Premier Li’s second term: from ‘Likonomics’ to following orders

With Xi Jinping taking a firm grip on policymaking, the party’s No 2 is likely to focus more on implementing economic decisions rather than making them

PUBLISHED : Wednesday, 25 October, 2017, 5:08pm
UPDATED : Thursday, 22 February, 2018, 1:47pm

China’s Communist Party unveiled its new leadership team on Wednesday. The membership of the party’s supreme decision-making body, the Politburo Standing Committee, remains at seven. Other than Xi Jinping and Li Keqiang, the other five members of the committee are new faces following the retirement of the previous members. The six other Standing Committee members will play a key role in affirming the core leadership of Xi, who has had his name enshrined in the party charter. The party also unveiled the new leadership of the Central Military Commission. Here we look at the key members of Xi’s team.

Li Keqiang will stay as No 2 in the ruling Communist Party but his role as premier is expected to be redefined during President Xi Jinping’s second term – with more of a focus on implementing rather than making economic policy.

The premier is one of the few Chinese leaders who can communicate directly with Western counterparts and deliver speeches in English – he is regarded as one of the best representatives of China’s technocrats who are keen for the country to move up the industrial chain and expand its global footprint.

Li was among the first students admitted to Peking University’s law school – the best in China – when the college entrance exams resumed in 1977 after the Cultural Revolution.

He was a student of professor Gong Xiangrui, an expert on Western constitutional law who studied in Britain in the 1930s. Li went on to earn a doctorate in economics from Peking University.

That academic background appears to have developed in Li a disposition which is rare among Chinese bureaucrats.

“I appreciate his expertise and he is kind of a professor type,” one European business executive who has lived in China for over three decades said. “Li is interested in unbiased information,” he said, referring to the premier’s habit of reading foreign media reports and research papers on China in English.

Opinion: Xi who must be obeyed – arise, China’s chairman of everything

In 1983, Li became an alternate member of the secretariat of the Communist Youth League’s central committee, where he worked directly under Hu Jintao and became one of his protégés. Ten years on, Hu recommended that Li, then 38, become the first secretary of the league’s secretariat.

He went on to become deputy party boss of central Henan province in 1998 and became Henan governor a year later, making him China’s youngest governor. He became the province’s party boss in 2002.

But under his watch, the provincial authorities clamped down on media reports about the HIV/Aids epidemic, spread by unhygienic blood collection in Henan. He also tried to improve its image by launching the country’s first provincial-level survey of HIV infection rates and started an 18 million yuan campaign to tackle Aids.

He was appointed party boss of northeastern Liaoning in 2004, taking on a slum renovation project and encouraging private sector growth.

In a bid to deal with harsh criticism over the authenticity of data, Li also scrapped official reporting of economic indicators from the province. According to US government documents released by WikiLeaks, Li told the US ambassador in 2007 that growth figures from Liaoning were unreliable.

Instead, he used three other indicators – cargo freight, electricity consumption and bank lending – to track economic performance, which led The Economist to create the “Keqiang Index” for China’s economy in 2010.

7 things you need to know about Xi Jinping’s vision of a ‘new era’ for China

When he succeeded Wen Jiabao as premier in 2013, China was facing a property market bubble, an unbalanced industrial structure, worsening environmental pollution and mounting financial risks after it pumped 4 trillion yuan (US$604.15 billion) into the economy to weather the global financial crisis in 2009 and 2010.

“Likonomics” – the term coined by Barclays Capital in 2013 to describe Li’s economic doctrine – referred to his reluctance to use stimulus to back economic growth and his support for reducing the high leverage ratio and promoting market-oriented reforms.

He endorsed the Shanghai Free-Trade Zone in 2013 to pilot capital account liberalisation in the hope of spurring broader economic changes – although it failed to live up to expectations at a time when China was haemorrhaging capital and progress on reforms had stalled.

Li tried other tactics to revitalise the economy – pushing for red tape to be streamlined to encourage businesses and voicing his support for entrepreneurship in a bid to create jobs.

His “Internet Plus” strategy meanwhile was aimed at unleashing the potential of internet technology on the economy, and he has also championed China’s bullet-train technology and launched “Made in China 2025” to revive manufacturing.

Tax changes have also been on Li’s agenda. He has announced nearly 70 tax cuts or breaks – especially for medium and small-sized firms – since 2013, reducing income tax by 70 billion yuan in the past five years, according to an official release.

The conversion from consumption tax to value-added tax was also expanded – leading to an estimated reduction in taxes of more than 1.7 trillion yuan in the past five years.

Friends in high places: Xi Jinping’s determined path to control

But his track record was dented in the summer of 2015 when a stock market rout wiped more than US$3 trillion off the value of mainland shares in just three weeks despite repeated government interventions.

And with Xi taking a firm grip on policymaking by setting up and presiding over a cluster of “central leading groups” – along with domestic and external challenges to the economy – a source told the South China Morning Post earlier that the State Council, China’s cabinet, will have to work in lockstep with the party in the next five years.

Read more profiles of China’s new leaders