(Bloomberg) — China’s Communist Party congress next month will set the stage for a possible overhaul of the country’s top economic roles, coming at a crucial time for the world’s second-largest economy.
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Premier Li Keqiang, economic czar Liu He, central bank Governor Yi Gang, banking regulator Guo Shuqing and Finance Minister Liu Kun are all likely to step down from their current positions by early next year, based on retirement age and term-limit norms for senior officials that President Xi Jinping is expected to largely stick to.
Who will take on those roles will become clearer at the once-in-five-year congress, where Xi is expected to secure a precedent-breaking third term as party chief. While the officials will remain in their government posts until at least March next year when the National People’s Congress, China’s legislature, will effectively rubber stamp new appointments, promotions at next month’s conclave will signal who is in line for senior leadership posts.
It’s shaping up to be the biggest economic reshuffle in a decade and comes at a time of heightened concern about growth prospects. The housing market remains in a historically deep downturn, youth unemployment is at a record 20%, and household and business confidence has plummeted under Beijing’s Covid Zero policy.
China watchers say the next generation of officials are likely to have previously served in senior economic roles, ensuring policy continuity. Some of the current team could receive honorary government posts and remain influential advisers behind the scenes, too.
It’s possible the next generation of economic officials — all of whom are expected to be men — could have weaker academic credentials than the current economic team, with their authority based more on their close ties to Xi and their previous government experience. Xi tends to set the economic policy direction for the country, while leaving the details of the plans to his team.
“Personnel matters,” said Victor Shih, associate professor of political science at the University of California San Diego. “The exact implementation and the policy-making process are dictated to some extent by the technocrats.”
Here’s a look at the key positions economists and observers are watching closely and the possible candidates that could fill them:
Liu He, a US-trained economist who has known Xi since childhood, has been Xi’s top economic official and “Mr Fix It” for the past decade. Liu, made a vice-premier in 2018, masterminded sweeping financial sector overhauls aimed at slowing the growth of domestic debt.
Though it’s possible Xi could keep him on, the 70-year-old Liu is already past the unofficial retirement age of 68 for members of the Politburo, the party’s top 25 officials. Liu’s retirement could be signaled at the party congress if he is not listed as part of the new Politburo.
If that happens, the appointment of a new director of the party’s Central Financial and Economic Affairs Commission, a position held by Liu, should confirm the identity of his replacement. That person would then likely be named as vice-premier at the annual legislature meeting, which usually takes place in March.
Liu’s successor would be “one of the most powerful — maybe the most powerful –” economic officials in the country, and “greatly impact China’s economic policy trajectory for the next five years and beyond,” analysts at consultancy Trivium said in a recent research note.
He Lifeng, currently head of the National Development and Reform Commission, China’s powerful planning agency, is seen as the current front-runner to succeed Liu. A promotion to the Politburo at the upcoming October party congress would be a signal of He’s promotion.
While He’s ties to Xi are seen as strong as Liu’s, “he’s much more of a politician than a technocrat,” said Neil Thomas, a China analyst at Eurasia Group Ltd. “He does not have the level of subject matter expertise that Liu He does.”
He, 67, also has less overseas experience than Liu, who used his fluent English to lead trade talks with the US when former President Donald Trump embarked on a tariff war with China.
It’s likely that Liu’s portfolio will be divided, with responsibility for high-level trade negotiations possibly being handed to another official, said Chen Long, an economist at Chinese consultancy Plenum. It’s possible the next premier could take on some of Liu’s current duties, he added.
The premier plays a major role in economic management as head of the State Council, co-ordinating the ministries that make up the government. That includes the central bank, which is treated like a ministry.
Despite being seen as an unusually weak premier outshined by Liu, Li Keqiang, who has a doctorate in economics, used his premiership to promote a distinctive policy platform centered on job growth, cutting taxes and easing red-tape for small businesses. Li, 67, said in March this would be his last year in the role after serving two five-year terms.
Li’s successor should be confirmed shortly after the party congress ends, when the Politburo Standing Committee members are presented to the public in order of rank. The next premier is generally the second person in that lineup.
Li Qiang, a close ally of Xi and the top official in Shanghai has been tipped for the role, although he has faced criticism for his city’s chaotic coronavirus lockdown earlier this year.
All Chinese premiers in recent decades have previously been a vice-premier and on the Politburo. There are only two officials who meet that bill and are younger than the unofficial retirement age: Hu Chunhua, 59, and Wang Yang, 67.
While neither have Li’s academic credentials, both have served as the top Communist Party official in Guangdong province, the southern economic powerhouse that neighbors Hong Kong. That gives them experience coordinating government departments and managing relations with private-sector companies, which dominate the province’s economy.
“Wang Yang is definitely the most qualified,” Shih said. “He has a deep understanding of both local governments and the center.” Hu is seen as having closer ties to current incumbent Li, he added, but his elevation to the premier position is “far from certain.”
Central Bank Governor
Yi Gang, a former economics professor who has led the powerful People’s Bank of China since 2018, will turn 65 in March — putting him at the traditional retirement age for Chinese officials at the ministerial level. The same rule applies to 65-year-old Liu Kun, who heads the finance ministry overseeing fiscal policy.
While the central bank is subordinate to the State Council, its governor has broad influence over monetary policy. Zhou Xiaochuan, Yi’s predecessor, was able to circumvent the usual retirement age by gaining a position on a political advisory body. Analysts see this as less likely in Yi’s case, though, as his political connections are weaker than Zhou’s.
The retirement of minister-level officials such as Yi will be implied if they are omitted from a list of members of the party’s Central Committee released at the congress. Any successors won’t be confirmed until the legislature meeting in the Spring.
The PBOC governor role usually goes to an official with experience as a vice governor at the bank. Current deputy, Pan Gongsheng, 59, a former academic who studied at Cambridge and Harvard universities, would be an “excellent candidate,” Shih said. “However, candidates with better political connections than Pan might win out,” he said.
One well-connected name doing the rounds among analysts is Yin Yong, a former vice governor of the PBOC, who now serves as Beijing’s vice-mayor, working closely with the city’s top official Cai Qi, a key ally of Xi. Ascension to the Central Committee would be a sign of promotion for Yin, whose academic background is in engineering rather than economics.
It’s also possible that Guo Shuqing, 66, the top Communist Party official at the central bank who is also head of the banking regulator, could take the governor job under an arrangement similar to Zhou’s, according to Hui Feng, co-author of “The Rise of the People’s Bank of China.” Guo is an academic heavyweight with decades of experience in top economic agencies.
“If Guo also retires, then it is more likely that there will be someone without an academic background to be in charge of the bank,” he added. “If this happens, it could mean monetary policy is more susceptible to political priorities.”
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