World Economy

Latest shuffle in Beijing puts more economic power into hands of Xi Jinping

A Chinese policeman stands guard in front of a portrait of Mao Zedong at Tiananmen Square in Beijing, China.
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Finance and the economy are top of the list as the leadership shuffle in China begins, ahead of a potential power grab by Chinese President Xi Jinping this fall.

With three promotions announced Friday, Xi has more allies in higher positions, said Michael Hirson, Asia director at Eurasia Group. "The fact that he's willing to make them now ... would seem to suggest he's pretty confident" in bringing in more loyalists at the 19th Communist Party congress this fall.

"It is certainly safe to say that economics are very, very important to Xi just given the economic pressures that are building in China in areas like debt and China's broader political stability," Hirson said.

Xi is expected to consolidate his power by appointing allies at the congress and possibly even signal he will stay on for an unprecedented third term. However, analysts say the leadership changes are due more to the opportunity offered by officials' retirement.

Chinese state media announced Friday that Guo Shuqing will succeed Shang Fulin as head the China Banking Regulatory Commission. Shang is 65 years old, the general retirement age for officials.

Guo turns 61 this year and was governor of the northeastern Shandong province. Before that, he headed the Chinese Securities Regulatory Commission and is seen as a reformer with a chance of becoming the head of the People's Bank of China.

"The campaign for the PBOC governor is more important," said Scott Kennedy, deputy director, Freeman Chair in China Studies, at the Center for Strategic and International Studies.

Kennedy said among Chinese proposals on the future of the PBOC, the central bank looks set to combine with other financial institutions such as the Chinese Securities Regulatory Commission. "It would be a reflection of Xi's ability to consolidate power," he said, and potentially increase effectiveness in economic policy.

Both the PBOC and CSRC did not return CNBC's emailed requests for comment.

Also on Friday, Beijing mouthpiece Xinhua said on its official microblog that He Lifeng will head the National Development and Reform Commission. Zhong Shan will lead the Ministry of Commerce, Reuters reported Friday. Both Zhong and He previously held subordinate roles in the same agencies.

He Lifeng is "very close to Xi," Eurasia Group's Hirson said. The NDRC "is a very important agency for both Xi's domestic agenda and foreign policy," he said, while Zhong has experience in anti-dumping issues that are "going to be a particularly key area of contention between China and the Trump administration."

These personnel changes — rumored for days but only confirmed Friday — precede an expected switch-up in five of seven members of the Politburo Standing Committee, the highest circle of leadership. Xi and Premier Li Keqiang are the only two members that should remain after the fall party congress.

China's president has enacted a sweeping anti-corruption campaign that many say has dampened economic growth and taken down his political enemies. Meanwhile, progress has stalled on ambitious market-oriented reform plans announced in 2013.

"Xi Jinping has been confronted with a lot of resistance to these reforms," said Stephen Orlins, president of the National Committee on U.S.-China Relations. "What he wants to do at the 19th party congress is to get enough allies that these reforms can be put through."

China watchers say Beijing is increasingly focused on reducing China's high debt levels, stabilizing the hot property market and making state-owned enterprises more efficient.

Analysts expect more details when the National People's Congress kicks off March 5, and some changes in low-level positions could also come then. But the key leadership changes will happen at the fall Communist Party congress and the 2018 National People's Congress.

That said, a view is that other than strong leaders like Xi, government officials hold little sway on policy.

"I don't think the leadership transition is going to have a big effect on Chinese economic policy and reforms because most of the reforms were launched in the 18th Party Congress" in 2012, said Yao Yang, director, China Center for Economic Research at Peking University. Rather, he said, "The U.S-China relationships are going to have a lot of impact."

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