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Xi Jinping Replaces as Head of Chinese Communist Party

By Bloomberg News
November 15, 2012 1:54 AM EST 6 Comments
Xi Jinping, general secretary of the Communist Party of China, delivers his maiden speech in Beijing.
Photographer: Mark Ralston/AFP/Getty Images
Xi Jinping, general secretary of the Communist Party of China, delivers his maiden speech in Beijing.

Xi Jinping replaced Hu Jintao as head of the Chinese Communist Party and the nation’s military, ushering in the fifth generation of leaders who are set to take control of the world’s second-biggest economy.

Xi, 59, succeeds Hu as general secretary of the 82 million- member party that has run China since 1949, the official Xinhua News Agency announced. He’s joined on the elite Politburo Standing Committee by Li Keqiang, 57, who is forecast to replace Premier Wen Jiabao at a March meeting. The Standing Committee has seven members, down from nine.

Xi’s immediate assumption of the military leadership, unlike his two predecessors, and the decision to cut the Standing Committee to seven from nine leave fewer voices to obstruct consensus and may help him consolidate control. Those moves may also speed up decisions on challenges ranging from an economic revamp and shrinking the nation’s wealth gap to a strengthened campaign against corruption and managing territorial disputes with Japan.

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“The Chinese goverment may want to send a message to both China’s domestic and international audience that the newly emerging leader will be strong and solid,” said Lee Dongmin, an assistant professor at the S. Rajaratnam School of International Studies in Singapore. “Since Xi Jinping now will get to control both the party and the military, this may be the sign of a new era.”

Enormous Responsibility

Introducing his fellow Standing Committee members at a ceremony in Beijing’s Great Hall of the People, Xi pledged to “carry out reform and opening up” of the economy and said taking leadership of China places “an enormous responsibility on our shoulders.”

“Our party faces many severe challenges, and there are also many pressing problems within the party that need to be resolved, particularly corruption, being divorced from the people, going through formalities and bureaucratism caused by some Party officials,” Xi said.

Xi and Li are joined on the Standing Committee by Vice Premier Zhang Dejiang, who turns 66 this month; Shanghai Communist Party Secretary Yu Zhengsheng, 67; propaganda minister Liu Yunshan, 65; Vice Premier Wang Qishan, 64; and Tianjin party chief Zhang Gaoli, who turns 66 this month, Xinhua announced. Wang was also named head of the party’s anti-corruption panel.

Standing Committee members typically retire after age 70. That means only Xi and Li may remain on the Standing Committee from the current group after the party’s next congress, in 2017.

All Men

The members of the new panel announced today are all men. There has never been a woman on the Standing Committee in the history of the People’s Republic. The number of women on the 25- member Politburo rose to two from one, the most ever.

In another change, Li Keqiang was made No. 2 in the party hierarchy. Wen, the man he’ll replace as premier, was one place lower. That’s a relic from 1997, when Li Peng held onto the second spot as he shifted from premier to chairman of the national legislature.

Hu’s decision to step down from the Central Military Commission contrasts with the last transition when he waited two years to take that post from his predecessor, Jiang Zemin. Xi is due to take the ceremonial post of state president in March.

The new leadership will have to balance calls by private entrepreneurs and some political leaders for market-opening reforms with the interests of state-owned monopolies and local governments that prospered in the past decade under Hu. Standard Chartered Plc sees a risk of annual growth slumping to between 3 percent and 4 percent within 10 to 15 years without market- driven change to increase competition for state enterprises.

Debt Surge

Zhang Dejiang, who oversees state-owned companies as vice premier, is an economics graduate of Kim Il Sung University in North Korea. Zhang Gaoli presided over a surge in debt-fueled growth in Tianjin, a municipality almost twice the size of Delaware.

Liu oversaw media controls and Yu is an engineer whose time in Beijing was spent in the construction ministry. Wang currently oversees finance as vice premier and is Treasury Secretary Timothy F. Geithner’s counterpart in annual bilateral economic talks with the U.S.

“It appears that this new Standing Committee is filled with centrist politicians who will continue to push forward reform at a steady pace, but are pragmatic enough to understand their constraints,” said Liu Li-Gang, China economist with Australia & New Zealand Banking Group Ltd. (ANZ) in Hong Kong. “It is difficult to imagine any bold policy measures will be implemented soon.”

Hu’s Tenure

During Hu’s tenure as general secretary, the yuan appreciated 33 percent against the U.S. dollar. The yuan appreciated even more in real terms, because the inflation rate in China exceeded that in the U.S. The yuan closed yesterday at a 19-year high in Shanghai trading, gaining 0.02 percent to 6.2252 per dollar, according to the China Foreign Exchange Trade System.

Xi may have to contend with pressure from U.S. lawmakers, some of whom say the Chinese currency is too weak and have called for duties to be added to Chinese imports. The Treasury Department’s latest report on exchange-rate policies, issued May 25, said China had made progress in allowing the yuan to appreciate, particularly since June 2010, when the nation moved away from a fixed peg to the dollar. The yuan is still “significantly undervalued,” the report said.

Stock Valuations

Under Hu, Chinese stock valuations fell more than in any other of the so-called BRICs nations, Brazil, Russia and India. The Shanghai Composite Index has fallen 19.3 percent in the past year. It was down 1.1 percent to 2032.23 at 2:43 p.m. local time.

The incoming Standing Committee also inherits a troubled relationship with Japan over islands in the East China Sea claimed by both sides. Japanese Prime Minister Yoshihiko Noda plans to dissolve parliament tomorrow, triggering elections that polls indicate will be won by former Prime Minister Shinzo Abe, who advocates a tougher stance in the territorial dispute.

There are signs that Xi will be a different leader -- at least in style -- than Hu, who stood stiffly in a 2009 photo of Group of 20 participants in London while U.S. President Barack Obama and former Italian Prime Minister Silvio Berlusconi laughed and chatted.

During a June 2010 visit to Australia, Xi took a river cruise through Kakadu National Park. When the boat stopped near a crocodile sunning itself on the shore, Xi posed for pictures with the Chinese delegation, including junior officials, with the reptile in the background, said Geoff Raby, Australia’s ambassador to China at the time.

Muscatine Visit

Earlier this year, Xi made a trip to the U.S., meeting Obama in Washington and returning to Iowa where he first visited in 1985 to learn about agricultural techniques. During his visit to Muscatine, a Mississippi River town, he recalled how residents then were surprised he watched American movies such as “The Godfather.”

“He’s going to be instinctively a better communicator and politician in terms of reading public mood and creating a more approachable public persona,” said Kerry Brown, a professor at the University of Sydney, who previously served as a British diplomat in Beijing. “As a leader, Hu Jintao’s been very remote and this is the cause of many problems.”

Political Scandal

The party’s larger, 25-member Politburo, includes Zhang Chunxian, the party secretary for Xinjiang, where China’s government is cracking down on unrest by some members of the region’s ethnic Uighur minority; Wang Huning, a former dean of the law school at Shanghai’s Fudan University and head of the party’s Central Policy Research Center; and Zhao Leji, the party secretary for northwestern China’s Shaanxi province.

The leadership transition has been roiled by China’s biggest political scandal in a generation, with the ouster of Chongqing party boss Bo Xilai from the Politburo in April. Bo’s wife was convicted in August for the murder of a British businessman, and Bo, once a contender for the Standing Committee, was expelled from the party. He now faces trial for corruption and abuse of power.

In his Nov. 8 address to open the Party Congress, Hu said that failure to address corruption “could prove fatal to the party, and even cause the collapse of the party and the fall of the state.”

A key challenge for Xi and his Standing Committee colleagues will be to ensure that Communist China doesn’t follow the pattern of the Soviet Union, which ossified into an unyielding organization riven with vested interests that blocked any change, said David Zweig, a professor of political science at Hong Kong University of Science and Technology.

A Soviet-style sclerosis in the country’s leadership “will make it very difficult for him to solve China’s numerous problems and could significantly intensify the party’s own problems,” Zweig said.

To contact Bloomberg News staff for this story: Michael Forsythe in Beijing at mforsythe@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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