China’s challenges ahead will test strengthening of party leadership
- State Council institutions must follow new line that aims to improve efficiency, deliver growth and ensure technological transformation
As the annual National People’s Congress session closed this week, delegates put the final touches on changes that signalled the strengthening of Communist Party control over government and financial institutions.
In the face of challenges at home and abroad, the legislature passed a law requiring Premier Li Qiang’s State Council, or cabinet, to adhere to the party’s ideology, leadership and instructions.
The amendment to the Organic Law of 1982 made it clear the State Council will take a back seat to shaping policy and instead turn to implementing ruling party policies.
The premier’s annual news conference, a fixture at the “two sessions” for 30 years, was also scrapped this year.
State Council institutions will adhere to the new line, among them the commerce, foreign affairs, finance and defence ministries, and the securities regulator and central bank.
In the case of the People’s Bank of China, last year’s appointment of Pan Gongsheng as governor and party chief fuelled speculation that the post held diminished power, as he was not a full or alternate member of the powerful party Central Committee.
But the latest move is designed more to shore up the bank’s strength as an institution, after years of leadership by powerful governors such as Zhou Xiaochuan, who pulled the policy levers to maintain growth and helped guide China through the global financial crisis.
That crisis led Beijing to reconsider the Western financial model and, in recent years, it has decided to forge its own path. The central bank is core to President Xi Jinping’s aim of creating a “financial superpower”.
China’s markets are slumping and the economy is sluggish, failing to bounce back quickly from Covid-19 and hampered by a property market in turmoil.
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Externally, the US trade war started by President Donald Trump only seems to have hardened under President Joe Biden, who imposed export bans on high-end microchips sold to China.
With the US headed for a Biden-Trump rematch of the 2020 election this autumn, relations between the superpowers will remain cool. All of this helps to explain why Xi has spoken regularly to delegates about “new quality productive forces”.
These forces – party shorthand for home-grown technology and innovation – are critical for China to transform its economy by targeting quality sectors and building self-reliance in an uncertain global landscape.
Li set an ambitious growth rate of about 5 per cent, perhaps achievable as China hit 5.2 per cent in 2023 while coming out of the pandemic. But an extra layer of approval and oversight may sometimes undermine the ability to take swift action in crises.
With a year to make good on its growth pledge, and longer for technological transformation, time will reveal the efficiency of party leadership across all fronts.
