News Analysis: Great expectations for premier-in-waiting Li Keqiang

willy_lam_thumbnail

Willy Lam looks at the key challenges for China’s next top leaders.

While it is most unlikely that the Fifth-Generation leadership to be endorsed at the 18th Chinese Communist Party (CCP) Congress later this year will introduce political reform, the new administration is set to run government institutions and state-held enterprises along much more pronounced market-oriented lines.
 
All eyes are on whether the likely successor of Premier Wen Jiabao, the current Executive Vice-Premier Li Keqiang, will summon the resolve and energy to tackle the 120-odd yangqi, or centrally-owned enterprises and conglomerates that still dominate sectors ranging from banking and insurance to and telecommunications and defense-related industries.
 
While most of these beheboths are listed on the stock markets, the government remains the largest shareholder – and the bulk of their board members as well as CEOs and CFOs are still appointed by party and state departments.
 
The recent detention of a few senior executives in two state-held banks is seen as a harbinger of sweeping changes that could bring these government monopolies into line with the requirements of the marketplace.
 
In June, Tao Liming, the Governor of the Postal Savings Bank of China, the country’s seventh largest financial institution, was arrested for alleged corruption. This followed the detention last month of the Vice-President of the publicly listed Agriculture Bank of China, Yang Kun, for unspecified economic crimes and dereliction of duty.
 
Earlier this year, Premer Wen had taken the unusual step of criticizing a number of yangqi for making “unreasonably high profits” due to their monopoly status. He specifically asked that more private or semi-private financial institutions be allowed to compete on a level playing ground with the established government banks.
 
Currently, the 120 yangqi report to the State-owned Assets Supervision and Administration Commission (SASAC), a ministerial-level unit under the State Council or cabinet. However, it is well known that the SASAC is a toothless outfit that lacks the clout to control such behemoths as the three giant oil monopolies or the four banking monopolies, all of whose presidents enjoy ministerial status or above.
 
One of Li’s urgent new job is to ensure that the prime minister has more authority over SASAC – and through SASAC – tighter control of how the state-held conglomerates are being run. Li, 56, is known to favor a partial breakdown of these monopolies in the interest of allowing more market-oriented competition. Viable private firms and even selected foreign enterprises may be allowed to get into sectors previously monopolized by the 120 yangqi.
 
Li is also likely to revive plans, first mooted in early 2008 when he became executive vice-premier, to form a host of “super-ministries” to centralize and improve decision-making in areas such as finance, transportation and
energy.
 
For example, Li wanted in 2008 to set up a “superministry” to look after all modes of transport, including air, railways, highways and so forth. However, the plan failed due to the opposition of then Minister of Railways Liu Zhijun, who enjoyed a close relationship with both Jiang Zemin and Hu Jintao. However, after the 2011 conviction of Liu on corruption charges – as well as the problems that befell China’s speed-train program after the July 23, 2011 Wenzhou disaster – Li’s plan may materialize after he has taken over the post of head of government.
 
Li enjoys distinct – and important – advantages over Vice-President Xi Jinping, the other Fifth-Generation titan who is slated to become party General Secretary and State President at and soon after the 18th Party Congress.
 
Firstly, while their age difference is minimal, Li seems to be a lot more knowledgeable about international issues, including global economics and international law. His training in law and economics at Peking University (Beida) was impressive. Moreover, Li is at least more aware of the importance of political and structural reform.
 
While studying law at Beida, Li impressed his professors and classmates with a good grasp of Western political ideals. His aptitude in English is probably the best among possible new Politburo members to be confirmed at the 18th Party Congress. A couple of the British textbooks he translated into Chinese are still being used in Chinese law schools. His enthusiasm for political reform was demonstrated in speeches he gave as a Beida student leader.
 
One big question regarding the Xi-Li administration is: will there be any clashes between these two leaders – and the factions behind them? If a power struggle were to develop between Xi’s Gang of Princelings on the one hand, and the Communist Youth League Faction, which is headed by President Hu Jintao and Li on the other, it could take the form of intensifying rivalry between the party chief and the prime minister.
 
For example, while Li, as premier, has overall charge of the economy, it is possible for Xi to breathe down Li’s neck. This is in light of the fact that in China, the party leads the government in almost all arenas. It is probable that after the 18th Party Congress, Xi will inherit Hu’s position as Head of the CCP Leading Group on Finance and Economics (LGFE) – and Li, like Premier Wen, will become the Deputy Head of this group.
 
Major economic and financial policies, such as the value of the renminbi, interest rates, and major economic relations with the U.S., EU or Japan, have to be confirmed by the LGFE, even though possible courses of actions are invariably recommended by State Council departments.
 
It is well-known that party general secretaries and premiers since the early 1980s – including Hu Yaobang and Zhao Ziyang; Zhao Ziyang and Li Peng; Jiang Zemin and Zhu Rongji; and Hu Jintao and Wen Jiabao – have had differences and occasional run-ins regarding specific financial and economic policies.
 
Clashes between Xi and Li may also be exacerbated because the post-18th Congress Executive Vice-Premier, who is likely to be Wang Qishan, is a charismatic cadre who enjoys close relationship with fellow princeling Xi Jinping. Wang also has more practical experience than Li in handling financial matters. Thus, the scenario of Xi and Wang working together to “make trouble” for Li in the course of the formulation and execution of economic policies cannot be ruled out. 

*Willy Lam is an Adjunct Professor in the History Department and in the Master’s of International Political Economy Program at the Chinese University of Hong Kong; he is also a Select Professor of China Studies at Akita International University, Japan. Dr Lam specializes in areas relating to China’s economic and political reform as well as foreign policy and is currently writing a book on the new Chinese leader Xi Jinping.

READ MORE ABOUT AUSTRALIA-ASIA

Join Australia-Asia Forum
receive newsletter & our event promotion

"*" indicates required fields

This field is for validation purposes and should be left unchanged.