China: It's my Party...

The 19th Congress of the Communist Party of China formally opens on 18 October in Beijing. The Party’s General Secretary, Xi Jinping, is widely expected further to consolidate his grip on power, thereby facilitating the pursuit of his ambitious reform agenda for the next five years, if not ten.

“Next Wednesday, the leaders of the ruling Communist party will meet to anoint Mr Xi for his second five-year term as chairman of everything. In the past five years, he has consolidated power, purged rivals and encouraged a personality cult to a degree not seen since the death of Mao Zedong in 1976.”

Jamil Anderlini, Financial Times, 11 October 2017

A busy week in Beijing…

The Communist Party of China (CPC) will begin its 19th Congress on 18 October when 2,300 delegates assemble in Beijing, marking the mid-point for the country’s ‘5th generation’ leadership’s ten year span. Proceedings will be opened with a report from CPC General Secretary (and President of the People’s Republic of China) Xi Jinping listing the achievements of the past five years (ie since the 18th Congress) and setting out a vision through to the next Congress due in 2022. The discussions which follow will be aimed primarily at firming up that vision.

On 24 October, towards the end of proceedings, the Congress will elect the 19th Central Committee of the CPC comprising 205 members and 171 alternates — to be followed by a closing speech from Xi Jinping.

On 25 October, the new Central Committee will meet for the first time to elect:

  • 25 members of the Politburo, where nearly half the current membership is due to retire under the convention that members step down at the Congress immediately following their 68th birthday (more on which below); and,
  • Critically, a new Politburo Standing Committee (SC) which currently comprises seven members, five of whom are due to retire.
…in the wake of bargaining in Beidaihe

If this all sounds moderately democratic, it is, in fact, reasonable to assume that much of what emerges from the Congress, especially as far as key appointments are concerned, was nailed down at the CPC’s annual (and ‘secret’) conclave in the northeast seaside resort of Beidaihe in August.

What has become something of a tradition (despite a ten-year gap during the 2003-2013 presidency of Hu Jintao), the Beidaihe conclave was originally conceived by Mao Zedong in 1954. It is seen primarily as an opportunity for the Party’s elders to contribute to current debates (be they policy or personnel, the latter seemingly just as vital as the former given the propensity for patronage in Party politics). However, Xi Jinping is widely considered to have gone to this year’s conclave with a very strong hand to play and to be prepared to try to advance his agenda with or without the elders’ backing. Nevertheless, as China expert Professor Minxin Pei has noted, this does not mean that Xi Jinping will have had it all his own way. Much as he seems determined to move away (at least to a large extent) from ‘pure’ patronage in favour of individuals who have won his personal respect through their work ethic and technical competence in his efforts to undermine vested interest in pursuit of his reform programme, he cannot afford totally to ignore key factions within the Party, notably the so called ‘Shanghai Clique’ around former President Jiang Zemin and the Tuanpai, or ‘Youth League Faction’, which has been Hu Jintao’s main power base.

So, there will almost certainly have been compromises. Furthermore, as the CPC is much less prone to leaks that some organisations one can think of, we shall likely have to wait for the members of the new Politburo SC to emerge onto the stage (one by one) on 25 October for us to assess whether Xi Jinping has indeed further strengthened his grip on the Party, as is now widely expected.

Who is due to step down from the Standing Committee…

The first thing of importance to note about what is widely considered to be the highest level of power within the CPC, ie the Standing Committee, is that it does not have a fixed number of members. In Jiang Zemin’s day there were eight members. Then in 2002, to general surprise, membership rose to ten, where it remained until it was cut back to seven (ie fewer than expected) in 2012. This year has seen suggestions that it could be increased to eight or even nine again to accommodate factional interests; or that it could be cut to five; or (which I personally regard as very unlikely) even that it could be scrapped altogether!

I noted earlier that five of the current seven members are due to retire under the age limit convention (nb: although ‘mandatory’ retirement ages are well established and have been enforced for many years, they are not incorporated in the Party rules). The five in question are: Zhang Dejiang, Yu Zhengsheng, Liu Yunshan, Wang Qishan, and Zhang Gaoli.

Of these, by far the most interesting and important is Wang Qishan. Head of anti-corruption and Xi Jinping’s closest ally on the SC, there has been widespread speculation that the latter has been working hard to secure a further five-year term for his chief enforcer, a move which would, many believe, set a precedent for Xi Jinping himself to stay on as CPC General Secretary and Chair of the powerful Central Military Commission (CMC), but not as President without a change to China’s constitution, beyond 2022. Indeed, in an article published on 24 July (subscriber access only) Tom Mitchell et al at the Financial Times wondered whether Wang Qishan might not only retain a place on the SC but also replace Li Kiqiang (who is not due to retire on age grounds) as Prime Minister. Bearing in mind the speculation over Li Kiqiang’s prospects which followed the 2015 equity market crash, I would not totally rule this out; and, if it were to happen, I certainly think it would be a positive for further progress with Xi Jinping’s economic reform agenda (as well as solid evidence of him tightening his grip on the levers of power generally).

…and who will step up?

Looking across a range of expert ‘China watchers’, one would come up with a ‘long list’ of between ten and fifteen candidates. However, in practice, I think it possible to trim the list of ‘possibles’ to a shorter one of ‘probables’. And topping my (and most people’s) shorter list would be the current Director of the General Office of the CPC’s Central Committee Li Zhanshu (born 1950), who was elevated to the Politburo in 2012, is a longstanding friend who is currently a top aide to Xi Jinping, and who is widely seen as the Secretary General’s closest ally after Wang Qishan.

Three other close associates of Xi Jinping are also seen by some commentators at least as strong contenders (though I doubt, given at least some need to balance ‘interests’ that more than two, at most, would make the cut), as follows.

  • Chen Min’er (1960), who was appointed Party chief in Chongqing in July. He replaced Sun Zhengcai, formerly the youngest member of the 18th Politburo and considered by many to be a strong contender for 6th generation leader, who has since been expelled from the Party for alleged political and criminal wrongdoing.
  • Li Quiang (1959), who is currently Party Secretary in Jiangsu.
  • Zhao Leji (1957), who is currently head of the CPC’s Organisation Department.

Among them, I see Chen Min’er as the frontrunner — but this is more of a guess than an analytical judgement!

All this being said, given their relative youth, all three may be stronger candidates for the SC in the 2022 rotation rather than now. Furthermore, for both Chen Min’er and Li Quiang appointment to the SC now would be without a prior spell on the Politburo (to which both are very likely to be elected this year), which is not unprecedented (eg Xi Jinping and Li Kiqaing both made the jump in 2007) but is unusual.

A fourth close associate of Xi Jinping, Wang Huning, is also being widely tipped for a seat on the SC. As Director of the Central Policy Research Office (since 2002), he is one of the Party’s top theorists; and he is also particularly skilled in international relations. However, some commentators believe that he lacks ambition and may prefer to stay in his present role.

Among contenders not as closely associated with Xi Jinping personally, my (and many others’) top pick is Vice-Premier Wang Yang (1955) who is the key official driving the President’s flagship Belt and Road initiative. It would, in my view, be a major surprise if he were not to be promoted to the SC.

An arguably darker horse (he was once a member of the ‘Shanghai Clique’) whose promotion would nevertheless be no big surprise is Shanghai Party chief Han Zheng (1954). Indeed, some even see him as a potential replacement for Wang Qishan as head of anti-corruption, ie (to give the role its proper title) Secretary of the Central Committee for Discipline Inspection. However, others believe that the fact tha t he has served his entire professional career in Shanghai may count against him. Nevertheless, he does seem likely to be given a top economic job (possibly as Vice-Premier), for which he would be well fitted.

Farther still from Xi Jinping’s ‘inner circle’ but probably the leading contender from the ‘Youth League Faction’ is Hu Chunhua (1963), currently CPC Secretary in Guangdong. Together with Chen Min’er, he has long been considered as a potential 6th generation leader; but the changing dynamics within China’s elite over the past five years have almost certainly reduced the likelihood of him winning the top job in 2022.

Without going into detail, I am also mindful of four further individuals whose name comes up from time to time, ie head of the Central Committee’s Propaganda Department Liu Qibao (1953); Vice-President Li Yuanchao (1950); head of the United Front Work Department Sun Chunlan (1950); and former Party Secretary in troubled Xinjiang province Zhang Chunxian (1953). Of these, in one respect at least the most interesting is Sun Chunian since her elevation would mark the first time a woman has been appointed to the SC.

The Politburo, the Central Committee…

The list of potential candidates for the 25-member Politburo is long, even if one confines oneself to close associates of Xi Jinping. Successful candidates are likely to have served as provincial Party chiefs as well as governors. China experts will be studying the new membership in great detail as soon as it emerges.

As for the Central Committee, the one thing about which we can be sure is that there will be the largest turnover since the 1969 Cultural Revolution. Of the 376 members (ie including alternates) of the current (18th) Central Committee, 38 have been purged and around 200 either have already retired or will do so this month. Again, the expectation is that vacancies will be filled largely by officials who match Xi Jinping’s preferences.

…and the PLA

It may be something of an aside but it is nonetheless an important one to consider briefly the representative of the People’s Liberation Army (PLA) at the Congress. If some consider, not unreasonably, that the pace of economic reform under Xi Jinping has been disappointing (especially at the same time as steps towards personal and political freedom have been going backwards) the same cannot be said for reform of the military. As China analyst Cheng Li has pointed out in a recent article for the BBC, of the 300 military delegates attending the Congress “an extraordinary 90%” will be first-timers; and, at most, only seven out of 41 Central Committee members will retain their seat. He continues:

“The degree of military reshuffling also offers a clue to broader leadership changes, particularly the likelihood of Mr Xi further consolidating power. With firm control over the military, Mr Xi has set the stage for a massive turnover in the party leadership at the 19th Party Congress.”

This “firm control” is amply demonstrated by three individuals, all close friends of Xi Jinping, General Zhang Youxia, General Li Zhuocheng and Admiral Miao Hua, all of whom ar e widely tipped to be the key members of the new top military leadership, together with General Xu Qiliang who is expected t o retain his current post of Vice-Chairman of the Central Military Commission.

What could go wrong?

The short answer is, probably, not much. ‘Back room’ deals have been done at the most senior levels and many of the ‘ordinary’ delegates will be individuals who have been advanced by Xi Jinping over the past five years.

However, the run-up to the 2012 Congress was disrupted by anti-Japan protests; and international (not to mention investor) attention was seized when Xi Jinping disappeared from public view for two weeks and by the arrest of top Party official Bo Xilai.

It is hardly surprising, therefore, that media attention was grabbed on 11 October when a US warship reportedly sailed through waters in the South China Sea claimed by China — even though the incident was, in my view, unexceptional.

A more likely source of turbulence than tensions in the South China Sea is, of course, North Korea. Based on what we have witnessed already this year (most recently last month when Xi Jinping was just about to open the 2017 BRICS Summit), it is reasonable to assume a high probability that North Korean leader Kim Jong-un will do something on the morning of 18 October to try to upstage Xi Jinping. This, of itself, should not be particularly worrisome. However, much may depend on how US President Donald Trump reacts; and, if only to judge from his increasingly bellicose rhetoric, there is cause for at least some concern on this count.

However, I don’t think we should get overly worried. Despite the rhetoric, in practice Mr Trump seems to be focused on drumming up support for a still tougher non-military stance on North Korea during his visit to Asia next month (which will include a summit in Beijing with Xi Jinping).

In short, headline-grabbing actions by North Korea aside, if something does go ‘wrong’ it is likely to be relative to very high expectations of what Xi Jinping will get out of the Congress. For example, even if we see him getting his way over at least the majority of key appointments, there may be some disappointment if he does not receive the accolade of having ‘Xi Jinping Thought ’ incorporated into the Party’s charter, despite the fact that the “Thought” word has only ever been associated with Mao Zedong previously.

What does it all mean?

If this proves to be the case, we can safely assume that much of the domestic focus of the next five years will be on economic reform. The detail of this will be formalised towards the end of this year at the annual Central Economic Work Conference . The overarching theme is likely to be a continuation of the current policy of “financial risk control and macro-stability”. Much of the responsibility for achieving this will be in the hands of the recently established Financial Stability and Development Commission (FSDC); so, there will be considerable interest among investors in particular in key appointments relative to it, especially the responsible Vice-Premier (which, as previously noted, could be Han Zheng).

Similarly, all eyes will be on who succeeds Zhou Xiaochuan as Governor of the People’s Bank of China (PBOC) if, as expected, he retires at the end of this year. The favourite among investors is probably the current head of the China Banking Regulatory Commission, Guo Shuqing.

Internationally, relations with Washington are likely to get even trickier thanks to North Korea on the one hand and, on the other, what I see as a high probability that the US’s current Section 301 investigation into alleged barriers to market access in China will result in Washington imposing tariffs on a range of imports from there. Although, as I wrote in a recent article, I think that, post-Congress, Xi Jinping will be willing to do even more with the US than he has to date to try to rein in Kim Jong-un, on trade Sino-US tensions seem set to rise, with a real risk that Mr Trump could trigger a trade war which would also suck in third countries.

More widely, I expect Xi Jinping to look increasingly to use China’s growing ‘soft power’ consistent with his keynote speech at the World Economic Forum earlier this year. This will almost certainly include working more closely with Europe on both free trade and climate change. After all, especially since Mr Trump's arrival in the White House, China has been doing pretty well out of soft power projection as far as both its regional and its global aspirations are concerned.

Conclusions

I am personally convinced that, although Xi Jinping will probably not get everything he wanted out of the 19th Congress, he will emerge with a still firmer grip on the levers of power in Beijing — even if he has not succeeded in removing the current barriers to his continuing in office after 2022. While commentators such as Jamil Anderlini, quoted at the start of this article, can reasonably claim that “…China looks more like [a dictatorship] than at any time in several decades”, strong leadership is almost certainly going to be needed if the regime is going to navigate safely through very treacherous waters both domestically and internationally. But it is very much to be hoped that, in surrounding himself largely with people beholden to him personally to at least some extent, Xi Jinping does not silence the contrarian voices which could help him avoid the sort of mistakes which were made in the financial sector in 2015 and which very nearly brought down the whole house of cards.

Alastair Newton

China is doing well in every single thing

Not really, msrinfo9. First, and probably foremost, there is a huge demographic problem resulting from the one child policy, ie around 120 young males to every 100 females. There is a great deal of research which suggests that societies with too many men are highly prone to both internal and external conflict. Furthermore, artificially constraining birth rates has meant, inevitably, an ageing society which now poses a very real threat of a rapidly rising number of 'dependents' relative to working age population with the consequence that China will get old before it gets rich. These are major threats to social cohesion. Second, encouraged by the mess in a number of Western democracies, Xi Jinping is rowing back quite strongly on political rights in China, reversing what has been at least the aim since the days of Deng Xiaoping's primacy of gradually moving to a more democratic society (while keeping the CPC in power, two things which may, in fact, be mutually incompatible - and, certainly, studies by the Party dating back to around 1995 have failed to come up with a way to achieve this!). This may not pose a threat to internal stability for now with the economy going reasonably well and all the obvious examples around of democracies' failings (eg the current state of affairs in both Washington to and London); however, even with the anti-corruption drive improving the general image of the CPC, I doubt this is sustainable in the medium- to long-term, ie I think there will be a popular backlash at some stage, even if China can avoid an economic/financial crash (which many believe to be inevitable given the huge stresses in the financial system). There are myriad other challenges which will be hard to address; but let me leave it there for now.

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