Xi Jinping is officially China's most powerful leader since Mao -- here's what that means for the economy

  • President Xi Jinping has been elevated to the same status as Mao Zedong in a shift that might shed some light on the country’s economic future.
  • Analysts argue the political leadership is becoming more resigned to the reality of lower economic growth. Additionally, the country could see swift progress in certain areas.
  • Although Xi says China will be more open to foreign investors, some analysts say that conflicts with his priority for the Communist Party to remain the preeminent authority in all walks of life.

President Xi Jinping was elevated to the same status as Mao Zedong at the conclusion of the 19th National Congress of the Communist Party of China in a shift that might shed some light on the country’s economic future.

Analysts argue China’s domestic political shifts suggest that the country is becoming more resigned to the reality of lower economic growth. And while there could be swift progress in certain areas, some doubt that painful structural reforms will be pushed through.

“We maintain our view that Chinese policymakers are becoming more open to lower economic growth and achieving a target range, rather than a fixed target of 6.5%, in order to ensure sustainable growth over the coming years,” analysts at BMI Research said in a report to clients earlier this week.

“The need to achieve better quality and more efficient, equitable, and sustainable development was […] one of the amendments made to the constitution as the government seeks to attain the goal of a ‘moderately prosperous society’ by 2020,” they continued. “This suggests a shift in the government’s objectives away from the previous objective of hitting hard economic growth targets at the expense of areas such as the environment, social inequality, and financial risks.”

Xi promised in an address to continue the economic reforms began by Deng Xiaoping about 40 years earlier, saying “We will see that reform and opening up complement and reinforce each other. […] It is my conviction that the great rejuvenation of the Chinese nation will become a reality.”

Xi’s consolidation of power also suggests that he’ll have more control over economic policy for some time going forward. “This should mean more rapid progress in some areas, such as efforts to address environmental concerns, but it seems unlikely to resolve many of the key structural problems that threaten China’s growth prospects,” Julian Evans-Pritchard, a China economist at Capital Economics Ltd. in Singapore, wrote in a report, according to Bloomberg.

Foreign investment

Xi said China will open further to foreign investment through a number of measures, including reducing barriers to entry and allowing a level playing field for all companies registered in China, but some analysts are sceptical.

“As constructive for foreign investment as these sound, we fear that they conflict to some extent with Xi’s clear priority for the Communist Party to be the preeminent authority in all aspects of Chinese life and for the State Owned Enterprises to be global leading companies and national champions in industries considered to be strategic for the economy,” Vincent Chan and Ray Farris, analysts at Credit Suisse, wrote in a report to clients. “This implies to use that market oriented reform and improving operating conditions for foreign competition will remain very gradual.”

‘Xi Jinping Thought’

On Tuesday, an amendment including Xi’s name was added to China’s constitution, marking the first time a living leader’s name has been added since Mao, reflecting Xi’s strong standing wtihin the Communist Party.

The amendment added to the constitution, which was approved by all 2,300 delegates attending the congress, is called “Xi Jinping Thought for the New Era of Socialism With Chinese Special Characteristics.”

This move places Xi on the same level as Mao and Deng, whose names also appear in the constitution in articles reflecting their principles. The political principles of Jiang Zemin and Hu Jintao, Xi’s predecessors, were added to the constitution, but their names were not.

The New York Times’ Chris Buckley notes that Xi’s authority “is not directly comparable to the almost godlike influence Mao commanded,” but, at the same time, “the Chinese economy, state and military are much more powerful now than they were under Mao, or even under Deng, which gives Mr. Xi far more global influence than his predecessors.”

BMI Research analysts argue that, regardless, the addition of “Xi Jinping Thought” suggests that he and his ideas will continue to play a crucial role in policymaking for years to come.

“We note that both the economic and foreign policies of Deng (based on his theories) were largely adhered to in the Jiang era (1989 to 2002) as well as under the Hu-Wen administration (2002 to 2012), underscoring the importance of the inclusion of one’s political thought into the party’s constitution,” the BMI analysts said.

“As such, we believe that the widespread dissemination of Xi’s thought could influence a new generation of leaders, emphasising the extent of Xi’s political power.”

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