China: Xi Jinping set to secure reform path – Danske Bank

China's news agency Xinhua recently reported that the Central Committee of the Communist Party has made a proposal to change the Constitution and remove the phrase that says the President can sit for only two terms (each of five years), points out the research team at Danske Bank.

Key Quotes

“This paves the way for Xi Jinping to be able to stay as President when his current term expires in 2023. With Xi Jinping most likely to stay in power for another 10 years – and possibly more, it should secure the current Chinese economic reform path for a long time. We expect economic policy to continue focusing on the upgrading of China into the areas of technology and innovation, opening the economy up further alongside reducing poverty, fighting financial risks and reducing pollution. The Chinese markets responded positively to the news.”

“Next step is a formal approval by the NPC

In our view, the Chinese legislative session the National People's Congress, which opens next week, is likely to approve the Central Committee's proposal. With approval, there would no longer be a limit to how long a President could sit and Xi Jinping could, in principle, sit for life if he has support from the Communist Party.”

“Xi Jinping to be longest sitting leader since Deng Xiaoping

• It has been clear for some time that Xi Jinping is the strongest leader since Mao. Xi Jinping was lifted to 'core leader' of the Communist Party in 2016, something his predecessor Hu Jintao did not achieve, and his name was written into the Constitution as the first sitting leader since Mao. Deng Xiaoping's name is also in the Constitution but got there after his death.
• Now we also know why there was no designated successor in the new Standing Committee of the Communist Party when it was presented in October 2017. The Party had probably already decided back then that Xi Jinping could stay on as President for longer than the two terms, although it needed a change to the Constitution. Xi Jinping will thus be the longest serving leader since Deng Xiaoping, who was China's 'paramount leader' for around 15 years from 1978 until the early 1990s. Although he stopped having any formal leadership roles in 1989, he was China's de facto leader until Jiang Zemin became President in 1993.”

“Xi Jinping a powerful leader but necessary to fight vested interests that block reforms

There is no doubt that Xi Jinping has amassed power during his first five years as President and driven a centralisation move. The Party has strengthened its' role and tightened controls. However, it has to be seen in the light of the country Xi Jinping took over in 2013. While economic growth had been high for many years, extensive corruption and crony capitalism was widespread in many spheres of the economy as well documented in the book China's Crony Capitalism by Minxin Pei. For China to get to the next stage of development and not get caught in the so-called 'middle-income trap', it had to deal with this problem. Many countries have become stuck in the 'middle income trap' because the existing leaders did not deal with – or were part of – the crony capitalism that is normal at the middle-income stage of development.”