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In this edition, we wrap up the events from the ‘two sessions’ and look ahead to what’s next after a busy few days of comings and goings in Beijing. Photo: EPA-EFE

Economy

Global Impact: China’s ‘two sessions’ may be over, but SVB, Aukus and Ukraine create uncertainty for Beijing

Global Impact is a weekly curated newsletter featuring a news topic originating in China with a significant macro impact for our newsreaders around the world
In this edition, we wrap up the events from the ‘two sessions’ and look ahead to what’s next after a busy few days of comings and goings in Beijing

Two Sessions 2023 (Lianghui)

Wendy Wuin Beijing

Published: 2:00pm, 21 Mar 2023

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Finally, the dust has settled on China’s “two sessions” for another year.

China’s National People’s Congress has confirmed a new government, with old hands retaining top posts within the central bank, finance ministry and other key economic agencies, including technology.

The team will support new Premier Li Qiang in ensuring a sustained recovery is the top priority on the economic agenda.

Li was quick to reassure entrepreneurs that the country would consistently support the private sector, while he also vowed to continue opening up.

04:53

Xi Jinping stresses party leadership as parliament draws to close

China also unveiled details of a plan to overhaul the Communist Party and state organs to strengthen the party’s control over finance and technology – the two sectors crucial for Beijing to ensure domestic stability and climb the tech ladder.

The message from Beijing is crystal clear – get ready for the competition with the United States.

The sweeping restructuring plan includes a set of dedicated organs under the party’s top policymaking body, the Central Committee.

A Central Technology Committee will lead strategic planning, coordinate innovation, streamline policymaking and push for military-civilian technology. A Central Financial Committee will also be set up amid heightened concerns over financial stability. As part of the changes, the Financial Stability and Development Committee, a regulatory body under the State Council, will be abolished.

The Hong Kong and Macau Affairs Office will also be placed under the Central Committee from the State Council. The plan also aims to improve grass-roots governance by setting up a new social work department, which is also tasked with party building in private enterprises and new business.

Questions remain on who will be put in charge of the new organs and how the responsibilities will be shared with the current central party organs, especially on the finance and economic fronts.

Beijing’s anti-corruption campaign in the finance sector is also still ongoing, while economic recovery in the first two months of 2023 is still being undercut by weak demand.

Black swan events have also hit the global financial markets, somewhat verifying Beijing’s warning to step up risk control.

The fallout from the collapse of Silicon Valley Bank, as well as two other US banks, continues to send shock waves and casts a cloud over the US Federal Reserve’s interest rate decision next week. Market sentiment was also dealt another blow with the liquidity crisis at Swiss lender Credit Suisse.

03:24

China’s new premier Li Qiang outlines priorities in first press conference

A recently published speech by Xi Jinping during the central rural work conference in December also showed China’s concerns of external turbulence and determination to ensure food security.

Xi said lessons must be learned from the Ukraine war as “over 30 countries have limited food exports, and some have experienced social turmoil or even regime change”.

He said agriculture is a national security issue of “extreme importance” and urged efforts to spearhead seed innovation, which is seen as one of the weakest links in China’s agriculture sector.

On diplomacy, Beijing scored a surprising victory by brokering a peace deal between Middle East powers Iran and Saudi Arabia.

30:39

What to expect from China under third-term President Xi Jinping | Talking Post with Yonden Lhatoo

Honduras is also set to switch ties to Beijing, a move to further isolate Taiwan and another possible diplomatic win for Beijing.

Now speculation is piling up on which role China can play, if possible, to de-escalate the Ukraine crisis.

Foreign Minister Qin Gang held a phone call with his Ukrainian counterpart on Thursday, calling the warring sides not to close the door to a political settlement.

Nevertheless, China is facing worsening security in the Pacific. The recent Aukus deal, which will see Australia purchase US nuclear submarines, has angered Beijing. It lashed out at the blatant act which would exacerbate nuclear proliferation in the region.

So while it is the end of the latest round of political reshuffling at home, there is still more on the horizon for Beijing to ponder.

60-Second Catch-Up

Why US is a factor in Xi Jinping’s Communist Party restructuring plans

President Xi Jinping begins third term urging a balance of growth and security

Chinese Premier Li Qiang launches confidence drive aimed at private sector and foreign investors

Li Qiang takes 1 foreign affairs question – on US-China decoupling

Xi Jinping vows ‘peaceful’ Taiwan ties as caution marks cross-strait tone from Beijing

Central bank, finance chiefs retain spots in cabinet shake-up

Beijing fills top prosecutor, judge and anti-corruption positions

Deep dives

What does China’s ‘employment-first strategy’ mean for young jobseekers in an overcrowded labour pool?

They appear in record numbers every year – fresh college graduates – and it ‘certainly adds pressure to employment’, new Premier Li Qiang says

Some say Beijing’s bolder employment objective – adding 12 million new jobs in 2023 – contrasts with leadership’s moderate GDP growth target for China

During his first press conference on Monday following the closing ceremony of the National People’s Congress (NPC), Li said Beijing would take multiple steps to stabilise and expand employment and offer more government support in employment services and technical training, especially for young people.

“Employment is the cornerstone of people’s livelihood, but ultimately, the solution to job creation lies in economic growth,” Li said.

Li Qiang is China’s new premier, but how much power will he wield?

Li Qiang was confirmed as China’s premier – its No 2 official – on Saturday, but the position is seen to hold diminishing authority as President Xi Jinping consolidates power

However, some observers say the former Shanghai party boss might enjoy more policy leeway on economics thanks to his close relationship with Xi

He was endorsed by 2,936 of the 2,947 NPC members who attended Saturday’s meeting, with three voting against and eight abstaining.

Xi and Li chatted before and after the vote, which also approved appointments to the country’s top supervision job as well as its top judge and prosecutor-general.

01:55

China’s Li Qiang shakes off Shanghai Covid chaos to become new premier

State Councillor Shen Yiqin – the one woman at the top of Chinese politics

Shen has made the leap from a provincial Communist Party chief to the top ranks of government but has yet to break through into the all-male world of the Politburo

Without a more diverse group of people in its upper echelons, the quality of decision making in China will continue to suffer, observers say

The appointment came five months after Beijing unveiled its first all-male Politburo in 20 years.

Experts said that while her appointment showed there was a path for women in politics in China, the glass ceiling limited their chances of promotion, undermining the quality of decision-making at the top levels.

China’s ‘two sessions’: Li Qiang brings ‘down-to-earth’ style as premier

The former governor of Zhejiang expects bureaucrats to get out of the office and find solutions at the grass roots

Li’s governing approach was honed in his home province which was known for its pro-business light touch and listening ear

Li, a long-time aide to President Xi Jinping, was endorsed as premier on Saturday by China’s legislature, and revealed the direction at his debut press conference in the role after the National People’s Congress closing ceremony on Monday.

Li said inspection and study trips to the front line and grass roots would be the new government’s top priority to improve its work style.

How does China pick top officials? Beijing mouthpiece sheds new light on secretive standards

Criteria include being 68 or younger and spending more than five years in ministerial or provincial leadership roles, according to Xinhua

However, the rules allow for flexibility, and recent promotion of Foreign Minister Qin Gang is among the exceptions

It was a rare disclosure about the standards, including age and rank, for nominating and elevating top officials for the State Council, the National People’s Congress, the Chinese People’s Political Consultative Conference (CPPCC) and the Central Military Commission.

The article said new nominees should be born after January 1955 in a bid to “actively and steadily construct the leadership team”. This age limit requires officials to be 68 or younger, though the criteria could be relaxed for some officials, including those from Hong Kong and Macau and ethnic minority groups, according to Xinhua.

Are US sanctions on China’s new defence chief the real barrier to dialogue?

Washington shows no sign of lifting long-standing sanctions on China’s new defence minister, observers say

‘Political sensitivities’ – not sanctions – are likely reason for stalled dialogue, one analyst says

Lifting the sanctions on General Li Shangfu is considered a necessary step by Beijing for such talks to resume between the Pentagon and the People’s Liberation Army (PLA), but that appeared doubtful, according to Zhou Bo, a senior fellow from the Centre for International Security and Strategy at Tsinghua University.

“The US has the initiative and responsibility to remove the barrier, because China’s defence minister is one of the PLA’s top military leaders who specifically takes care of the country’s military diplomacy,” said Zhou, a retired senior colonel and former director of the Centre for International Cooperation at the Central Military Commission.

Who is Chinese economist Yi Gang, the US-educated governor of the People’s Bank of China?

Since 2018, central bank governor Yi Gang has led financial reforms and debt reduction, while maintaining a prudent monetary stance

Educated in the US, Yi has also been responsible for raising China’s profile on the global stage and continuing its opening to the world

And he has unexpectedly secured a second five-year term as head of the central bank, extending his leadership role despite having reached retirement age this year. This gives him the chance to serve longer than usual, and it is particularly eye-catching given that the country has ushered in a mostly new administration under President Xi Jinping.

Yi, the 65-year-old governor of the People’s Bank of China (PBOC), is considered in Beijing to be a straight-talking, pro-market reformer with a scholarly air. Respected for his knowledge of monetary economics, he is also well known for his low-key and balanced work style.

Global Impact is a fortnightly curated newsletter featuring a news topic originating in China with a significant macro impact for our newsreaders around the world.

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