms. But it has failed to carry through on dozens of other promised changes. Meanwhile, the party is putting money into computer chip making, aerospace and other industries.

Private sector success stories, including Alibaba, the world’s largest e-commerce company, and Tencent, a games and social media giant, are under pressure to join the party plans. They spend billions of dollars on chip development and other political causes.

Xi’s government wants manufacturers to become less dependent on global supply chains and use more domestic suppliers, even if that increases costs.

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

Li, the No. 2 leader, will step down as prime minister next year, but at 67 that will be a year below retirement age. It is not clear whether he can remain on the Standing Committee and occupy another government position.

Other regulators and policymakers, some of whom are trained and experienced abroad in dealing with foreign markets and governments, will resign in the coming year if the retirement age is maintained.

Among them, Deputy Prime Minister Liu He, a Harvard-trained reform lawyer who is Xi’s economic adviser and chief envoy for trade war talks with Washington. Yi Gang, central bank governor and former professor at Indiana University, Treasury Secretary Liu Kun and banking supervisor Guo Shuqing will also leave.

When their successors are chosen, the big question will be “whether Xi has unlimited decision-making power over the economy and technology,” Derek Scissors of the American Enterprise Institute in Washington said in an email.

“Is Xi being forced by party elites to listen to anyone?” Scissors said. “If it’s a bunch of mushrooms, we get more paranoia as a policy.”

Xi’s decision to go abroad for the summit with Russian President Vladimir Putin and Central Asian leaders last month suggests he was confident he could land a third term and not have to stay home to make deals. to close.

“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, it would suggest putting the party’s priorities above those of China’s economic technocrats.

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

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

Hu could 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 on agricultural policy in the major party newspaper.

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

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

A potential “economic czar” to succeed Liu, the deputy prime minister, is He Lifeng, chairman of the cabinet planning bureau, 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 formation.” Last month, the party magazine Seeking Truth published a Xi speech highlighting the party’s need for “self-revolution” to fight corruption and other problems.

That suggests Xi will tighten party control, “and further narrow the scope for liberal approaches to economic policy,” Eurasia Group’s Neil Thomas said in a report.

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