Chinese Congress: Economic Trends to Watch as Xi Consolidates Power | Business and economy


The 20th Congress of the Communist Party of China (CPC) which begins on Sunday will be watched closely for clues about the future direction of the world’s second-largest economy.

The once-in-five-year rally, in which Xi Jinping is poised to secure an unprecedented third term in office that will put him as potential president for life, comes as the economy China is on a precarious basis.

After decades of rapid growth, China’s $18 trillion economy faces some of the worst headwinds in decades, including draconian COVID-19 restrictions, Western sanctions, capital outflows and a bubble. deflating real estate.

Here are three areas with implications for the Chinese economy to watch at the key meeting.

Direction changes

While there is little doubt that Xi will remain in charge – either by remaining as general secretary of the seven-member Politburo Standing Committee (PSC), the CCP’s top decision-making body, or by creating a new position such as that of party chairman – the congress will announce a host of leadership positions responsible for economic policy.

One of the biggest questions is who will replace Chinese Premier Li Keqiang, the second-highest ranking CPS official who has become the most important voice on economic issues during the pandemic.

Li, who hails from a rival faction associated with former President Hu Jintao, announced in March that this year would be his last as premier, although he could possibly remain a member of the PSC.

After being sidelined throughout Xi’s tenure, Li, a fluent English speaker well known to foreign business circles, has risen to prominence this year with dire warnings about the economy and the need for local authorities to better balance the brakes on the pandemic and growth.

Although Li did not directly criticize Beijing’s ultra-strict zero-COVID strategy, his focus on the economy has fueled speculation of a split within the party over how to handle the pandemic after nearly three years of punitive lockdowns, mass testing and border controls.

Chinese Premier Li Keqiang announced his intention to retire earlier this year [File: Jason Lee/Reuters]

Among the names mentioned as a possible successor to Li are Chen Miner, a senior CCP official in Chongqing and a close confidant of Xi; Wang Yang, a former boss from Guangdong Province known for his relatively liberal and market-oriented outlook; and Hu Chunhua, a protege of former President Hu who is vice premier responsible for poverty alleviation, agriculture and trade.

Another key figure to watch is Vice Premier Liu He, Xi’s top economic adviser, who is expected to step down from his post in the 25-member Politburo, the CCP’s second most powerful body.

Harvard-educated Liu, who is believed to have known Xi since childhood, stressed the need for a sustainable growth model that prioritizes mitigating economic risks, reducing poverty and preserving the environment. .

Taylor Loeb, economics and trade analyst at Trivium China, said Liu’s replacement could be China’s most powerful economic official.

“The two most likely candidates are the current chairman of the National Development and Reform Commission, He Lifeng, and the current chairman of the China Banking and Insurance Regulatory Commission, Guo Shuqing,” Loeb said. at Al Jazeera.

“If he takes the role of Liu, we’re probably looking at a more Xi-led, state-centric economic policy. If it’s Guo, the bias will be towards further capital account liberalization and deleveraging.

State control versus private enterprise

Under Xi, the Chinese economy has been placed under tighter state control.

After decades of market-oriented reforms initiated by his predecessors, Xi has repeatedly prioritized political control, national security, inequality and other concerns over economic growth.

“The key question for me is whether the Chinese economy continues to be subordinated to what tends to fall under the label of ‘national security’ – that is, the security of Xi Jinping’s status and elites and the elite system around it – or if economic development and the well-being of Chinese citizens become the overriding goal,” said Carsten Holz, an expert on Chinese economics and a professor at the Hong Kong University of Science and Technology at Al Jazeera.

“I suspect that we will continue to see ‘national security’ as the dominant theme. The Chinese economy then only matters insofar as it endangers or supports “national security”.

Under Xi’s push for “common prosperity”, authorities have launched sweeping crackdowns to rein in sectors ranging from education and real estate to gaming and technology.

In a 12-month period that coincided with heightened regulatory scrutiny from giants such as Alibaba and Tencent, the 10 biggest tech players lost an estimated $2 trillion in market value.

While Xi framed the campaign as an effort to address rising inequality, the crackdown is widely seen as also aimed at avoiding any future challenges to the CCP’s monopoly on power.

Xi also doubled down on his “zero-COVID” lockdown measures, mass testing and border controls, which continue to cripple economic activity even as the rest of the world lives with the virus.

China’s economy is expected to grow just 2.8% in 2022, according to the World Bank, which would be among its worst performance in decades.

“Until now, ‘common prosperity’ has been a relatively nebulous concept: does it mean brutal redistribution? Does this mean fairer rules of the game to improve equality of opportunity? said Loeb.

“I expect we will get more information on exactly how the party views ‘common prosperity’ at the convention, which will set the stage for how the policy is implemented in practice. “

Alicia García-Herrero, chief economist for Asia-Pacific at Natixis in Hong Kong, said she expected congress to deliver on the transition to a state-led economic model.

“We’re starting to hear about a new concept, which is ‘people-driven economy’ rather than market economy,” García-Herrero told Al Jazeera.

“It’s clearly a very socialist concept with Chinese characteristics, which will gain prominence after the party congress. It is essentially a justification of a state economic model but putting people in front of the concept and opposing the market.

“Shared prosperity is the complementary concept of a people-driven economic model,” added García-Herrero.

“President Xi has already made it clear that China does not intend to follow Europe with its welfare state model, but is looking for something different. In fact, shared prosperity is about the state playing an even more crucial role and avoiding excessive wealth being concentrated in a few hands.

Self-sufficiency versus globalization

Although he presided over a massive trade expansion that helped double the size of China’s economy, Xi stressed the need for greater economic autonomy.

In speeches, the Chinese leader has called for greater self-sufficiency in sectors ranging from science and technology to energy, food and finance.

Xi’s calls for self-reliance have been motivated, at least in part, by fears that China’s economy is vulnerable to attack from Western countries, particularly the United States, which has implemented a series of sanctions for hamper Chinese tech companies, including semiconductor makers. .

For Xi, the risks of integration into the global economy have been further underscored by Western sanctions imposed on Russia following its invasion of Ukraine.

zero covid
China’s ultra-strict ‘zero-COVID’ policy has put a strain on the economy [File: Aly Song/Reuters]

At the same time, many foreign companies view China as increasingly unwelcoming due to its tough pandemic restrictions and growing hostility towards private companies and outside influence.

As China and the West increasingly view each other less as trading partners than as a threat, economic decoupling is set to continue, if not accelerate.

“A third term for Xi would cement the idea in Washington and other Western capitals that China’s political and economic divergence from the West will continue – making deeper economic engagement increasingly difficult, including including in green technology supply chains where China has an advantage,” Logan Wright and Agatha Kratz said in a recent commentary for Rhodium Group. “Appointments of technocrats seen as somewhat removed from Xi’s personal networks could revive hopes for limited reform, but promise fatigue is real.”

Loeb said Beijing could use the congress to signal increased domestic investment in industries considered critical to China’s supply chain, particularly in the technology sector.

“Beijing will redouble its efforts for technological self-sufficiency and security vis-à-vis key resources, but we will watch to see if policymakers will discuss the role that foreign companies will play – or not play – in these ambitions” , says Loeb.

García-Herrero said she expected the CCP rally to double down on its message of self-reliance.

“In fact, China might not fully open up – restrictions, especially on exits, may remain – but it will be justified on national security grounds and it will also be a case of self-reliance,” he said. she declared.


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