“There’s been a lot [of] premier-as-savior talk,” former CIA analyst Christopher Johnson told The New York Times, for an article documenting China’s updated Central Committee list, which grabbed headlines Saturday as the 20th National Congress closed. “Obviously that’s not going to happen,” Johnson, who now runs a China-focused political and financial risk consultancy, said.
Li Keqiang, whose exhortations for the Party to safeguard the economy went mostly unheeded this year amid strict virus containment measures ordered by Xi Jinping, is headed for retirement. Li was dropped from the Central Committee list ahead of Sunday’s all-important Standing Committee unveil.
Li’s apparent retirement wasn’t wholly unexpected, but it was notable. For those unaware, The Standing Committee has a loose rule called “seven-up, eight-down.” Basically (and experts will give me some leeway here), if you’re 68 at the time of the Party congress, you’re expected to retire. Li is “only” 67.
He wasn’t the only prominent figure absent from the 200-strong, reconstituted list. Also missing was Wang Yang, previously seen as a candidate to succeed Li, NPC Chair Li Zhanshu and vice premier Han Zheng. Li and Han, 72 and 68, respectively, were expected to retire.
That left four open spots on the seven-member Standing Committee, which heads the 25-member Politburo. The Central Committee, which has 170 alternate members, meets Sunday to decide on the composition of China’s ruling elite. Simply put: Xi can install four loyalists next to him at the top. Of course, everyone is a loyalist in the Western sense of the word. In this context, loyalist means unquestioning fealty in all matters, large and small.
Hawkish Foreign Minister Wang Yi made the Central Committee list, and Zhang Youxia, a PLA general who’s vice-chair of the Central Military Commission kept his spot, despite being over 70. Zhang is credited with accelerating the modernization of the PLA, a priority for Xi. He joined the military at 18, and does have combat experience (1979 and 1984).
There were two other (very) notable omissions. Neither PBoC chief Yi Gang nor vice premier Liu He, who led China’s trade negotiations during Donald Trump’s presidency, made the new Central Committee roster. Also dropped was Pan Gongsheng, Yi’s deputy. Yi Huiman, a relatively youthful 57, may end up running the central bank. Formerly an alternate, the CSRC chief is now a full member of the Central Committee. He Lifeng, currently head of the National Development and Reform Commission and a Xi loyalist, may replace Liu.
Li’s replacement won’t be known immediately, but the ranking on the Standing Committee will give the world a pretty good idea. Whoever’s No. 2 (or No. 3) will probably be the next premier. It’s possible markets won’t be enamored with the apparent exits of Li, Yi, Liu and Guo Shuqing, the banking regulator whose resume includes high-ranking roles at SAFE, the PBoC, the CSRC and China Construction Bank. As Bloomberg noted, “the men have strong academic credentials and are known for promoting policies supportive of opening up the economy.”
There was also an awkward moment Saturday when former president Hu Jintao was “helped” away from a front row seat next to Xi during the closing session of the congress. He might’ve been unwell. He was certainly confused. The episode was censored from Weibo, China’s Twitter. Li is a Hu protégé.
The twice-per-decade reshuffle won’t be complete until March, even as the Party leadership is decided this weekend.
Bottom line: If there were questions as to whether the week-long proceedings would suggest Xi is amenable to any sort of ideological diversity on key issues, those questions were answered emphatically in the negative.
As one expert told the Times for the same linked article mentioned here at the outset, “There are no alternative centers of power left in the Standing Committee, if there ever were, even symbolically.”
Read more: The King’s Speech
Imagine what a trade blockade between China and the US would look like.
How many products, or components therein, are made in China?
Has Apple made any attempt to diversify away from Chinese production?
I have tried, unsuccessfully, to estimate how much is produced in China that the US consumer would not easily give up (eg: the first or maybe even the second TV/electronics, refrigerators etc) vs. items that the US consumer purchases due to a shopping addiction/obsession with stuff (eg 3rd/4th TV, excessive amounts of clothing and household paraphernalia).
At some price point, the shopping addict/obsessive accumulator of stuff will simply shift to a different “object of their desire”. US consumerism is already shifting to services, travel, eating out; and away from “stuff”. This is not good for China because there are not other consumers anywhere in the world that are as “consumey” as US consumers. China can, alternatively, sell to less developed countries, but that won’t be as economically advantageous for China.
Agree, consumption trends are changing towards experiences, be it travel, eating out, other lifestyle experiences.
AAPL is rapidly increasing iPhone production in India, but is still overwhelmingly dependent on Chinese assembly.
Yes, and Foxconn is building a factory in the US (they employ roughly 1.5 million people in China) as labour costs rise, the yuan gets stronger, the workforce ages and production gets progressively more automated.
If it wasn’t already obvious- it certainly is now: the number 1 priority on Xi’s list of priorities is Xi. In an environment where globalization, especially between China and the wealthier western world, is incentivized (for multiple reasons) to shift away from China and due to internal Chinese demographics, Xi will likely become even scarier than he already is. He has already declared “war” on anyone (Ma) or anything (semiconductors) that threatens his view of himself as the supreme leader.
Investing in China or doing business with China in order to gain economically, based on the “hope” that China will honor their verbal or written contract – would be naive on the part of the western world.
The Chinese people briefly got a taste of freedom of speech- but it didn’t last long.
China continues the route Russia is on: without checks and balances they will rot from within. Nobody will dare raise valid criticisms nor accurate numbers, and like the USSR they will self implode.
It may take a decade, and I suspect self-interested greed on both sides will keep the economic relationship looking ok (see Russia’s petro business, or even diamond mines around the world), but unfortunately the people of China will likely suffer the worst.
China is in pretty bad shape. Economic liberalism (in the Chinese sense) enormously benefitted the Chinese economy. Xi and his consorts have turned their backs on capitalism (I stress, their form). I fundamentally do not understand how autocrats believe that their economies will survive in a non-competitive environment. I mean Plato’s republic (as well as xenophone, Hayek et al) slated autocracy and still, 2500 years later, these autocratic idiots still fail to understand that the violent failure of autocracies is predetermined. Autocracy contains a self-destruct gene, the longer it lives, the more violent it’s demise and there ain’t anything they can do about it (unless they become philosophers before anyone picks me up on Plato).
Great leaders can make it work… but it then has an issue with stability over generations. As soon as the Great Man is gone, things tend to go to shit as the successors are rarely as gifted or wise…
I’m waiting to see how the sellside spins this as bullish for Chinese equities 🙂
No, seriously.
(I exited China stocks in 2020 and have not been tempted back in.)
I think people often forget that China is a communist country in its core. The whole reason China open its economy to the rest of world since 1978 is that the Party deems market economy is better than planned economy when it comes to increase a country’s wealth. As for the uneven distribution of wealth being made during the GaiGeKaiFang, the Party choose to ignore it at first as long as the size of the cake keeps growing and everyone can see their living standard been lifted over the years.
Now the world has seen its best days in the process of globalization in the past few decades and the cake cannot grow fast enough to make the majority happy in China. The ruling foundation of the Party is economic growth and if the majority in China feels more and more unsatisfied with their current situation, you can check out what happened to every dynasty in China’s history. If the cake cannot grow fast enough, there is only one option left, which is redistribute the cake. Since China is a communist country, the Party has no hesitation in doing what western country thinks horrifying, a typical example if Jack Ma. One must understand that from Party’s perspective, it is the Party who gave Jack Ma the chance to make such a fortune, if it was not Jack Ma, it could be Jack Wang or Jack Li. What Party gives, Party deems it has every right to take it back. The Party want those who grow rich first will help those who are not rich, and if those who got rich first declined to do so(transfer wealth overseas), the Party will do it for them.
I have no problem with what the Party did to Jack Ma. (As long as they don’t physically hurt him, obviously.) In fact, I think the US should try a (very) soft version of the Jack Ma approach with Elon Musk, since Musk is so intent on flouting decorum at every turn. Nat Sec reviews for Musks’s deals would be a good start.
I think there’s a difference? Jack Ma could have been right about the excessive regulation? Or at least it’s not a terribly bizarre opinion for a business leader…
I honestly sympathise with Musk over not getting paid for the use of Starlink when Lockheed Martin certainly is compensated for the weaponry sent to Ukraine but that’s about the extent of Musk being right in recent weeks. And him aligning with Putin and/or Xi is a real danger to US national interests.
Musk becoming beholden in some way to Putin is, in my opinion, a real risk, albeit a tail risk. If you give Putin an opening, he’s going to exploit it, and Elon has (unfortunately) given him several openings. Note that Putin facilitators don’t always know they’re facilitators. You don’t have to be wittingly doing something wrong to end up as a facilitator. Musk was almost surely not trying to be a propagandist with his Twitter polls on the future of the Donbas and Crimea. But that’s what he ended up being, probably accidentally.
Again in my opinion, Musk shouldn’t be allowed to speak privately to the Kremlin. I’m not saying he has, or at least not in any sort of formal capacity, but the US should take all steps to prevent that. SpaceX has a relationship with NASA. That alone should rule out private conversations with Russia. Musk is also seemingly becoming more erratic, although that’s an anecdotal assessment (I have no proprietary erratic-o-meter).
I too got the impression Musk is in a particularly erratic phase?
Pure gossip at this point – but could it be linked to not taking proper medicine/a new regimen?
Oh, what a horrible thing — looking after the needs of the majority rather than the top 1%.