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China – Xi Tightening Grip on Power

The 19th quinquennial National Congress of the Communist Party of China (NCCCP), which is scheduled to open on October 18, will bring greater clarity to the country’s political direction, as replacements are named for retiring members of the 25-member Politburo and the seven-member Politburo Standing Committee (PSC), the two most important decision-making bodies in the governing apparatus. President Xi Jinping is all but certain to be nominated for a second five-year term, and political reforms proposed at the annual closed-door Beidahe meeting of the Politburo in Hebai Province suggests that Xi’s allies are maneuvering to lay a basis for extending his tenure in power beyond the two-term limit on the presidency.
According to leaked reports, draft proposals that will be presented for approval by the CCP plenum that will convene one week before the five-year congress include one calling for the revival of the post of party chairman, which was abolished in the early 1980s. Other proposals include enshrining Xi’s political doctrine in the CCP’s constitution, and waiving the PSC’s mandatory retirement age of 68 for the president’s 69-year-old anti-corruption czar, Wang Qishan.
The move to retain Wang highlights the fact that Xi’s faction has a weak bench within the upper echelons of the CCP hierarchy compared to allies of his two most recent predecessors, Hu Jintao and Jiang Zemin. Xi has likewise sought to compensate for that imbalance by marginalizing figures with close ties to Hu and Ziang, illustrated by the exclusion of both Chief of Joint Staff Fang Fenghui and Zhang Yang, the head of the Political Work Department of the Central Military Commission from the list of 253 military delegates to the NCCCP.
In contrast to the potential for fairly significant departures from standard procedure on the political front, the upcoming congress is unlikely to produce much in the way of surprises with regard to the economic policy program, which is outlined in the five-year plan that went into effect last year. Further steps to address potential sources of economic distress, including the still unresolved problem of overcapacity and the risk of damaging financial instability stemming from the accumulation of bad debt, will be a priority in the near term, but with little prospect of a significant tightening of fiscal or monetary policy, the massive national debt will continue its climb toward 300% of GDP, contributing to a persistent risk of a hard landing for the economy.
With that in mind, the NCCCP will be watched for clues as to who might be named to succeed Zhou Xiaochuan when his 14-year tenure as governor of the central bank in March 2018. Zhou is the longest serving PBoC head, and has been hugely influential in steering China’s gradual opening of its financial sector. A potential contender whose name has been appearing in state-controlled media is Jiang Chaoliang, the current party secretary of Hubei Province. Jiang oversaw liquidations during the Asian financial crisis of the late 1990s, experience that could make him an appealing choice for Xi, who is keen to iron-out the bubbles and distortions that are driving financial-sector uncertainty.
Annual real GDP growth hit a 26-year low of 6.7% in 2016, and the pace of expansion was only slightly faster in the first half of this year, averaging 6.9% (year-on-year) over the first two quarters. The tightening of restrictions on consumer lending will have a dampening impact on both household consumption and the housing industry, holding the annual growth rate to 6.7% once again this year, with putting the economy on track to slow to less than 6.5% in 2018.
Since 1979, The PRS Group Inc., has been a global leader in quant-based political and country risk ratings and forecasts. For more information on The PRS Group and its wide range of risk products, go to:, or contact us at (315) 431-0511 and


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