How the personnel and organization changes of the two sessions will affect the direction of China’s economy

[March 8, 2023](Epoch Times reporters Song Tang and Yi Ru interviewed and reported) The Communist Party of Chinatwo sessionsIt is being held, and from the institutional reforms, personnel appointments, leaders’ speeches, and the composition of the participants of the two sessions, we can see a relatively clear development track where the party and the state tend to be integrated, the state advances and the people retreat, and the economy tends to be closed.

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Under Xi Jinping’s “party leads everything”, the keynote of the CCP’s “top-level design” is that the autocratic model of communist China is trying to compete with the free world. Under this national goal, key government departments are gradually encroached by the party, economic affairs are subject to political orientation, political loyalty is higher than professional knowledge, market-oriented officials are replaced by officials who obey orders, and economic officials can provide flexibility, There will be less and less room for pragmatism.

Due to changes in the main axis of the CCP’s policies, people’s expectations and confidence in the future of China’s economy are becoming less and less. The relocation of industries and talents has become a major trend. In addition to benefiting from the economic rebound triggered by the end of the zero-clearing in the short term, in the long run, China’s economic prospects are becoming increasingly bleak.

The institutional reform of the unity of the party and the government lacks an error correction mechanism

At the National People’s Congress of the Communist Party of China, in addition to some personnel appointments such as the replacement of Li Keqiang’s economic team, the pending “Party and State Institutional Reform Plan” also attracted great attention from the outside world.

Xi Jinping’s speech released on February 28 mentioned that institutional reform should “optimize the government’s responsibility system and organizational structure” and “improve the Party Central Committee’s decision-making, discussion and coordination mechanism.”

Analysts pointed out that this means that some departments of the State Council will be shut down and transferred to the Party Central Committee. A ready-made example is Pan Yue, the vice minister of the United Front Work Department of the CCP, who is also the director of the State Ethnic Affairs Commission under the State Council; Chen Xu, the vice minister, who is also the director of the Overseas Chinese Affairs Office of the State Council; another vice minister, Cui Maohu, is also the director of the State Administration of Religious Affairs under the State Council .

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Specific to the so-called “key areas”, Xi Jinping’s speech mentioned “deepening the reform of the financial system” and “improving the party’s unified leadership system for scientific and technological work”, which means that at least in the two fields of finance and technology, there is a party covered by the Central Department.

On March 7, the Chinese authorities announced the State Council’s institutional reorganization plan, which included the abolition of the CCP’s banking and insurance regulatory agency, the establishment of the State Administration of Financial Supervision and Administration as an institution directly under the State Council, the adjustment of the CCP’s Securities Regulatory Commission to an institution directly under the State Council, and the establishment of the National Data Bureau.

Some media also revealed that in order to strengthen the control, coordination and decision-making of the financial system, Xi Jinping may restore the Central Financial Committee of the Communist Party of China and appoint one of his cronies to this important position. All financial regulatory affairs will be consolidated under a central party body.

the cpctwo sessionsIt was previously reported that the CCP will set up a new organization, the “CCP Central Internal Affairs Committee”, and that the Ministry of Public Security and the Ministry of State Security will separate from the State Council system and be directly under the “CCP Central Internal Affairs Committee.” It is also reported that the Hong Kong and Macau Affairs Office has been separated from the State Council and directly under the Central Committee of the Communist Party of China. However, the CCP officials have not revealed such a new plan so far.

Regarding the CCP’s plan to restore the Central Financial Work Committee, Akio Yabata, director of the Sankei Shimbun’s Taipei branch, told “In China’s financial industry, quick money can come in and money can come out quickly. But now Xi Jinping said that the financial industry should be grasped, which is a typical management Kill or bury, basically any industry, as long as he grabs it, it will definitely be a chicken feather.”

Yaba Akio analyzed that Xi Jinping wants to suppress the hedonic spirit of the financial industry, and eliminate the theory of financial elites, money-only theory, and the theory of being on par with the West. The financial industry is a very difficult industry. Except for the elite, no one else can handle it. The purpose of finance is to make money. Excluding money-only theory, is it still the financial industry? To rule out the theory of being on par with the West, if you cut it off from the West, you won’t be able to handle it yourself. If Xi Jinping really starts to catch it, it will be a very serious blow to the Chinese financial sector.

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Zheng Xuguang, an economist based in the United States, told “This time it is clear that the party and the government are united. The 19th National Congress of the Communist Party of China has already blown this wind, and now it is done with great fanfare. All important departments must belong to the party. The State Council also has The problem with the party group is that it cannot be centralized at the Party Central Committee, and it will form a division. Xi Jinping hopes that all the divisions will be brought together by the general secretary, which is actually more conducive to the stability of his personal rule. .”

“In the long run, this party-state system will become more and more rigid and rigid, and more prone to brittleness. The rigidity of the system has increased, but the toughness and flexibility are not enough, and relatively large brittle incidents are prone to occur.”

Current affairs commentator Wang He told “Xi’s reform is to strengthen the party’s leadership, which means to monopolize the big power and disperse the small power. The problem is that inside the CCP, everyone is watching Xi’s face. I will give you whatever plan Xi Jinping wants. There is very little space for policy discussion, and many policies are wrong to the end, and there is no error correction mechanism.”

A Perspective on Xi Jinping’s New Economy Team

In the CCP’s political system, the prime minister is traditionally in charge of managing the economy, with several deputy prime ministers assisting him in his work and taking charge of different areas. At the current CCP Congress, Xi Jinping will conduct a thorough reorganization of his economic team. It is expected that Li Qiang will be the prime minister, Ding Xuexiang will be the executive vice premier, He Lifeng will be the vice premier, and Zhu Hexin will be the new governor of the central bank.

Unlike their predecessors, all four were either Xi Jinping’s cronies or were connected to his cronies, and they were not educated in the West or believed to have no experience in dealing with international financial organizations. The four wouldn’t have been competitive in the competition were it not for loyalty.

The Chinese economy is facing mounting challenges, including weak consumption, rising unemployment, a sluggish real estate market, lack of business confidence, local government debt troubles, an aging population and facing U.S. sanctions on technology, all eyes are on Focus on how they will help shape policy.

Wang He said, “Li Qiang’s advantage is that Xi Jinping trusts him, and he can do many things freely. He is not necessarily a weak prime minister.”

“Li Qiang’s qualifications were not qualified to be the Premier of the State Council according to the CCP’s practice in the past. Now that Xi Jinping has pushed him to the top, can Li Qiang be able to convince the public? Will the people in the State Council listen to him? It remains to be tested.” Wang He said.

Experts also pointed out that although Li Qiang has local work experience, but the time is not long enough. He only has experience in rich provinces but not in poor provinces. In addition, the CCP has run the country with experts in the economic and technological fields for many years. This is also Li Qiang’s weakness.

But what Li Qiang can do is limited. “Li Qiang can make some repairs here and there, but he won’t tear down walls and build new ones,” said Chen Daoyin, a former associate professor at Shanghai University of Political Science and Law and now a Chilean-based commentator.

Alfred Wu, an associate professor at the National University of Singapore, believes that since Xi Jinping controls everything, who is the prime minister under Xi’s leadership is no longer as important as it used to be.

Ding Xuexiang, Xi’s current chief of staff, is expected to become executive vice premier, likely in charge of the domestic economy, especially fiscal policy. But he has never led a province and has little experience in making economic policy.

Wang He commented, “Ding Xuexiang has party affairs experience, but no experience in government affairs management. In terms of qualifications, Cai Qi’s current position as the first secretary of the Central Secretariat may be more suitable for him. But Xi Jinping did not let him take Cai Qi’s position. Instead, let him take the position of first vice premier of the State Council, obviously training him as a potential successor.”

He Lifeng, who runs China’s powerful National Development and Reform Commission, is likely to be named the next vice premier in charge of economic, financial and industrial affairs. He Lifeng has an undergraduate degree in finance from Xiamen University, but he has never studied overseas.

He succeeds Vice Premier Liu He, a Harvard-trained economist who led U.S.-China trade talks in 2018 and 2019.

Wang He believes that Xi Jinping’s economic rectification in the past few years came from He Lifeng’s National Development and Reform Commission. He Lifeng has relatively poor experience in international experience exchange. His policy philosophy is more inclined to the left of the economy, and he cooperates with Xi Jinping in this area. China’s economy is already in a precarious state. It is basically difficult to bring confidence to the economic team composed of these three people at the top.

Another key player is the governor of the People’s Bank of China (PBOC), which is responsible for China’s monetary policy and oversight of the financial system. Zhu Hexin, chairman of CITIC Group, is the leading candidate, and unlike Yi Gang, who has a Ph.D. in economics from the University of Illinois, Zhu Hexin has little overseas experience.

Lu Zhengfeng, associate professor of the Department of International and Continental Affairs at National Quemoy University, told The Epoch Times: “This is a group of members of the Xi family class. This team must be loyal to Xi, but the policy coordination mechanism should be improved compared to before. And domestic pressure continues without relief, and even silent forces within the party may erupt. The pressure on the new team is not small. The Xi family army is completely integrated with the party and the government.”

Wang He said, “China’s economic problems do not mean how capable the new generation of economic leaders are, but that China’s economy is already in a state of terminal illness and has fallen into a triple trap: the first trap is the imbalance of the economic structure, and the second trap is the economic system. The third trap is the reversal of the entire international economic environment. After the new generation comes to power, it is impossible for him to fundamentally change this declining trend. The Chinese economy is a general trend of turbulence, and he cannot change it.”

Xie Tian, ​​a professor at the Aiken School of Business at the University of South Carolina in the United States, told “This new leadership team must be obedient to Xi Jinping, and there is no way to expect any different voices and constraints, or have their own initiative. Zhongnanhai South Institute North The court dispute may be eliminated, and the Chinese economy may become less dynamic. China has no way to stimulate the economy now. The three carriages driving the economy have all stalled, and there are no new economic growth points. I think the Chinese economy going into a long recession.”

“High-quality development” where the country advances and the people retreat, tending to be self-closing

Since Xi Jinping came to power, the CCP has been downplaying the GDP target and turning to the so-called “high-quality development”. Institutional reforms, personnel appointments, leaders’ speeches, and the composition of participants, we can see a relatively clear development track where the party and the state tend to be integrated, the state advances and the people retreat, and the economy tends to be closed.

Speaking at a closed-door session of the Communist Party’s National Congress, Xi said self-reliance and strength in technology was the way to advance “high-quality development.” In the face of fierce international competition, he called for “original and pioneering research”.

On the list of attendees of the “two sessions” of the CCP, Internet giants such as Ma Huateng, founder of Tencent, and Robin Li, founder of Baidu, disappeared from the list and were replaced by researchers and engineers in the technology hardware industry such as chips, including Guo Huiqin, an engineer from SMIC, Zhang Suxin, chairman of Hua Hong Semiconductor Co., Ltd., and others.

The list of the Two Sessions conveys the thinking of the highest level of the CCP: on the one hand, Beijing still has no trust in private companies; on the other hand, with the US ban cutting off the CCP’s sources of cutting-edge technology, Beijing is changing its priorities and focusing on strengthening the hard technology industry.

The Internet platform economy is a product of the era of China’s economic reform. Most of them are privately owned, creating employment, consumption and prosperity in the Chinese market. In contrast, hard technology industries such as chips require a lot of government investment, which is not economically cost-effective, and national capital lacks innovation and encourages corruption.

Zheng Xuguang commented, “What Xi Jinping wants is high-quality development, which means that GDP will not grow at a high rate every year. Some low-end, labor-intensive industries must be shut down and turned around. Xi Jinping hopes that there will be high-tech The good thing is chips. These things can’t solve employment and can’t generate much GDP, but they are very core. What Xi Jinping cares about is not to let others pinch my neck.”

“What’s the point of him cracking down on the platform economy and the education and training industry? If more than a billion people have the same idea, what innovation does this country have? If it is some high-tech foreign capital, Xi Jinping will be very happy, but for Xi Jinping doesn’t care about some so-called consumer products that are of great significance to the people’s livelihood in the world, and he first cares about whether he can govern for a long time.” Zheng Xuguang said.

In the government work report, the word “energy” was used 14 times, a 17 percent increase from the previous year, and mentions of “food” surged 89 percent to 17 times, both figures since Xi Jinping came to power highest level.

Zheng Xuguang commented, “Xi Jinping vigorously develops agriculture, which has little output value. But he thinks it is food security, and self-sufficiency must be ensured. What Xi Jinping cares about is whether the current economy can be maintained in a closed environment. If someone wants Sanctions, decoupling and breaking chains, whether you can maintain production as usual, this is what Xi Jinping is worried about.”

Policy axis changes and people lose confidence

Business confidence has plummeted amid uncertainty over China’s future policies and the geopolitical dispute between the United States and China. In the 2023 annual report released by the American Chamber of Commerce in China on March 1, more than half of the interviewed American businessmen said that China is no longer their primary or top three investment destinations.

Xie Tian said, “For them now, the economy is of course an important policy direction, but it may be more responsive to the environment of the international community. In the face of some sanctions by the United States, whether it is the Taiwan Strait or the South China Sea, it may be the same as the United States. The conflict that happens, that’s probably the biggest issue for the Chinese Communist Party.”

Big electronics assemblers ranging from Foxconn Technology Group to GoerTek are responding to customer demands for a diversified supply chain by setting up more factories outside of China. Apparel companies are also starting to shift supply chains.

The CCP is taking all measures to keep Apple and its supplier, Foxconn, in China. Henan province, home to Apple’s largest overseas iPhone assembly, was greeted by the top official of the province when Foxconn’s chairman visited the local factory, showing that the local government is working hard Attract foreign capital.

Foxconn plans to invest $700 million in a new factory in India, Bloomberg reported last week, signaling an accelerated shift of supply chains away from China amid rising tensions between Beijing and Washington.

Yaba Akio said, “At the 20th National Congress, reform and opening up was basically no longer mentioned, and economic construction was no longer mentioned. It became the Chinese dream and loyalty to the party. The entire country’s development goals have undergone a huge adjustment, which has caused People have doubts about the expectations of China’s economic development, and when you find that it may not grow in the future, or will grow negatively, the investment money will stop, I think it is a serious matter.”

“There are many negative things about China’s economy. The first one is that in terms of high-tech semiconductors, China (the CCP) has been completely blocked by the Western world led by the United States. The other is the relocation of industries, and more seriously, the relocation of talents. Some people say that after the 20th National Congress of the Communist Party of China, every year will be a “beautiful” year, and every month will be a “beautiful” month. Especially the more ambitious and capable people are, it will be more and more difficult to realize their ideals in China, so everyone goes out .”

Responsible editor: Lin Yan#