Why the Chinese Communist Party’s New Summit Scared Markets

On the final day of the Communist Party National Congress, held every five years in Beijing, Chinese President Xi Jinping unveiled a new team of leaders that signaled his growing dominance over the military and economic superpower.

Investors expect the nominees to focus on security and state control rather than pro-business policies, which sent Chinese stocks plummeting in Hong Kong and New York on Monday.

For decades, the Politburo Standing Committee, China’s most powerful political body, controlled the leader’s power through a convention that ensured the group was made up of politicians of different ages and from all factions of the party.

Now, for the first time since former leader Deng Xiaoping’s departure from top party positions in 1989, the seven-member elite group has been made up of people close to the leader.

Christopher Beddor, a China expert at the Beijing-based research group Gavekal Dragonomics, believes that Xi is now on track to remain in power for at least a fourth five-year term from 2027. The new standing committee is the “victory.” most striking” of Xi, he said.

Filled with believers who owe their careers to their leader, the group that took the stage on Sunday showed that there was no longer a “plausible faction of senior officials representing different interests or ideas”. Nor is there an obvious successor to Xi, Beddor said.

Xi’s consolidation of power has also sparked warnings that the world’s most populous country is increasingly fitting the definition of autocracy.

“This is complete and total mastery,” Taisu Zhang, a China expert and professor at Yale University, said on Twitter. “Please don’t ever tell me again that Chinese politics is a meritocracy.”

Xi’s wrist grip comes as his country faces a critical moment on the international stage. Relations with the United States and many Western countries have fallen to historically low levels, as fears grow about an increasingly militaristic administration that refuses to rule out taking Taiwan by force.

“Xi would like loyalists to hold all the levers of power in the Chinese government. Speedy and complete compliance seems to be an important objective with these appointments,” said Victor Shih, a professor of Chinese political economy at the University of California, San Diego.

Shih pointed out that Xi faced the internal political risk of being held responsible for the political failures of his acolytes. “It always helps to have one or two employees to blame if things go wrong.”

Surrounded by his team of supporters, Xi is likely to step up efforts to get China to focus less on growth and more on redistribution and state control, said Andrew Gilholm, head of China analysis at consultancy Control Risks.

There are signs of investor unease as China’s increasingly authoritarian tendencies spill over into the corporate landscape.

US-based WisdomTree Asset Management said on Monday it had removed tech conglomerate Tencent, search engine operator Baidu and social media giant Weibo from its index in China. The move resulted in turnover of more than a quarter of the index.

Tech companies, long criticized for suppressing dissent and favoring censorship in the country, came under fire this year for promoting content that supported Russia’s invasion of Ukraine.

“Due to their involvement in serious violations of freedom of expression in China, these companies have been demoted from a watch list for violating UN principles,” said Liqian Ren, director of WisdomTree.

Still, looking at Xi’s record over the past ten years in power, the 69-year-old is known for taking calculated risks.

“It is doubtful to say that Xi will now suddenly pursue some radical campaign against the growth of private companies and the wealthy, just because the congressional results allow it,” Gilholm said. “It’s not clear to me that Xi was just embarrassed by others and will now go into total demolition mode.”

As Xi embarks on a new term, breaking China’s two-term limit for its leader, these are the six members below the supreme leader:

Li Qiang, 63

Party chief in Shanghai, Li has been one of Xi’s close allies for two decades. He served directly under Xi when the president ruled Zhejiang Province from 2004 to 2007.

While Li has long been considered a rising star, his government’s chaotic handling of the Covid outbreak earlier this year in Shanghai has fueled some uncertainty about his political future.

Now he is ready to be promoted to prime minister, replacing Li Keqiang. Although Li Qiang has no experience in central government, he has a history of supporting private sector development.

Li’s rapid rise – from a provincial post to prime minister with key responsibilities for the Chinese economy – is seen as a clear sign that Xi has prioritized loyalty to experience.

Zhao Leji, 65

Alongside Wang Huning, Zhao Leji survives Xi’s sweeping changes in the upper echelons of the party. A trusted ally and chief of staff of Xi since 2012, he is seen as an effective and loyal bureaucrat in handling key party-state appointments.

He took over from Wang Qishan as Xi’s anti-corruption chief in 2018, warning at the time that his priority was to crack down on “disloyal and dishonest” people with the party and “prevent interest groups from forming and usurping political power,” the officials noted. researchers at Gavekal.

The roles of head of China’s main political advisory body, the Chinese People’s Political Consultative Conference, and head of China’s legislature, the National People’s Congress, will likely go to either Zhao or Wang.

Wang Huning, 67

Xi’s ideological guru supports the leader’s ambition to deepen party control and the country’s self-confidence.

A rarity in the new leadership, Wang was also an influential political advisor to Xi’s predecessors. The former policy professor was appointed to China’s highest political body in 2017. He has vast experience among Chinese leaders, having been appointed by then-leader Jiang Zemin as a special assistant to the central policy research group in 1995.

According to Cheng Li of the Brookings Institution, Wang is believed to be an important source of Xi’s typical political ideas and a more assertive foreign policy. Wang argues that China’s reform should not be pursued at the expense of stability and that strong and unified central leadership is crucial to the country’s development.

Fall Qi, 66

He has been the party’s head in Beijing since 2017. He is also considered one of Xi’s closest allies. The two worked together at various points during the 1980s, 1990s and 2000s, when Xi was a rising provincial leader in Fujian and Zhejiang.

Cai joined the Politburo in 2017, among a group of Xi’s acolytes.

His leadership in Beijing was marked by the harsh expulsions of migrant workers from the capital. His credentials have improved after dealing with the Beijing Winter Olympics and Covid outbreaks this year.

Brookings’ Cheng Li says Cai is known for energetically demonstrating his loyalty to Xi and could be in the running to lead the Central Commission for Discipline Inspection, the Chinese Communist Party Secretariat, a body under Xi’s Politburo, or possibly the Chinese Communist Party. CPPCC, a political advisory body.

Ding Xuexian, 60

He advanced his career in Shanghai, where he was promoted to chief of staff to successive party secretaries, including Xi, for a period in 2017.

Despite the fact that Ding has never served as party chief in one of China’s cities or provinces, he is still seen as one of Xi’s favorite protégés.

Since Xi ascended to the leadership of the party a decade ago, Ding has served as director of the leader’s office, essentially a personal assistant to Xi. In 2017, he was selected for the 25-member Politburo and positioned for promotion.

Although he also has no background in governing a province, he is expected to become vice premier, meaning he would have the responsibility to help Li Qiang manage China’s economics.

Li Xi, 66

Li Xi’s ties to Xi Jinping span four decades, through Li’s former patron Li Ziqi and Xi’s father in Gansu, northwest China. For the past five years, he has been party chief in Guangdong, a launching pad for higher positions.

Before leading the tech hub in southern China, he served as party chief in Liaoning, in the north, where he built a reputation for taking a tough stance on corruption and party discipline, much in line with Xi’s policy.

He is also one of the top candidates to become Xi’s anti-corruption boss. As head of CCDI, the party’s much-feared internal watchdog, he would take responsibility for Xi’s anti-corruption campaign, which in a decade has investigated 4 million party members and purged hundreds of senior officials.

(Collaborated by Cheng Leng)