Xi seen giving China’s economic reins to trusted ally in third term

Chinese President Xi Jinping is expected to appoint one of his closest allies as economic czar as he prepares to kick off a third term at the helm of the Communist Party, a move seen further expanding Xi’s involvement in macroeconomic policy and setting back market reforms.

He Lifeng, chair of the powerful planning body National Reform and Development Commission, is seen as a likely successor to Vice Premier Liu He, Xi’s current economic policy chief, who is expected to retire after a party congress in mid-October.

In China, the general secretary of the ruling Communist Party typically takes charge of political matters, while the premier steers the economy. Xi and Premier Li Keqiang initially followed this template, though Xi has increasingly involved himself in economic policy since around 2016 through Liu, a close ally.

Liu is director of the office of the party’s Central Financial and Economic Affairs Commission, the organ responsible for charting China’s general economic goals. He is also a key driver behind financial policy and served as China’s lead negotiator during its trade war with the U.S.

But 70-year-old Liu is expected to step down at the party’s twice-a-decade congress this month, given the customary retirement age of 68 for top party officials.

China watchers predict Liu’s responsibilities will be passed down to He. The National Reform and Development Commission he oversees has wide-ranging responsibilities including crafting energy policies, supervising industries and approving new infrastructure projects.

U.S. risk advisory firm Eurasia Group said He will take Liu’s place as the fourth-ranking vice premier in its prediction for China’s next Politburo, a key policymaking body made up of the Communist Party’s top 25 officials. And He is seen joining the Politburo at the upcoming congress and being officially named vice premier at the National People’s Congress in March.

Originally from Guangdong province, He has a doctorate in economics from Xiamen University. He often played basketball with Xi during the latter’s tenure as vice mayor of Xiamen, in Fujian province.

Xi had initially struggled to adjust to life in Fujian, but He actively reached out to him and won his confidence. “He is like a trusted younger brother to Xi,” said a source who worked for years in Zhongnanhai, a district in Beijing where many party heavyweights have offices.

After a long career in Fujian, He in 2014 was appointed a vice chairman of the National Reform and Development Commission. He was promoted to its chairman in 2017 and has accompanied Xi on almost all of his trips in China and overseas. If He succeeds Liu, Xi is expected to only ramp up the push for “common prosperity” and his other macroeconomic priorities.

Liu, Xi’s current economic czar, is close to reform-minded bureaucrats influenced by former Premier Zhu Rongji. But he has also known Xi since childhood and is said to have the Chinese leader’s ear on economic issues, which are not necessarily the latter’s forte. This let Liu strike a balance between Xi’s goal of economic control and the reformists’ focus on market functions. His departure from party leadership will deal a blow to those seeking further market reforms.

Amid such concerns, the idea of a “people’s economy” is drawing interest in China.

A people’s economy is an economy where all assets are held by the people, according to Renmin University professor Wen Tiejun, who is believed to have coined the phrase. Companies would aim not to maximize individual gains, but to advance society as a whole.

The concept, reminiscent of China’s planned economy before its reform and opening-up, has drawn criticism from economic experts in China.

“It’s a drastic concept,” a source familiar with the party’s inner workings said. “Still, given that the party congress is coming up soon, the phrase could reflect the intentions of the party leadership.”

Another closely watched appointment is for the head of the People’s Bank of China. Current PBOC Gov. Yi Gang is expected to step down alongside Liu, who has been one of Yi’s biggest supporters. Those in the running to succeed him include Deputy Gov. Pan Gongsheng, Banking and Insurance Regulatory Commission Chairman Guo Shuqing, and Beijing Vice Mayor Yin Yong.

Author: IORI KAWATE, NIKKEI Asia