China's top annual meeting of its equivalent of Congress starts this weekend, a convening of the "Two Sessions" that this year coincides with a once-in-five-years reshuffle of the top civil service ranks.
There's every indication that Chinese President Xi Jinping, fresh off reelection to a precedent-breaking third term as head of the Chinese Communist Party last year, will use the event to weaken the power of the civil service. Not content with appointing yes-men to the top cabinet positions, Xi is also intent on bringing the police and secret-service ministries under party control. A disused party entity, the Central Financial Work Commission, may also be dusted off to give the Communist Party greater oversight of the financial system and central bank.
We'll get a forecast for the economy in the year ahead, the last act in office for Premier Li Keqiang. Former Shanghai Communist Party chief Li Qiang, a Xi loyalist, is in line to take that post.
China's top economic negotiator, Liu He, will also step down, part of an enforced retirement of reform-minded members of the administration. Xi's close confidant He Lifeng is in line to take his place, with He also in line to become Communist Party secretary at the central bank, an unusual move indirectly giving Xi greater control. Although Xi eased off the disruptive rhetoric at the height of Covid, China's president had begun to push Maoist-minded policies aimed at greater state control of the private sector, even hinting at the need to redistribute wealth.
The "Two Sessions" consist of the concurrent meetings of the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC). Technically, the NPC and its 2,977 members form the legislature, and the CPPCC is an advisory body, but they're both really rubber-stamp entities that agree on the path ahead.
The NPC is due to begin on Sunday in the Great Hall of the People, and normally presents Beijing's GDP growth target on that first day as part of a work report. It will also confirm the reshuffling of the State Council, China's cabinet, toward the end of the roughly two-week session. The new premier, technically the top civil-service post in China, is due to appear at a press conference as it ends.
Nomura expects the growth target to remain at "around 5.5%," which would be the same as last year's target, while Reuters says the forecast could be between 5.0% and as high as 6.0%. China's economy missed badly last year, with GDP growth at 3.0% in 2022 due to the disruptive effects of the fight to bring Covid cases down to zero. The campaign led to mass protests and was abruptly abandoned overnight in early December, leading to a massive nationwide outbreak of the disease.
Xi took a low profile during that episode. His new premier, Li Qiang, oversaw a crushing two-month lockdown of Shanghai that alienated and angered residents of China's biggest city. So the top leadership will be at great pains to move past Covid, likely without explaining why it was so extremely crucial to eliminate the disease and declare "victory" over Covid, until suddenly it wasn't.
China has eliminated the vast majority of Covid restrictions, with the health authorities pushing the propaganda line that a less-deadly strain means the disease has changed nature. This will be the first "normal" NPC, which had been shortened to one week during the pandemic. But journalists have still been confined to quarantine hotels prior to covering the event.
Xi is due to open the Two Sessions with a speech on Saturday. While he was appointed in October to a third term as general secretary of the Chinese Communist Party and head of the armed forces, it is at these meetings that he will formally assume a third term as president, too.
Xi has already alerted that he will embark on "intensive" and "wide-ranging" plans "for deepening reform of Party and state institutions." Those details are still to come, but are likely to involve reorganizing Communist Party entities so that they swallow up civil-service bureaus, departments and functions, bringing even greater control of China's bureaucracy under Xi's leadership.
The meetings always involve the spouting of Communist catchphrases designed to encapsulate how the party and its leader have such a great command of economic and political theory. State news agency is prepping the way with a video article in praise of the words "flowing with deep meaning" uttered by Xi over his 10 years in charge. "Pomegranate seeds," "nails," "flowing water from the source," are just a few of the "very wonderful metaphors" coined by Xi at past Two Sessions that are now "deeply rooted in the hearts of the people."
In time-honored political fashion, the Chinese Communist Party will likely take credit for the positives it is able to draw out of the country's recent progress, which surely could never have happened without the party in charge, while airbrushing over negative episodes such as the pandemic, which weren't its fault.
The media have been briefed that the Beijing leadership are surprised and happy at the pace of economic rebound in China, with Covid peaking in January instead of February/March as anticipated. But with export demand lagging as overseas economies slow, the recovery is uneven. The services sector is rapidly back in action, manufacturing is cranking back into gear, but there is poor demand for big-ticket items such as cars and apartments.
Chinese stocks, in the form of the CSI 300 index of the largest listings in Shanghai and Shenzhen, peaked at the end of January, after a 19.7% two-month rally. They have recovered from two slight dips since then but lack direction as investors wait to see how the bounce-back plays play out.
