Practical analysis for investment professionals
10 December 2012

Fact File: Leadership Transition in China and the 18th Party Congress

Posted In: Economics

Shiba Da (十八大), as the 18th National Congress of the Communist Party of China (中国共产党第十八次全国代表大会) is commonly called in the Greater China region, concluded on 15 November 2012. The once-a-decade central leadership transition in China is not an overnight change simply marked by this much highlighted Shiba Da event. It is a rather long process that started more than a year ago and will extend for another year or so after the Shiba Da.

Here is an outline of the still-unfolding process and some insights into what these changes mean for the financial sector.

Key Steps to the Leadership Transition

October 2011 to June 2012 – Communist Party leadership in various provinces were elected in regional congresses with major changes to their party committees (党委换届), paving the way for building up the contingents of delegates for the Shiba Da.

November 8–15, 2012 – At the Shiba Da, new members for the Politburo (中央政治局), the Politburo Standing Committee (中央政治局常委), the Central Committee (中央委员会) , the Central Commission for Discipline Inspection (中央纪律检查委员) and the Central Military Commission (中央军事委员会) were elected by around 2,300 delegates. The new members of the Politburo Standing Committee are:

  • Xi Jinping (习近平): vice president since 2008; vice chairman of the Central Military Commission since 2010; Politburo Standing Committee member since 2007; executive member of the Secretariat since 2007; president of the Central Party School since 2007; full member of the Central Committee of the party since 2002.
  • Li Keqiang (李克强): Executive vice premier since 2008; Politburo Standing Committee member since 2007; full member of the Central Committee of the party since 1997.
  • Zhang Dejiang (张德江): Vice premier since 2008; Politburo member since 2002; Chongqing party secretary since 2012; full member of the Central Committee of the party since 1997.
  • Yu Zhengsheng (俞正声): Shanghai party secretary since 2007; Politburo member since 2002; full member of the Central Committee of the party since 1997.
  • Liu Yunshan (刘云山): Director of Publicity Department of the Communist Party of China (also referred to as the Propaganda Department of the Communist Party of China) since 2002; Politburo member since 2002; member of Secretariat since 2002; full member of the Central Committee of the party since 1997.
  • Wang Qishan (王岐山): Vice premier since 2008; Politburo member since 2007; full member of the Central Committee of the party since 2002.
  • Zhang Gaoli (张高丽): Tianjin party secretary since 2007; Politburo member since 2007; full member of the Central Committee of the party since 2002.

As expected, Xi Jinping was elected to the top post, general secretary of the Party Central Committee, and Li Keqiang will become the premier of the State Council (国务院) in March 2013, when the National People’s Congress is held. Liu Yandong (刘延东), a top contender and the only woman in the running, did not make the committee. CCTV and CNTV have put together multimedia biographies of the new Politburo Standing Committee: Xi Jinping (习近平), Li Keqiang (李克强), Zhang Dejiang (张德江), Yu Zhengsheng (俞正声), Liu Yunshan (刘云山), Wang Qishan (王岐山), and Zhang Gaoli (张高丽).

December 2012 – In the Central Economic Work Conference (中央经济工作会议), top-level leadership in the party and the State Council review the past year’s work on the economic front and discuss in detail their proposed plans and priorities, setting the tone for next year’s macroeconomic policy-making. This has been an annual event since 1994, though this one, which will immediately follow the Shiba Da, has special significance in terms of gauging the policy direction of the new leadership.

Mid-February 2013 – The second plenum session of the congress will be held to complete the ground work in preparation for National People’s Congress which will take place the next month.

March 2013 – In the National People’s Congress (全国人民代表大会), the new State Council members will be elected. Key top ministerial posts will be announced. At the same time, the National Committee of the Chinese People’s Political Consultative Conference (中国人民政治协商会议全国委员会), or National PCC (全国政协), will have its meeting. Key central-level policy decisions will be announced after these two meetings, which are often referred to as “the two meetings” (两会).

October 2013 – The third plenum session of the congress will be held to deal with policy issues arising from the second plenum session and the National People’s Congress.

Two comprehensive research reports “Preparing For the 18th Party Congress: Procedures and Mechanisms” and “The Road to the 18th Congress” from the Hoover Institution’s China Leadership Monitor provide the details of this process.

New Appointments at Financial Regulatory Authorities

During the early part of this process, on 29 October 2011, new appointments to the top positions at the three main financial regulatory authorities were announced:

Commentators’ Observations on the Leadership Transition

  • Many commentators have noted that the reduction of Politburo Standing Committee from seven members to nine may promote greater efficiency in the policy-making process. Given the age-limit rules on mandatory retirement, successors to Xi and Li will come from outside of the current committee, and those selected to fill the two spots would likely be the next general secretary and premier.
  • The committee contains a mixture of members from the “elitist” group and the “populist” group, with five of the seven members from the former and Li Keqiang and Liu Yunshan from the latter. The higher weighting of the “elitist” faction is considered by some to be favorable for the business sectors and the markets.
  • Three members have rigorous academic training in economics, and the other four have had substantial experience in economic policy, commerce, and the private sector. Li Keqiang has a doctoral degree in economics from Peking University and has overseen an economic affairs portfolio since 2008 in his role as vice premier.
  • Xi Jinping also became the chairman of the Central Military Commission. This is a significant difference from previous leadership transitions, in which the new general secretary did not have control of the military. In the past, the military had remained with the general secretary’s predecessor, who was quite active in this role, continuing to confer with the heads of other nations and appearing at official events during their visits to China. This consolidation of power by Xi Jinping is viewed by many to be a positive development and signals the possibility that the policy agenda of the new administration will get finalized more speedily and implementation of new policy goals can start early in his 10-year term.
  • During the congress, various officials commented on the need to make the Yuan exchange rate and interest rates more market-oriented, and to further reform capital markets.
  • President Hu Jintao’s report to the congress, “Firmly Marching on the Path of Socialism with Chinese Characteristics and Strive to Complete the Building of a Moderately Prosperous Society in All Respects,” emphasized social fairness and income equality within the “scientific development” framework, which attempts to correct the perceived overemphasis on GDP growth in recent years. A GDP per capita target was mentioned for the first time, with a goal of doubling the measure in 10 years to build a moderately prosperous society (全面建成小康社会). In addition to improving democracy, human rights, and the legal system, as well as building society in a resource-conserving and environmentally friendly way, fighting corruption was also mentioned, coinciding with a key item in Xi Jinping’s adress to the media toward the end of the congress. Xi told the press that he is urging party cadres (党干部) to get closer to the people, avoid being overly bureaucratic, and conduct themselves honorably first and foremost as the party faces many severe challenges as new conditions emerge.
  • Xi Jinping delivered his speech in a more conversational and relaxed style than his predecessors, raising expectations of an even more pragmatic and people-oriented style. His visit to the United States last February appears to have been well received. The first-lady-in-waiting, Peng Liyuan (彭丽媛), a well-known soprano with the rank of a civilian general (文职将军) in the People’s Liberation Army, could help in building his image domestically and abroad.

Online Resources

There are lots of resources available on the internet on Shiba Da in Chinese, as well as in other languages.

English-Language Sites

Chinese-Language Sites

English readers might find these sites useful as well. Free online translators (like Google Translate) are now reasonably well developed and can be used to get an impression of the content as necessary.

Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.


About the Author(s)
Samuel Lum, CFA

Samuel Lum, CFA, was director of Private Wealth and Capital Markets at CFA Institute, where he focused on wealth management and capital markets, mainly in an Asia-Pacific context.

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