China Appoints Li Keqiang as New Premier

Getty Images

China's legislature formally chose Li Keqiang as premier on Friday, installing an English-speaking bureaucrat as the man in charge of the economy, the world's second-largest, and its aim of reviving growth through consumer-led expansion.

The largely rubber-stamp National People's Congress, as expected, chose Li, 57, to replace Wen Jiabao.

Nearly 3,000 delegates gathered in Beijing's Great Hall of the People to vote on Li's appointment, putting the final stamp of approval on a generational transition of power.

Li drew only three no votes and six abstentions from the carefully selected parliament.

(Read More: What Will Be China's 'Next Act' Under Xi?)

Li rose and shook hands with Xi Jinping, who was elected president by the legislature on Thursday, as legislators applauded. A beaming Wen walked over to Li, shook his hand and exchanged words.

While Xi is the country's top leader, Li heads China's State Council, or cabinet, and is charged with executing government policy and overseeing the economy.

As premier, Li is faced with one of the world's widest gaps between rich and poor, an economy over-reliant on investment spending and a persistently frothy housing market that has stoked resentment among the middle class.

"I believe that in this class (of new leaders), his intent to reform is quite strong," said Chen Ziming, an independent political commentator in Beijing. "He has a close relationship with reform-minded economists. We've seen from his speeches after the 18th party congress that the gap between them and him isn't far."

More than any other Chinese party leader until now, Li was immersed in the intellectual and political ferment of the decade of reform under Deng Xiaoping, which ended in the 1989 Tiananmen Square protests that were crushed by troops.

As a student at Peking University, Li befriended ardent pro-democracy advocates, some of whom later became outright challengers to party control. His friends included activists who went into exile after the June 1989 crackdown.

"He has a better understanding of how Westerners think," a source familiar with China's foreign policy told Reuters.

Li, who has a degree in law and a doctorate in economics, will take the reins of an economy whose growth slowed in 2012 to a 13-year low, albeit at a 7.8 percent rate that is the envy of other major economies.

Lost Decade

Analysts have described the Wen years as a lost decade during which economic reforms slowed and state-backed industries tightened their grip on the economy.

(Read More: For China, New Era Brings New Set of Problems)

Both Xi and Li will need to deliver a blueprint to stabilize the real estate market. They need to do this quickly to calm a market in which real estate prices have soared 10-fold in major cities during the last decade.

Across China, people are resentful of the widening income inequality gap. China has 2.7 million U.S. dollar millionaires and 251 billionaires, according to the Hurun Report, but 13 percent of its people live on less than $1.25 per day, according to United Nations data. The average annual urban disposable income is just 21,810 yuan ($3,500).

Failure to close this gap or deflate a dangerous property bubble could create a backlash that could even break the Communist Party's grip on power.

The new administration must also try to turn legions of cheap, assembly-line exporters into world-beating product-makers, while expanding domestic consumption, the economy's prime focus to ensure growth is more balanced.

Since he was elevated to the No.2 spot in the ruling party hierarchy last November -- a departure from the time of Wen, who was third-ranked -- Li has embarked on an urbanisation drive.

That project aims to bring 400 million people to cities over the next decade with the hope of turning China into a wealthy world power with economic growth generated by an affluent consumer class.

On the environment, an issue which is causing much anger across the country, Li added his voice to appeals to curb the toxic haze blanketing Beijing in January, but offered few specifics and said there was no quick fix.

In late November, Li promised to let non-governmental groups play a bigger role in fighting HIV/AIDS.

But during his time in central Henan province from 1998 to 2004, Li was criticized by activists for presiding over a crackdown and helping to cover up the extent of an HIV/AIDS crisis there, when hundreds of thousands of impoverished farmers became infected through botched blood-selling schemes.

(Read More: China Bowing to Public Outcry Over Environment: Advocate)

One of China's most prominent dissidents, Hu Jia, told Reuters he was detained in Henan, while Li was governor, for four days in 2002, when Hu was advocating for rural victims of AIDS there.

"When the AIDS epidemic exploded, everything that Li Keqiang did was with the aim of covering it up," Hu said. "He didn't allow the ordinary people to go to Beijing to petition, meet the media, and didn't allow Aizhixing, the institute I was working at, enter Henan to examine and report on the reality of the AIDS situation."

Hu said two state security officers beat and kicked him on Thursday till his head bled. He was summoned by police on a charge of "provoking quarrels and making trouble".

The Dongcang police station, where Hu was held, could not be reached for comment.

On Thursday, China also appointed Zhou Qiang, the former party chief in the southern province of Hunan, as the head of the Supreme People's Court.