China’s Forgotten Premier Steps Out of Xi’s Shadow as Economic Fixer
By Lingling Wei, May 11, 2022, WSJ

In China’s opaque political system, it is difficult to gauge
how much support Mr. Li has. The people close to decision-making
said his moves are backed by some Communist Party officials who
worry Mr. Xi has focused too heavily on adhering to an ideology
rooted in Mao Zedong’s socialist vision, rather than on giving
priority to practical measures to ensure economic growth.

Supporters of Mr. Li’s efforts include officials with ties to
the Communist Youth League, a once-powerful organization that
produced past leaders including former party chief Hu Jintao,
but has fallen out of favor in the Xi era.

Last month, during an inspection tour of Jiangxi, a farm province
in eastern China, Mr. Li visited an industrial park populated with
e-commerce firms. That industry has been hit hard by Xi’s campaign
to rein in tech companies and punish what Mr. Xi has described as “disorderly expansion of capital”—a euphemism for unchecked
free-market behavior.

Standing in front of a crowd of e-commerce executives and their
employees, Mr. Li promised to invigorate the “platform economy”—
meaning internet-based businesses such as online retailer Alibaba
Group Holding Ltd.—and to promote entrepreneurship. “We support the platform economy,” the premier told a cheering crowd, according to
a video of the event. “We support entrepreneurs.”

A few days later, a meeting of the Politburo, a 25-member central decision-making body, signaled a halt to Xi’s regulatory crackdown
on tech firms, which has included hefty fines and other punishments
that have eroded business confidence and led to mass layoffs. An
official readout of the meeting called for measures to “support
the standardized and healthy development of the platform economy.”

The people close to decision-making said feedback Li and his team
had received from inspection tours since late last year showed that
Xi’s clampdown had hurt employment and growth. “Li is the driving
force behind the shift,” one of the people said.

Such changes, however, aren’t expected to lead to a paring back of
Xi’s expansion of the state’s role in the economy or to enhance
China’s engagement with the West. Xi remains China’s most powerful
leader in decades, and many senior leaders agree with his hard-line
policies.

Policy victories by Li and his supporters could easily be reversed.
Xi’s distrust of private capital would make it difficult for any
other senior leader to steer China back toward economic liberalization. Regardless, for now, Li’s profile has been rising. An analysis of state-media reports by Minxin Pei, editor of quarterly journal China Leadership Monitor, shows that Li appeared in newspaper headlines
15 times more in 2021 than the previous year, and is on track to
roughly double last year’s number if early-2022 trends continue.
Before 2021, Li was “practically nonexistent,” said Pei, who is also
a professor of political science at Claremont McKenna College in
California. Now, the premier “looks better by the day,” he said.
“Xi is an ideological leftist deep down, but he has to make tactical compromises over the economy.”

Frustrations with Xi’s leadership are building ahead of a pivotal
party conclave this fall, where he is aiming to secure a third term.
While that plan remains on track, there is uncertainty whether Xi
will be able to surround himself with loyalists or will have to make
room for dissenting views, as was common in previous Chinese govts.
The new makeup of the party’s top leadership body, the Politburo
Standing Committee, will be decided this summer when current and
former Chinese leaders meet in the northern seaside town of Beidaihe, according to party insiders.

People close to Li describe him as a skilled but cautious politician
who has embraced market liberalization, yet is driven more by
pragmatism than ideology. As a young man, he studied law at the
prestigious Peking University, then pursued a doctorate in economics
under a prominent Chinese economist known for advocating Deng Xiaoping’s market-reform agenda and privatizing state firms. While at the
university, he joined the leadership ranks of the Communist Youth
League, which had a reputation for embracing economic reform,
albeit within the party system.

Li later ran China’s rust-belt Liaoning province. To measure growth
there, he eschewed official gross domestic product data and instead
used indicators such as power generation and freight volume as more
reliable measures of economic performance. Li eventually became the
favorite of then party chief, Hu, to succeed him, but Hu was
outmaneuvered by party elders who favored Xi, a son of a revolutionary
leader, according to historians and party insiders. Li settled for
the No. 2 position.

During the two decades before Xi rose to power, the premiership had considerable clout. The president, who is also the party chief,
oversaw politics, diplomacy and security. The premier, technically
the head of government, managed the economy.

As premier, Li wanted to remake China’s debt-driven development
model by curbing vast bank lending, which had saddled China with
debts and projects with little commercial value. Li also wanted
state firms to slim down and become more efficient, and to make it
easier for migrant workers’ families to get education and other
benefits in cities. Barclays economists coined a term for Li’s
priorities: “Likonomics.”

That term fell out of favor when it became clear Xi was subverting
the traditional division of labor between the president and the
premier and taking charge of the economy. Xi was depicted as
playing a central role in an ambitious economic agenda approved by
the party’s Central Committee in Nov 2013. State media published a
lengthy account saying Xi had personally led the plan’s drafting.
The account mentioned Xi’s name 34 times. Li wasn’t mentioned once.
Since then, Xi has hammered home the need for tighter party control
over the economy with a wider role for state enterprises. He reined
in the Communist Youth League, in part through corruption investigations.

Li’s urbanization plan was supplanted by one focused on building up
smaller cities and towns. His push to revamp state firms was trumped
by Xi’s emphasis on strengthening the state sector. His support for Internet-based businesses, seen as a way to provide jobs, was followed
by Xi’s effort over the past year to bring those firms to heel.
Li fell into line. Party insiders said he had little choice but to
accept a supporting role.

Widening grievances within the party over Xi’s policies are creating
an opening for Li and his supporters. China’s economy is struggling,
and its financial markets are suffering. Some economists expect growth
to contract this quarter. Millions of graduates are struggling to find jobs.

Xi’s entente with Putin is leaving China more isolated on the world
stage than any time in decades. Frustration with Xi’s autocratic style
is boiling over, according to people familiar with party discussions.
In feedback gathered recently by Communist Party schools, which help disseminate policy in China, many party members expressed concern that
Xi puts ideology over practical steps to keep the economy strong,
according to the people familiar with the discussions.

“ ‘Politics in command’ has replaced ‘economics in command’ as the central task of the party,” one official said in the feedback. “That’s
a main issue raised with Xi’s leadership,” an official familiar with
the feedback said. As doubts grow about Beijing’s resolve to continue
Deng Xiaoping’s “reform and opening,” which has propelled Chinese growth since the 80s, economic development remains the party’s central task,
Li has said in recent meetings with multinational executives,
local officials and government advisers.

Li has overseen much of the recent effort to shore up growth,
including prodding banks to lend. The Finance Ministry is speeding
up approval of local bonds to help finance infrastructure investment,
while putting on the back burner experiments with new property-tax
programs that Xi had advocated as a way to tamp down housing speculation.

Worried about the effect of Xi’s Covid control measures on jobs and
the economy, Li has held meetings instructing various ministries to
clear logistical hurdles for facilities like Tesla Inc.’s Shanghai
plant to resume production. Li’s efforts will be put to the test at
the all-important party conclave later this year.

Xi’s desired candidate for the next premier, Li Qiang, Shanghai’s
party secretary, is being criticized by some inside the party for
his handling of Covid-19 outbreaks in the city, where lockdowns
led to widespread anger. Candidates supported by Premier Li may be
gaining ground, people familiar with decision-making said. They
include Wang Yang, who heads China’s top government-advisory body,
and Hu Chunhua, a current vice premier in charge of trade & foreign investment. Both held roles in the Communist Youth League.

Wang was named mayor at age 33 of a Yangtze River port city,
where locals dubbed him “baby mayor.” He later ran the southern
province of Guangdong, known for entrepreneurship and technology
development. Hu also ran Guangdong, between 2012 and 2017, after
years of governing Inner Mongolia. He is known to many as “little Hu” because of similarities between his career and Hu Jintao’s.

https://www.wsj.com/articles/china-premier-li-keqiang-xi-jinping-11652277107

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