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Who Will Xi Turn to After Liu He to Run China’s Economy?

The possible resignation of Liu He, China’s influential vice premier and a key figure in President Xi Jinping’s trade and monetary policymaking, means the economy will struggle to pull itself out of its worst slowdown in decades. It is bringing further pressure to Beijing’s power circles.

Liu, who is two years past the retirement age of 68, the recognized leader of the Communist Party, announced on Oct. 16 at the party’s congress, which is held twice every ten years, that China’s highest decision-making body, the Party’s Politburo. is expected to be the first to resign from

President Xi Jinping, a childhood friend of Liu’s, lifted presidential term limits but could secure a third term as party leader at the same event.

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Given the urgency to revive growth and deal with tensions between Beijing and Washington, Xi could arrange for Liu to continue working for the next 12 months, possibly under another appointment, he said. says a professor. Peking University (PKU) School of Government A person who refuses to nominate.

“The job of the most powerful vice premier China has ever seen is not finished,” said the scholar. “Having said that, Liu won’t stay until his next term, so it makes sense to start looking at potential candidates to replace him.”

Liu will step down from the party’s Politburo first at the party congress and then as China’s economic emperor at the next parliamentary session in early 2023. Deputies according to staffing decisions made at party conventions.

Whoever was appointed as Liu’s successor should already be involved in international trade and economic policy decisions.

The rumor mill has seized two names in the fog of obscurity that characterizes China’s high-level politics. Guo SuqingChairman of the China Banking and Insurance Regulatory Commission (CBIRC), he is seen as most similar to Liu in his understanding of reforms and popular trends. Waryuthe chief of the influential National Development and Reform Commission (NDRC) Xi’s friend and ally.

Graphics: Aarushi Agrawal

Regardless of the winner, Liu’s departure from his current position will add further uncertainty to the country’s economic outlook.

China’s gross domestic product grew by just 0.4% in the second quarter as Covid-19 lockdowns crippled activity. It was the weakest quarter to date outside of the immediate Covid outbreak drop in the first half of 2020.

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The current concern is that a global economic slowdown will add to domestic challenges exacerbated by high youth unemployment and the meltdown of the indebted real estate market, leading to social and political unrest.

The Chinese government still expects the Chinese economy to grow by about 5.5% this year, but many economists believe the target will be out of reach.

China's unemployment rate during Covid
Chart: Richa Gandhi

Liu’s continued leadership will be needed this year and beyond, and adjustments to the following policies rolled out in recent months to get growth back on track, said the PKU professor.

Often compared to former U.S. Treasury Secretary Larry Summers for his use of economic history and research as a focal point for policymaking, Liu studied at the prestigious Renmin University of China, where he taught for several years.

His political career took off after being recruited by the Chinese State Council’s economic think tank and choosing to pursue postgraduate studies in finance and economics at Harvard and Seton Hall.

“Mr Liu is unique and a rare example in Chinese politics of a scholar being given real power.” The Chinese University of Hong Kong Business SchoolSaid.

He’s Access to Xi Instrumental in Rise

His access to Xi helped in his rise. As an economic emperor, Mr. Liu is credited as the chief architect of President Xi Jinping’s supply-side reforms that cut industrial overcapacity. He was China’s chief negotiator in trade talks with the United States and recently introduced reforms to curb its monopoly and debt, but so far with mixed results.

Mr. Liu is widely believed to be an anonymous “authority” who appears in the People’s Daily at key times heralding policy shifts and stimulus measures.

The likely resignation of Liu He, China's influential vice-premier and a key figure in President Xi Jinping's trade and financial policy, is putting further pressure on Beijing's power circles. Graphics: Aarushi Agrawal
Graphics: Aarushi Agrawal

In April, when the Covid resurgence reached its peak, this “authoritative figure” emphasized Beijing’s renewed commitment to relief aid and incentives to restore trust damaged by lockdowns.

A month later, Liu resurfaced to ease pressure on tech giants and China’s platform economy, signaling reprieve from the regulatory storm that began two years ago.

“Liu’s reassurances are usually nothing new, but the fact that these words were uttered by the deputy prime minister…can allay anxiety,” said a PKU academic.

Professor Mariko Watanabe Faculty of Economics, Tokyo Gakushuin University“Liu definitely belongs to a group of Chinese policy makers who are economists turned reformers. Even then, it acts like a “doorstop” that keeps China’s economy and trade flows open to the rest of the world.

She added: When he resigns, I can’t imagine anyone else playing a more active role in China’s leadership,” she said.

He vs Guo – Who will run the Chinese economy?

Of the two candidates, 66-year-old Oxford-educated Guo is seen as the better choice to restore confidence. Widely known as a reformer, he has a proven track record of leading many institutions and regulators, including the State Administration of Foreign Exchange, China Construction Bank, China Securities Regulatory Commission, and now he is the CBIRC. .

However, there have been reports suggesting that the next parliamentary session could mark the end of Guo’s career, as only Xi Jinping’s disciples will be in line for promotion.

“Like Liu, Guo knows the market well and knows how to elicit positive sentiment,” PKU said. “Guo’s weakness is that he is not that close to Xi Jinping. The next vice premier must win the president’s trust and approval.”

“Guo is talented but not a political heavyweight, so I don’t see him replacing Liu,” said Jean-Pierre Cabestin, a research professor of political science at Hong Kong Baptist University.

There were also reports of Guo opting out and retiring.

Having worked with Xi Jinping for decades, 67-year-old He Lifeng is highly credible. After graduating from the prestigious Xiamen University in 1985 with a degree in economics, he began working in Xiamen, a port city in the southeastern province of Fujian, as an assistant to President Xi, who was then deputy mayor.

Xi’s star shined when he served as governor of Fujian in the early 2000s. In 2014, just two years after President Xi came to power, he was appointed head of the NDRC, and in 2018 he was promoted to vice-president of the NDRC. Chinese People’s Political Consultative Conference (CPPCC)the Supreme State Advisory Body, a title that is equivalent to Deputy Prime Minister and places him above Guo.

Tseng Weifeng, an associate professor at the Graduate School of Chinese Studies at Tamkang University in Taiwan, said Xi can usually be seen accompanying the visit on news programs on China Central Television.

Xi needs a credible lieutenant to implement a dual circular policy, gain more control over the private sector, and push other initiatives such as co-prosperity.

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Frank Chen

Frank Cheng is an Asian financial correspondent covering business and finance in China with a particular focus on market indices. He has strong interests in real estate, transportation, infrastructure and consumer brands. He has spent time in Shanghai and Hong Kong and speaks Mandarin, Cantonese and English.

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