Chinese economy: China set to shake up economic leadership as reformers step down

China’s ruling Communist Party is setting the stage next month for the biggest overhaul of its economic leadership in a decade, with a generation of reform-minded policymakers set to step down amid deteriorating growth prospects.

Beijing’s once-every-five-year reshuffle begins at the party congress that begins Oct. 16, where President Xi Jinping is poised to break with precedent and secure a third term in office.

As senior government officials remain in office until the annual meeting of parliament, usually in March, the party conclave is expected to offer clues about who is vying for the top jobs and identify who succeeds Li Keqiang, who resigned in March after two terms as prime minister, a post responsible for managing the world’s second-largest economy.

Li is widely seen as having seen his role diminished under Xi, but has nonetheless been a source of comfort to investors who see him as a moderate voice amid Xi’s shift to state-led economic management.

“Li’s power has been limited but at least he was named at the same time as Xi. His successor could be even weaker,” said a political insider who spoke on condition of anonymity, given the sensitivity of the subject.

“Under the existing political structure, whoever takes over (as prime minister) won’t make a big difference,” the person said.

In addition to Li, economic czar Liu He, 70, and top banking regulator Guo Shuqing, 66, are also expected to step down early next year, political sources said Xi, 69, to maintain retirement age standards for managers. other than himself.

The retirement age for top executives is traditionally 68 or two five-year terms.

Li, 67, has a doctorate in economics from the elite Beijing University and is fluent in English.

Liu, a vice premier and a Harvard-educated economist, is a close confidant of Xi and his go-to man in trade talks with Washington. He is seen as the mastermind behind previous reforms, including painful efforts to reduce excess factory capacity and financial risks.

LIMITED ROOM

China’s next economic team, by contrast, could be dominated by domestically trained Xi loyalists who lack the international savvy, academic polish and independent-mindedness of the current team. , according to political insiders and analysts.

The two favorites to replace Li are Wang Yang, 67, chairman of the Chinese People’s Political Consultative Conference, an advisory body, and Vice Premier Hu Chunhua, 59.

While both Wang and Hu have held positions at the helm of Guangdong province’s economic powerhouse and are seen as pragmatic and pro-reform officials, their ability to bring about major change may be limited, officials said. political insiders.

Other longer-term possibilities for the premier include Chongqing party leader Chen Miner and his Shanghai counterpart Li Qiang, they said. Both are considered Xi loyalists.

He Lifeng, who heads the National Development and Reform Commission, the powerful state planning agency, is a leading candidate to replace Liu, political insiders said. An economist and bureaucrat close to the Xi, he worked for 25 years in Fujian province.

In late 2013, a newly elevated Xi unveiled sweeping reform plans, but market liberalization has since run out of steam.

“The 20th Party Congress has plenty of room to choose a new economic team,” said Bert Hofman, director of the East Asian Institute at the Lee Kuan Yew School of Public Policy in Singapore.

“If this team is a technocratic team pursuing a pragmatic agenda to achieve the broad goals set by Xi, we can see much of the unfinished reform agenda from the 2013 decisions resurface and hopefully see growth pick up again.” , said Hofman, former country. Director for China at the World Bank.

“If, on the other hand, the new team reflects a more statist approach, growth could continue to lag.”

EDITING CHALLENGES

The new economic team will inherit unprecedented challenges, from finding an exit to what many see as an increasingly unsustainable zero-COVID policy to a real estate crisis threatening financial stability and rising tensions with Washington. .

A chaotic crackdown on tech companies and private education that has shaken investor and business confidence has prompted Li and Liu to voice support for the so-called platform economy.

“In the face of growing internal and external challenges, the Chinese government’s attention seems to have been diverted from its reform agenda,” said Joerg Wuttke, president of the EU Chamber of Commerce in China. The chamber plans to publish a document with nearly 1,000 recommendations to improve conditions for European businesses in China ahead of the congress.

“The Chamber believes that the best way for China to realize its economic potential is to return to the path of reform and opening up,” he said.

With few signs that China will significantly ease zero-COVID soon, some analysts expect the economy to grow just 3% this year, which would be the slowest since 1976, excluding the 2.2% expansion during the first hit of COVID in 2020.

Li, who has fought an uphill battle to keep the economy on a balanced keel while pushing limited change, seems keen to leave his mark on public memory as a reformer.

During a visit to Shenzhen, a village-turned-megalopolis and symbolic cradle of reforms that sparked four decades of soaring growth, Li said the trend was irreversible.

“China’s reform and opening up will keep moving forward. The Yellow River and the Yangtze River will not ebb,” he said last month at the port of Yantian in Shenzhen.

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