Xi Jinping has emerged from the 19th five-year congress of China’s communist party in firm control of the world’s second largest economy. His “thoughts” have been enshrined in the party’s constitution. He has stacked the Politburo Standing Committee, the party’s most influential ruling body, with men who are loyal to him and, much as I predicted in last week’s CEO Daily, succeeded in excluding from that group anyone young enough to pose a threat to him as a potential successor.
I won’t rehash the profiles of the members of the standing committee. (You can find detailed assessments of the new leadership here and here and here.) I will note, however, that now the congress is over, Xi is, unquestionably, China’s most powerful leader since Deng Xiaoping. Moreover he has reshuffled party leadership in a way that leaves open the possibility he can remain in power well after his current five-year term as party boss expires.
In the wake of the congress, many have argued that Xi is the most powerful Chinese ruler since Mao Zedong. The Economist, in a jab at at US president Donald Trump, declares Xi to be the most powerful leader in the world. Not everyone agrees. The Financial Times’ Tom Mitchell has penned a smart piece debunking claims Xi is more powerful than Deng. My old boss David Ignatius, one of the shrewdest foreign policy analysts I know, contends Xi is far more vulnerable than he appears.
Either way, there’s no doubt China now has a leader who is large and in charge and, as veteran China analyst Ian Johnson points out in this excellent essay, pushing an expansionist vision of China’s role in world affairs.
For foreign business leaders, Xi’s ascendance poses at least three important questions:
Now that Xi has consolidated power, will he seek to tighten the party’s grip on China’s economy or will he feel sufficiently confident to step back and allow greater autonomy for markets and private firms? My guess, for what it’s worth, is that Xi intends the former. Don’t expect a reversal of China’s crackdown on aggressive outbound investors such as Anbang Insurance Group, HNA Group, Dalian Wanda or Fosun International. Do expect government support for expansion of the role of state-owned enterprises in China’s economy.
If Xi tightens the party’s grip on China’s economy, will it help or hinder growth? Undoubtedly the latter, but as the Economist argues persuasively in its current issue, meddling by Beijing won’t be enough to stop the dynamism of China’s private sector.
Over the next five years, will China offer greater or fewer opportunities for global firms? Greater, as long as China continues to grow—and therein lies the dilemma for many global, and particularly for American, business leaders. Under its new, more powerful chairman, the Communist Party is likely to intervene more vigorously than ever in structuring the terms under which foreign firms are granted access the Chinese market. And yet, the Chinese market will remain too large and important for foreign businesses to ignore.
President Trump has promised to press Xi for improved market access for US firms on his visit to China in November. His commerce secretary, Wilbur Ross, predicts “decent deliverables” on trade from Trump’s trip. But as China’s new helmsman grows stronger, he has less incentive to make concessions. In comments to the New York Economic Club on Wednesday Ross acknowledged that the two nations aren’t likely to resolve their long-running differences on forced technology transfers and intellectual property safeguards anytime soon.
More China news below.
China's New Leadership
Hallmark card. North Korean leader Kim Jong Un issued a rare personal message to congratulate Xi Jinping and wish him “great success” in his future tasks as China’s leader, said Pyongyang’s official state media. Reuters
King of China. Meanwhile in the White House, Trump went a step further in his congratulatory message to Xi, calling him “the king of China”, while adding that the bond between the two presidents is unparalleled. Fortune
Where’s my invite? Despite Xi’s call for more foreign media coverage of China, a number of major western news organisations have said that they were denied invites to the unveiling of China’s new Standing Committee members this week. Titles excluded without any explanation include the BBC, the Financial Times, the Economist, the New York Times and the Guardian, in some cases for the first time in more than two decades. Guardian
Old boys club. A mere 4.9% of China’s new Central Committee, and just 10 of the body’s 204 members, are female. One tier up, the sole woman among the 25 members in the Politburo is Sun Chunlan, who is serving her second term as head of the party’s outreach efforts to non-Communists, and is likely to retire in five years. Reuters
Rigged elections. Three disgraced senior cadres from the Chinese Communist Party, including a former potential Xi successor, have been accused of attempting to bribe voters in the party’s internal elections at the previous 17th and 18th party congresses, said state-owned Xinhua News Agency. It also offered a rare, detailed explanation of how members of the innermost Politburo Standing Committee and the broader Politburo are selected. South China Morning Post
China In the World
Hot potato. Donald Trump was keen to deport US-based Chinese dissident Guo Wengui, after receiving a letter from the Chinese government hand-delivered by Last Vegas casino tycoon Steve Wynn, but was persuaded by top officials not to add to the current tensions between the two countries, according to the Wall Street Journal, who detailed a dramatic meeting between Guo and Chinese state security officials in Guo’s New York apartment this week. Wall Street Journal
In absentia. Trump will be skipping the East Asia Summit in the Philippines when he makes his maiden Asia visit as president next month. Observers say his absence from the annual gathering of leaders from 18 nations in East Asia, Southeast Asia and South Asia, including the US and China, will give China president Xi Jinping a window to step into the regional leadership vacuum. South China Morning Post
The rich list. The number of billionaires in Asia surpassed that of the United States for the first time last year, according to a report by UBS and PricewaterhouseCoopers. The number of Asian billionaires grew by 23% last year, compared to 5% in the US, and half of those billionaires were Chinese. Wall Street Journal
In Case You Missed It
What China’s Leadership Reshuffle Means For Xi Jinping’s New Era South China Morning Post
Inside China’s secret ‘magic weapon’ for worldwide influence Financial Times
China lawyer recounts torture under Xi’s ‘war on law’ BBC
An inconvenient truth? China omits key figures that may have highlighted its demographic time bomb from official statistics South China Morning Post
Technology and Innovation
Riding in tandem. Publicly listed Chinese bike-sharing start-up Youon has just announced its merger with Hellobike – making it the first merger in China’s hot-right-now bike rental sector. The new firm, co-owned by Youon, Ant Financial, and Shanghai Jun Zheng, will be operated by the original Hellobike team and will be beefing up to compete against the country’s two largest bike-rental players ofo and Mobike. Tech in Asia
Airbnb loses its China head. Just four months into his role, Airbnb vice president and China head Ge Hong has resigned after his personal indiscretions with a subordinate became public. Ge was appointed amid an adjustment in Airbnb’s business strategy to prioritise the Chinese market. Airbnb co-founder and chief strategy officer Nathan Blecharczyk will take over as China chairman. The Information
Face value. Chinese unicorns are increasingly being exposed for lying about their pre-IPO valuations, says China Money Network, which this week exposed Rong360 Inc., once listed tagged with a US$1 billion valuation. A review of the company’s prospectus filed with the U.S. Securities and Exchange Commission ahead of a U.S. listing for its wholly-owned subsidiary Jianpu Technology Inc. has shown that the company inflated all four of its funding rounds by an average 40%. China Money Network
Out of gas. Ezzy, the Mobike of car-sharing in China has shut down, leaving some customers RMB 2000 out of pocket. The company, which started with rental electric cars, recently expanded into the premium end of the ride-sharing market by adding a fleet of BMW i3s and Audi A3s to their inventory. TechNode