Jeremy Page, Bob Davis and Lingling Wei
The Wall Street Journal
December 20, 2013
Expanding His Own Remit Further, President Takes Lead on Economy, Traditionally Premier’s Turf.
British officials were finalizing details of Prime Minister David Cameron‘s visit this month to Beijing when they received a last-minute scheduling change: President Xi Jinping would host a banquet in Mr. Cameron’s honor.
The invitation, which delighted the British officials, effectively scrubbed dinner plans with Mr. Cameron’s official host, Premier Li Keqiang. And it illustrates an important shift in the Chinese leadership’s internal dynamics: Mr. Xi is downgrading the premier’s role and assuming the primary duty of overseeing economic reforms as well as briefing foreign leaders on economic affairs, Communist Party insiders say.
In the frantic diplomatic exchanges over the scheduling dilemma, Premier Li’s dinner was first postponed, then turned into a lunch, and Mr. Cameron had to cancel a visit to the city of Hangzhou. Previous protocol dictated only a brief meeting with the Chinese president as Mr. Cameron isn’t head of state.
There is no evidence of discord between Messrs. Xi and Li, the party insiders say. But Mr. Xi is subverting a nearly two-decade-old division of power whereby the president, who is also party chief, handles politics, diplomacy and security, while the premier manages the economy.
Having rapidly established his authority over the party and the military in his first year in power, Mr. Xi is now stepping in on the economy, making him the most individually powerful leader since Deng Xiaoping, the man who launched China’s economic liberalization in 1978. “The really big change is that Xi is saying, ‘I’m the boss, and that extends to everything,’ ” says Barry Naughton, an expert on the Chinese economy at the University of California, San Diego.
Some party insiders welcome the concentration of power in Mr. Xi’s hands as a way to combat the bureaucratic inertia that some say bogged down reforms under the previous leadership. Others, however, fear that it could lead to impulsive, or misinformed, decision-making. One possible example was China’s sudden announcement last month of a new air-defense identification zone over the East China Sea without consulting neighboring countries, analysts and diplomats say.
Mr. Xi’s predecessor, Hu Jintao, played a negligible role in the economy and shared power evenly with Wen Jiabao, the last premier, who was in charge of the massive stimulus plan to respond to the 2008-09 global financial crisis. Before them, President Jiang Zemin left the economy to Premier Zhu Rongji, who pushed through wrenching state-sector reforms and secured China’s entry to the World Trade Organization.
By contrast, Mr. Xi is depicted as playing a central role in the ambitious economic-reform package approved by the 376-member Central Committee last month. State media published a lengthy official account saying Mr. Xi had personally led the drafting of the plan—the first time a party chief had done so since 2000. The account mentioned Mr. Xi’s name 34 times. Mr. Li wasn’t mentioned once.
Drafting of a similar economic plan, unveiled in 2003, was overseen by Premier Wen.
The latest plan calls for a new party body to oversee the reforms. While the group’s composition hasn’t yet been chosen, members are likely to report to Mr. Xi, according to several party officials. That will help the president bypass the State Council, or cabinet, which is headed by the premier, party insiders say, and has been a choke point for reform because its many ministries represent different interest groups.
Mr. Xi hinted at his plans early this year in a conversation with Ma Kai, a vice premier, according to several party officials with knowledge of the exchange.
The president asked Mr. Ma whether he thought the party or the government had been more effective in managing the economy. Mr. Xi referred to Zhongnanhai, the compound in Beijing that houses the offices of both the party and the State Council.
“The northern courtyard,” Mr. Ma answered, referring to the section of the compound that houses the State Council.
“I don’t necessarily think so,” Mr. Xi is said to have replied.
Premier Li still ranks second in the party and handles day-to-day running of the government and the economy, party insiders say. Nonetheless, his remit has largely been reduced to implementing decisions made by Mr. Xi and his advisers, while making sure the economy doesn’t miss its 2013 growth target of 7.5%, the insiders say.
“The premier worries about how to keep the economy going,” says Tsinghua University economist Li Daokui, a former adviser to China’s central bank. “The general secretary worries about changing the underlying institutions.”
Mr. Xi’s top-down approach to reform is a departure from that of his predecessors, who encouraged local experiments that could be given a broader trial once a collective of party leaders reached a consensus. Many Chinese officials and academics now use the term “top-level design” or “top-down design” to describe the plans. That’s a pet phrase of Mr. Xi’s top economic adviser, Liu He, whom Mr. Xi appointed to run the leadership’s main economic advisory group. Previously, the group had reported to the premier; now, it reports to Mr. Xi.
Some Western officials and business leaders welcome Mr. Xi’s take-charge approach, preferring to deal with a leader who wields real power and can cut through bureaucratic red tape.
When U.S. Treasury Secretary Jacob Lew jetted to Beijing a few days after the Central Committee meeting, his goal was to meet with Mr. Xi, said officials familiar with the trip. He didn’t meet at all with Mr. Li.
Mr. Xi gave Mr. Lew an in-depth briefing on the planned reforms, said people familiar with the discussions, including such nitty-gritty details as China’s procedures for approving foreign investments—usually the premier’s preserve.
He gave a similar briefing last month to European Union leaders visiting Beijing. He asked for a dinner with them at the last minute—before Mr. Li’s meeting—and briefed them in detail on economic reforms, according to European officials. “He’s really upstaging Li,” commented one European official.
The concentration of power in Mr. Xi’s hands entails risks. Some Chinese economists warn that Mr. Xi might make decisions that are beyond his depth on the economy, leaving the premier to clean up the damage. Another concern is that he will be stretched too thin, with foreign and military affairs and party matters to deal with.
“The risk is that if you focus too much on top-level design, you lose the advantages of building from the experiences garnered at the grass roots,” says Huang Yiping, a Peking University economist.
Many lawyers and legal scholars, meanwhile, say they have lowered hopes that Mr. Li, who studied law at Peking University in a period of relative political openness in the 1980s, might be able to use his position to strengthen the rule of law.
In June, Mr. Huang, who at the time worked for Barclays Capital, coined the term “Likonomics” to describe Mr. Li’s economic priorities, which he said were to slow surging credit growth, eschew stimulus and remake China’s growth strategy, even if it means slower short-term economic growth. The term quickly caught on among economists covering China, but has since fallen out of fashion. Now Mr. Huang says it shouldn’t refer to Mr. Li specifically but “the economic policy framework of the new leadership.”
CLSA, a brokerage, now uses the term “Jinpingnomics.”
Some of Mr. Li’s top economic priorities have been sidelined, party insiders and economists said. At his first news conference as premier in March, Mr. Li highlighted urbanization as a driver of growth. But a party conference last weekend reiterated the party’s long-standing policy of building up smaller cities and towns, rather than allowing rural Chinese to move more easily to China’s largest cities where there are more opportunities. A Xinhua account gave Mr. Xi more credit for leading the session than Mr. Li.
“Urbanization isn’t the engine of growth that Li wanted it to be,” said a consultant to the Chinese government.
Another Li project, the free-trade zone in Shanghai, has been less ground-breaking than state media advertised. Mr. Li canceled plans to attend its opening in September because of bureaucratic wrangling over how it should operate, according to local planners. Chinese economists say the project was rushed.
Some party insiders say Mr. Li has little choice but to accept a supporting role, given the overwhelming support Mr. Xi—whose father was a revolutionary leader—enjoys from retired party elders, the military and other “princelings,” or descendants of party chieftains.
“Xi is a much more forceful personality,” said one politically connected Chinese businessman who has had regular dealings with both men. “What can Li do?”
Mr. Li was Hu Jintao’s first choice to succeed him as party chief, party insiders say. But they say Mr. Hu was outmaneuvered by party elders, led by Jiang Zemin, who favored Mr. Xi. When the new Politburo Standing Committee was unveiled in November 2012, six of its seven members had ties to Mr. Jiang, according to insiders. Only Mr. Li was closely associated to Mr. Hu.
Shortly before the new leadership was unveiled, Mr. Hu told a gathering of the party’s most senior leaders, past and present, that he wouldn’t meddle in politics as his predecessors had, party insiders said. He said Mr. Xi was “qualified” to be the party and military leader.
“After I retire, I absolutely won’t interfere with the next generation of leadership,” Mr. Hu said, according to a party official with direct knowledge of the meeting, a declaration that moved Mr. Xi to tears.
