Chinese president Xi Jinping will further consolidate his power at the National Party Congress next week, facilitating faster restructuring at home and a more muscular foreign policy abroad, leading economists and party figures told GlobalMarkets.
Attention will focus on the seven appointees to the powerful Politburo Standing Committee when senior party officials meet in Beijing for their twice-a-decade summit. Five of the seven existing members were at retirement age, noted Jing Ulrich, vice chairman of Asia Pacific at JP Morgan. GlobalMarkets understands it will be reduced from seven to five, concentrating power for Xi.
She also said she would not be surprised if Xi was made party chairman: a title that has only ever properly been held by the founder of the People’s Republic of China, Mao Zedong. It will enable Xi to get round the state constitution and extend his period in office beyond two terms.
The likelihood had already been priced into financial markets and would not come as a great shock, Gene Ma, chief China economist at the Institute of International Finance (IIF) told GlobalMarkets. “There may be a shift in the centre of gravity towards the top,” he said. “But there are still checks and balances.”
Instead of worrying about concentrated power, Jin Liqun, president of the Asian Infrastructure Investment Bank (AIIB), cited Xi’s anti-corruption drive. “This will carry on,” he told GlobalMarkets. “Xi is determined to do this and it’s important for China to move forwards and become a modern state with first class, clean state governance that serves the people.”
‘Runner on steroids'
The IIF’s Ma said Xi’s tighter grip on power should speed up consolidation within state-owned companies and enable the president to become more assertive on the world stage.
But he was less optimistic about easing China’s debt migraine. “Realistically, I think the best we can hope for is a slower increase in debt to GDP,” he said. “But there’s no such thing as a free lunch and our central bank will end up being as straight-jacketed as developed market peers, needing to keep interest rates down to finance domestic debt.”
It is an argument supported by Brian Coulton, chief economist at Fitch Ratings.
Coulton said it was important to look at total social financing and adjust for local government debt swaps, which have flattered the numbers. “We think the stock of credit is still growing faster than GDP and has risen about 14.5% so far this year,” he said.
James Daniel, assistant director at the International Monetary Fund (IMF) said he was also concerned about growth once China tries to wean itself off debt-fuelled expansion. He compared China to a “runner on steroids.”