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Crisis in the Chinese leadership?: the differences between Xi Jinping and Li Keqiang paralyzes the economic officials of the regime

Chinese regime chief Xi Jinping and Premier Li Keqiang attend the second plenary session of the National People’s Congress (NPC) at the Great Hall of the People in Beijing, China, on March 8 (Reuters)

The last time a senior Chinese leader impromptu addressed thousands of officials in February 2020, Xi Jinping asked for a “people’s war” against him Covid-19 at the start of the pandemic.

On Wednesday, the prime minister Li Keqiang held an equally rare video call with thousands of cadres across the country to warn of an economic crisis even worse than two years ago, asking them to better balance Covid controls and economic growth..

Nevertheless, many policy makers on the ground are not quite sure who to listen to: Xi continues to insist on the need for officials to press for there are no cases of Covid-19while Li He continually urges them to boost the economy and achieve pre-set growth targets.

This dilemma is leading to paralysis in a nation normally hailed for swift enforcement of dictates from above.according to eight top local government officials and financial bureaucrats who asked not to be named because they are not authorized to speak publicly.

Although Investors and analysts viewed Li’s impromptu meeting as an attempt to bolster consensus on the urgency of reviving the economy.four senior officials stated that it did not serve to change their opinion that the control of the Covid outbreak remained a priority. One of them said that from a personal career point of view, the hard work of cadres means nothing if they fail to contain an outbreak, while the advantage of starting economic projects was limited.

Perhaps the most revealing detail of the gigantic gathering of Li was the one who didn’t show up. The heads of the Communist Party of many cities were absent because they had to focus on ensuring control of Covid, said one of the people, adding that it indicated that the work on the pandemic was still ahead of the economy. The attendance of party bosses was not compulsory.

Xi Jinping and Li Keqiang at Tiananmen Square in Beijing on October 1, 2019, to mark the 70th anniversary of the founding of the People's Republic of China (AFP)
Xi Jinping and Li Keqiang at Tiananmen Square in Beijing on October 1, 2019, to mark the 70th anniversary of the founding of the People’s Republic of China (AFP)

The Council of Statesupervised by Lidid not immediately respond to questions sent by fax.

Though Li did not criticize the policy covid zero nor did he suggest a change of it, he showed a frustration “palpable” due to the slow pace with which local governments were enacting the stimulus measures approved in recent months, according to Trey McArverco-founder of the research firm Trivium China.

You are being put in the impossible position of trying to rescue the economy without being able to adjust the only policy – Covid zero – that is causing the most economic damage.“, said McArverreferring to Li.

The stakes are especially high, as the Chinese Communist Party is preparing to celebrate at the end of this year a conclave of leaders that is held twice in a decade and in which Xi is expected to win a historic third term. The party leadership will also be revamped, clearing the way for other cadres to rise through the ranks if they can avoid any missteps, especially in dealing with outbreaks of Covid.

The paralysis is reflected in market sentiment. The benchmark CSI 300 index was flat after falling as much as 1.1% on Wednesday, while Hong Kong stocks fell..

the meeting of Li Wednesday brought together cadres down to the county level, with officials from nearly every government department, including propaganda, environment and public services, according to notices posted on county government websites.

A man crouches at a barricade in a shopping area during the lockdown amid the coronavirus disease (COVID-19) pandemic, in Shanghai, China, May 26, 2022 (Reuters)
A man crouches at a barricade in a shopping area during the lockdown amid the coronavirus disease (COVID-19) pandemic, in Shanghai, China, May 26, 2022 (Reuters)

The prime minister used that platform to launch his harshest warnings about the weak performance of the economy, stating that “the difficulties in some aspects, to a certain extent, are greater than when the epidemic hit us badly in 2020″. She said that China must avoid a contraction in the second quarter, adding that the nation would pay a huge price with a long road to recovery if the economy cannot continue to expand at a certain pace.

deep drop

In a separate act, Li also urged local officials to ensure a bumper crop for the summer crop in order to meet annual grain production targets and stabilize prices, the China National Radio.

The latest official data showed a contraction in industrial production for the first time since 2020 and a jump in the surveyed unemployment rate to 6.1% in April, close to a record. High-frequency data for May showed the economy remained in a deep depression, according to the aggregate index of eight Bloomberg.

Xi has not directly addressed the depth of China’s economic struggle in recent weeks., although his more generic comments have received prominent treatment in state newspapers. “China’s determination to open up at a high level will not change, and China’s door will be further opened to the world“, said Xi at a recent anniversary meeting of the trade councilin a typical comment.

A man takes a photo on an empty street during the lockdown amid the coronavirus disease (COVID-19) pandemic, in Shanghai, China, May 26, 2022 (Reuters)
A man takes a photo on an empty street during the lockdown amid the coronavirus disease (COVID-19) pandemic, in Shanghai, China, May 26, 2022 (Reuters)

Li, instead, has been revealed as a more candid figure. At the same business council event held in Beijing earlier this month, Joerg Wuttkepresident of the European Union Chamber of Commerce in Chinasaid the prime minister “woke up” when some delegates shared their frustrations about China’s policy of Covid.

Li came over afterwards and asked how we were doing and how business was going.“, said Wuttke, adding that he was surprised by the move. “It was a very positive gesture. The fact that he crossed the street, introduced himself and said ‘let’s have a chat’ was impressive”.

a lot of talk

Wuttke said the virtual comments of Xi they included “a lot of talk” and no opportunity for an exchange of views.

Xi has tried to maintain a policy of Covid-Zero, while GDP growth of 5.5% has been proposed this year, a goal that has put local officials in trouble. The economists surveyed by Bloomberg they forecast that the economy will grow 4.5% this year.

The directors of several state-owned banks have been told they will be held accountable if they fail to meet lending targets. They have struggled to implement orders to introduce more liquidity as eligible companies are reluctant to borrow in the uncertain outlook for the economy, according to bank officials and executives.

Still, some analysts remain hopeful that the worst may soon be over.

Premier Li’s speech yesterday was incredibly important in adjusting expectations to a more realistic position.“, said James Sullivanhead of equity research at Asia-Pacific at JPMorgan Chase & Co. “Then we can start looking forward”.

(C) Bloomberg.-

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