MNI ANALYSIS: No Major China Policy Changes Seen Under Xi Govt

By William Bi

     BEIJING (MNI) - For months, China watchers speculated about the makeup of

the ruling Communist Party's leadership for the next five years: will a

long-standing retirement age tradition be set aside to allow Vice Premier and

anti-corruption czar Wang Qishan to remain on the Politburo Standing Committee?

Will Premier Li Keqiang, No. 2 in the current leadership, get the boot from the

committee? Will the number of Standing Committee members be cut to five from

seven? Will an obvious successor to Xi be appointed to the panel? 

     Despite the many questions about the make-up of the leadership, the

consensus was General Secretary Xi Jinping would amass the kind of power over

the world's biggest economy unseen since the days of Mao Zedong.  

     Led by Xi, who was born in 1953, the rest of the team filed out one by one

into the main stage in the East Hall of the Great Hall of the People, which has

hosted the new Chinese leadership's coming-out parties since the 1990's: Li

Keqiang, born in 1955, whose continued presence on the standing committee defied

naysayers; Wang Yang, born in 1955, a former member of the Communist Youth

League supposedly aligned with Xi's predecessor Hu Jintao; a capable vice

premier in charge of agriculture and foreign trade, Li Zhanshu, born in 1950;

the secretariat of Xi's party office, Han Zheng, born in 1954, the youngest

mayor of Shanghai; Zhao Leji, born in 1957, the head of CPC's organizing

department; and Wang Huning, 1955, director of CPC's Central Policy Research

Office and the party top ideologist.

     Wang Qishan did retire and there was no obvious successor to Xi appointed

to the top leadership. 

     The make-up of the new team was seen as confirmation that Xi is poised to

control China well beyond his next five-year term, breaking with a tradition

that a younger-generation leader -- or the post-60's in Chinese vernacular -- is

inducted into the highest echelon of power in a sitting party secretary's second

term. 

     Top party officials seen by observers as strong candidates to succeed Xi

had been pushed out of the way. Sun Zhengcai, born in 1963 and a once-rising

star, was charged with corruption earlier this year. Another would-be

leader-of-tomorrow, Hu Chunha, the 54-year-old party secretary of Guangdong

province, was spared jail but steered out of Xi's way.

     Xi's overarching power was apparent from day-one of the week-long affair,

when he laid out his expansive vision of China well into the middle of the

century in a three-and-a-half hour speech, lecturing  the nearly 90 million CPC

members and 1.4 billion Chinese citizens what they should or shouldn't do on the

road to the "great revival" of the Chinese nation, labeled "Xi Jinping Thought

on Socialism with Chinese Characteristics For a New Era." At the congress's

conclusion on Tuesday, the CPC announced that "Xi Jinping Thought" is now

enshrined in the party constitution, along side those of former supreme leaders

Mao and Deng Xiaoping. 

     To be sure, every Chinese leader from Mao left a legacy imprinted in the

party's psyche: Mao's "thoughts," Deng Xiaoping's "theory" of developing

socialism with Chinese characteristics, even Jiang Zemin and Hu Jintao had their

shares of slogans touted, though much less memorably. But critics note that Xi

is the first leader to have himself enshrined after only serving one term; other

leaders were elevated only after retirement. 

     That has led to the concern that Xi's absolute grip on power is undermining

China's system of checks and balances installed by Deng, who was a victim of the

ruthless purges of Chairman Mao. There now seems to be no one who could

challenge Xi if he were to make a major policy misstep. 

     From an economic perspective, from now until the National People's Congress

in March next year, the CPC's leadership is expected to consolidate and

stabilize. Even some of Xi's fiercest critics admit that he has put in place

well-intended policies: steering China away from the growth-at-all-costs frenzy,

providing a basic social safety net for the poor, and attempting to repair a

scarred environment depleted of resources. The 19th congress left little doubt

that these measures will continue. 

     In the medium term, there is expected to be no major shift in policy

direction. Xi's report as well as comments by his ministers and state media

during the week-long congress repeated the country's priorities: supply-side

reform; bigger and stronger state-owned enterprises, including investment by the

private sector; continued global expansion under the "One Belt, One Road"

banner; and improving social safety.

     UBS projected growth would soften slightly in the next two years, because

only 6.3% is needed to achieve China's goal of doubling its GDP by 2020 compared

to 2010. But as Xi said, "development is the foundation and key to addressing

all problems." Don't expect China to tolerate a significant slowdown that could

jeopardize employment and hence social stability. 

     "All in, we think the 19th Party Congress has effectively strengthened

President Xi's power," analysts at Mizuho said. "It allows the leadership to

turn its focus from solely the pace of China's economic growth to the quality

and sustainability of it."

     Balanced growth:

     Xi stressed that China must now pursue more balanced growth. His phrase

"the contradiction between unbalanced and inadequate development and the

people's ever-growing needs for a better life" has been repeated as a slogan by

state media and no doubt will be studied and touted by party cadres. 

     Environment and social safety net:

     Xi, in his report on the congress's opening day, subtly de-emphasized

specific growth targets. During the week-long proceeding, Xi's ministers and

state media also emphasized "quality over speed." 

     The most comprehensive discussions, or reiteration of key economic

principles, were already laid out in an editorial run by the Xinhua News Agency

newspaper and the People's Daily, both CPC mouthpieces: continued reform

measures to address the real economy's structural imbalances in supply and

demand, the deviation of speculative financing from the real economy and the

deviation of investor and home-owner demand in the housing market as well as

remove excess industrial capacity, continue property controls and deleveraging,

and support weak sectors including municipal services and environmental

protection, it said. 

     What seems to be new is the increased focus on improving the country's

drive to clean up the environment. Xi had already actively pushed his government

along that line this year, espousing an "ecological civilization" campaign. But

the once-toothless Ministry of Environmental Protection was given new authority

by Xi himself to apply the strictest measures on industry throughout the country

in the run-up to the 19th congress, sending auditors to shut down steel blast

furnaces, coal-burning cement plants and even starch producers. The

unprecedented 2+26 campaign, which will see major city centers in northern China

halting production by heavily polluting factories during the winter months, has

already caused a commodity price boom in anticipation of tighter supplies of

industrial materials, such as steel, cement and plywood.  

     These coercive measures will likely continue. At a press conference last

week, Li Ganjie, minister of Environmental Protection, vowed China will sharply

cut its pollution levels by 2020 and "fundamentally" improve its ecosystems by

2030. Moreover, Li said the government is seeking to establish laws to codify

the current ad-hoc environmental supervision.

     As many China watchers expected, the congress was largely about personnel

changes and did not give much new direction on policy. On that front, the first

decisions may come when the new Xi-led economic team presides over the annual

economic work conference in early December, which will set the country's policy

direction for next year, including giving signals about the new growth target. 

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

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