The meeting gives China’s Xi an opportunity to tighten control over the economy

At the Communist Party congress starting on Sunday, President Xi Jinping, China’s most powerful figure in decades, will have a chance to appoint more allies who share his vision for an even more dominant role for the party in the economy and tighter control over businessmen.

The only question, economists and political analysts say, is whether China’s economic crisis can force Xi to tone down his enthusiasm for the state economy and include supporters of markets and private companies that create jobs and wealth.

The congress will appoint a new Standing Committee, China’s inner circle of power and other party leaders. Economic regulators will be appointed by a ceremonial legislature that meets in March. But the formation of the leadership will highlight who is likely to succeed Premier Li Keqiang, the top economic official, and take on other government duties.

Xi 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 reducing dependence on technology and foreign markets.

Xi is expected to try to break with tradition and award himself a third five-year term as party leader. The report to be submitted to Congress will outline economic, commercial and technological goals for at least the next five years.

Investors will be looking for signs of a “more private-sector-led economy. But with President Xi in power, there won’t be much change,” said Lloyd Chan of Oxford Economics. will be managed by the state”.

The party faces an avalanche of challenges: a tariff war with Washington; restrictions on access to Western technology; decreasing and aging labor force; the rising cost of Beijing’s anti-Covid strategy and a debt that Chinese leaders fear is dangerously high.

Economic growth fell to 2.2% year-on-year in the first six months of 2022, less than half of the official target, hampered by debt reduction in China’s massive real estate sector and repeated shutdowns of major cities to combat the virus outbreak.

Loyalty to Xi is seen as the key to advancement. The potential prime ministerial candidate, a post that usually goes to the party’s No. 2 or No. 3 leader, announced his loyalty by publishing a newspaper article in July that invoked Xi’s name 48 times.

“Xi Jinping prefers to appoint party apparatchiks, cadres loyal to himself, rather than technocrats,” said Willy Lam, who researches elite Chinese politics at the Chinese University of Hong Kong. “This is a big problem if 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 he failed to deliver on dozens of other promised changes. Meanwhile, the party is investing money in the creation of computer chips, aerospace and other industries.

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

Xi’s government wants manufacturers to reduce their dependence on global supply chains and use more domestic suppliers, even if it increases costs.

Under the 1950s propaganda slogan “shared prosperity,” Xi is pushing businessmen to help close China’s wealth gap by paying for rural job creation and other initiatives.

Li, the other leader, is due to step down as prime minister next year, but at 67, he is a year below party retirement age. It is not clear whether he can remain in the Standing Committee and take another post in the government.

Other regulators and policymakers, some educated abroad and experienced in dealing with foreign markets and governments, are expected to step down next year if the retirement age is introduced.

Among them is Vice President Liu He, a Harvard-educated reformer who is Xi’s economic adviser and chief envoy for trade war talks with Washington. Central bank governor and former Indiana University professor Yi Gang, Finance Minister Liu Kun and banking regulator Guo Shuqing are also expected to attend.

When his successors are chosen, the big question will be “whether Xi has unfettered power to decide on 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?” said the scissors. “If it’s a bunch of sycophants, we have more paranoia masquerading as politics.”

Xi’s decision to go abroad for last month’s summit with Russian President Vladimir Putin and Central Asian leaders suggests he was confident he had a third term secured and did not need to stay at home to make deals.

“Financial markets expect some evidence of internal resistance to Xi” to change the direction of policymaking, Logan Wright and Agatha Kratz said in a report for Rhodium Group. If Xi strengthens that authority, it would mean “elevating party priorities above those of China’s economic technocrats.”

Among the possible candidates for prime minister is Wang Yang, who is already a member of the Standing Committee, according to political analysts. Others are Hu Chunhua and Han Zheng, both vice premiers, a role seen as training for the highest office.

Wang, a former party secretary in the southern manufacturing province of Guangdong, and Han, who for years served as party secretary in the business capital of Shanghai, are considered politically close to Xi and may represent a slight shift in economic direction.

Hu could represent a potential change. He is considered politically closer to Xi’s predecessor, Hu Jintao.

Hu Chunhua, 59, pushed for the spot in a July 27 article on agricultural policy in the party newspaper, quoting Xi in every sentence.

This showed that Hu “really wants to get the position,” Lam said. He said Hu has less economic experience than Li, the premier, “but at least he comes from a different faction” than Xi, which would increase the diversity of viewpoints.

Potential losers include party secretaries Li Qiang of Shanghai or Chen Min’er of the populous southwestern city of Chongqing.

A potential “economic czar” to succeed Liu, the vice premier, is He Lifeng, chairman of the government’s planning agency, the National Development and Reform Commission. A friend of Xi’s, he is seen as a politician, not a technocrat.

A party statement in August cemented the dominance of politics by calling for “party building”. Last month, the party magazine Seeking Truth published a speech by Xi that emphasized the party’s need for “self-revolution” to fight corruption and other problems.

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

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