The ruling Communist Party of China (CPC) on 23 October revealed its new Politburo Standing Committee (PSC), following its week-long 20th National Congress. The seven-person PSC is the party’s top decision-making body.
- The PSC and wider Politburo line-up are a striking reflection and reinforcement of President Xi Jinping’s dominance. They suggest he is not seriously constrained by factional balance or compromise.
- Xi’s continued pre-eminence portends policy continuity with his established agenda. With even stronger control, he seems more likely to double down on key policies than to moderate them.
- There are signs that tax reform, redistribution and scrutiny of “wealth accumulation” may move back up the agenda, but there is no sign of an indiscriminate or radical anti-business shift.
- Indicators of more specific economic policy adjustments (which remain highly unlikely to include an exit from zero-COVID-19) may come at subsequent meetings in November-December.
Wang Yang, the fourth-ranked member of the outgoing PSC, has retired after one term on the PSC, at age 67, which is below the informal retirement age of 68 that in recent decades tended to guide PSC membership. Wang Huning, who is also 67 but is widely considered closer to Xi, has not retired and will remain on the PSC. Among leaders not associated with Xi, the strongest PSC contender was Vice Premier Hu Chunhua. However, Hu not only failed to gain promotion but also lost his Politburo seat, as did Chen Quanguo, while Vice Premier Sun Chunlan has retired. Hu, Chen and Sun, like Li Keqiang and Wang Yang, have ties to former president Hu Jintao.
Li Qiang’s 2022 record has been overshadowed by the Shanghai lockdowns, but he otherwise has a good reputation in the city’s business community. Foreign investors have tended to find the Shanghai government relatively supportive and effective amid difficult national and geopolitical conditions. Li has more economy- and business-related exposure than most of the new PSC, having had over 20 years’ leadership experience in Zhejiang, Jiangsu and Shanghai – home to some of China’s most internationally connected economies and strongest private sectors. He was once party chief of Wenzhou, a famous hotbed of private entrepreneurship and SMEs.
Li is thus simultaneously a Xi protégé (they worked together closely in Zhejiang) and someone who does not seem “anti-business” to investors. However, his track record probably says as much about the places he served as about Li’s own preferences. As Xi’s own record shows, leaders’ work in the provinces is not a reliable predictor of what they do in central government. Xi, not Li, will call the shots on major issues anyway.
PSC shows KPIs
Li Qiang’s rise despite the controversial Shanghai lockdowns this year can also be read as another reiteration of the “correctness” of the zero-COVID-19 policy. It reinforces the low likelihood of that policy being rolled back in the coming months, and shows that the loyal implementation of central directives – not popularity or economic growth – is the critical performance metric for all CPC officials under Xi. Others in the new PSC fit the pattern:
- As Beijing party secretary, Cai Qi is not viewed as especially effective and has not been free of controversy (including over the implementation of lockdowns), but has kept aligned with central policy and advanced to the PSC. Cai worked under Xi in Fujian and Zhejiang provinces, dating back to the 1990s.
- As director of the Central Committee’s General Office and of Xi’s support office, Ding Xuexiang has effectively been Xi’s chief of staff. Xi brought Ding with him to Beijing in 2012 after they worked together in Shanghai, and the latter is a trusted close aide to the president.
- Guangdong CPC Party Secretary Li Xi will head the CPC’s disciplinary and anti-corruption watchdog, the Central Commission for Discipline Inspection (CCDI). Outgoing CCDI head Zhao Leji’s promotion within the PSC left a vacancy, and Li worked at the CCDI during Xi’s first term. He has longstanding ties to Xi dating back to the 1980s, and the two men share a background in Shaanxi province. Li also worked under Xi in Shanghai in 2011-12.
The congress has triggered a surge in concern among both the domestic and the foreign business communities, based largely on two things:
- A resurgence in talk about tax reform, “common prosperity” and scrutiny of the wealthy, mainly triggered by some language in Xi’s report to the congress.
- The new leadership line-up, insofar as it further increases Xi’s dominance and excludes leaders seen as balancing relatively more market-concerned voices in Beijing.
In addition to the Li Keqiang and Wang Yang exits, and the question of the new premier, the congress also saw Liu He (Xi’s “economic tsar”) and top banking and finance policymakers Guo Shuqing, Yi Gang and Pan Gongsheng exit the party leadership – meaning they will retire from their government posts at the NPC in March. They are all familiar faces for foreign investors and seen as competent, relatively market-friendly (by CPC standards) stewards. Their looming departure thus adds to likely market jitters.
However, it would be premature to panic pending a new line-up at the NPC, and given the reduced control that ministries and regulators have had over top-level policy direction in recent years. National Development and Reform Commission (NDRC) head He Lifeng remains a favourite to replace Liu, and this might fit Xi’s statist tendencies on economic policy. However, it is unclear whether this will make much difference, or whether Liu’s successor will retain the same broad role. Policy predictions really hinge on speculation over Xi’s intent.
Xi’s main report and speech to the congress included some language about tightening regulation of improper “wealth accumulation”, and around his theme of “common prosperity”. The latter caused alarm in 2021 amid the crackdown on some of China’s leading tech companies and entrepreneurs, but this faded somewhat in 2022. Xi’s mention of these themes at the congress sparked arguably disproportionate media attention and headlines, since he did not say very much, and most of it was not new.
Since Xi has already been dominant for years, it is not at all clear that he will now pursue some radical, broad campaign against private businesses and the wealthy just because he has further consolidated control of the party’s leadership. It will therefore be important to watch the next Politburo meeting (likely in November) and Central Economic Work Conference (likely in December), which might give more substantive, less speculative indicators of whether Xi intends major policy change or intensification. He has shown himself capable of surprises, major changes and taking calculated risks, but to date has rarely been reckless.