Economy, Talking Point

The new guy

Li Keqiang will steer China’s economy for a decade. Is he a bold reformer?

The new guy

Meet the press: China's new Premier Li Keqiang outlined the nation’s challenges on Sunday

Most of us can recall a pivotal decision that altered the course of our lives. For Li Keqiang, one choice stands out in particular. In 1982 the talented legal student was offered a full scholarship to Harvard Law School. Anxious to keep him in Beijing, Beida (or Peking University) also made Li an offer: to become head of the college’s Communist Youth League, the powerful organisation that fast tracks the careers of young Party members. Li agonised over his decision for a week, with many of his fellow students telling him he’d be crazy not to go to the US. But in the end Li opted to stay, and the Harvard scholarship went to a fellow student at Beida (who went on to become a partner at a New York law firm and resides in America today).

Had Li chosen differently, perhaps he’d be living in Manhattan. Instead he is the new prime minister of China and on Sunday he gave his first press conference to mark his elevation. Over the next decade Li will steer the Chinese economy, so everyone was on the lookout for signs of the direction that he might take.

The rise of Li Keqiang…

One of the questions Li was asked at his press conference last weekend was how he had navigated his spectacular rise. After all, he was born into a poor rural community in Anhui province and although his father was a lowly county official, Li enjoyed none of the family connections that have helped others to reach prominent positions in China.

During the Cultural Revolution Li spent his days farming in the fields of Fenyang with the Dongling Brigade. But what marked him out from the others in his group, says the Beijing News, was that he stayed up late into the night reading. That proved advantageous when ‘normality’ returned and the universities were reopened in 1977. Li’s entrance examination score was so high that he was able to enrol at the prestigious college, Beida.

He soon became the star pupil at the Faculty of Law, studying under Gong Xiangrui, China’s foremost expert in constitutional and administrative law. Under Gong’s guidance Li began looking at foreign constitutions and comparative politics. And thanks to his English language skills, he was assigned a plum role, becoming the lead translator of The Due Process of Law by Lord Denning – a classic legal text on the functioning of the rule of law in modern societies. It was the first time that a book about due process had been published in Chinese and even today’s Li’s translation is still in print.

This marked Li out as a rising star and was one of the reasons the Party was so keen to keep Li at Beida rather than lose him to a law firm in the US.

After agreeing to stay, Li made another significant decision: after obtaining a degree in law, he switched focus, opting to study for a doctorate in economics. His thesis – The Ternary Structure of the Chinese Economy – won a prestigious prize, the Sun Yefang Economic Science Prize Paper Award. Media comment in the past week has lauded Li not only as the youngest person to become premier since China’s reform period began but also as the only prime minister to hold a PhD in economics.

On completing his doctorate, Li worked his way up the ranks of the Communist Youth League, a path that would become more significant in later years, since China’s previous president – Hu Jintao – was also a product of this body.

Next Li was asked by the Party’s organisation department about a potential provincial posting. Contrary to kind of answer expected from an ambitious bureaucrat (“send me to Zhejiang”), Li said he would like to be go to Henan, one of China’s poorest areas. It’s a province that’s not only heavily dominated by agriculture but is also among the most heavily populated (with 94 million people) making it difficult to run. Most officials would view it as the kind of posting that was the kiss of death to any career.

And so it nearly proved for Li. After arriving as acting governor 1998, a fatal nightclub fire produced a nationwide scandal. He immediately wrote a letter of resignation, an unprompted display of personal accountability that surprised the hierarchy in Beijing (policy failings that preceded his arrival had led to the tragedy). Instead of firing Li, he was promoted the next year to the province’s top role, Party Secretary, and spent seven years working on industrialising the province.

But it was in his next posting – to China’s rustbelt, Liaoning – that Li made his most significant policy decision. He was made Party Secretary in 2004 and quickly prioritised the building of affordable housing. He saw the need for such a move to help the thousands of workers that had been laid off when local state-owned enterprises had been closed. Li worked with local real estate developers to channel state funds into a massive building programme, capping their returns, but guaranteeing they wouldn’t make losses. Within three years 1.2 million residents were moved into new affordable housing zones.

The success of this project inspired Premier Wen Jiabao to push for a nationwide scheme. It also singled Li out as an expert in urbanisation (more on which later).

Analysts say that two things emerge from Li’s career path. First, that he rose through the ranks without becoming beholden to vested interests. Second, that his doctorate in economics not only helped him become China’s youngest provincial governor, but also gave him a sense of job security that many other bureaucrats lack. Ultimately, Li knew that if his political career failed, he could become a university professor. For both these reasons, Li is viewed as one of the cleaner politicians in a graft-strewn landscape.

A new style of government?

One of the most talked about elements of Li’s two-hour press conference was the style of his delivery. Reporters had become accustomed to the literary style of his predecessor Wen, who liked to fall back on references to ancient Chinese poetry as he answered questions.

In contrast, Li’s approach is already considered as more earthy, using the language of common folk. He used “popular slang to illustrate his points”, noted Wang Xiangwei, the editor of the South China Morning Post, adding that Li came across as “confident and pragmatic”.

He Gang, executive editor of Caijing magazine, wrote on his weibo: “What is important is Li’s practicality. There was no bookish poetry but only the down-to-earth style of someone who comes from a peasant family.”

Li was anything but stiff in his body language too. A reporter from Phoenix TV told the new premier that he had raised his arms above his head more than 30 times, as he gestured in response to questions.

Li’s response to the comment: “Thank you for pointing that out. I realise that if I use hand gestures too much, people may only pay attention to my hands instead of what I say.”

For netizens even this remark was a subtle indicator. In the 1990s no one would have dared to critique the body language of Premier Li Peng. But Li Keqiang’s response signalled someone who wants to be seen as more open, who is less worried about losing face than getting results.

In fact, Raymond Zhou of the China Daily was so overwhelmed by the performance that he drew comparisons with the oratory of John F Kennedy.

So what were the key things he said?

Li largely stayed on-message, making clear that economic reforms were his priority: “I have often said that reform pays the biggest dividend for China. That’s because there is still room for improvement in our socialist market economy. There is great space for the further unleashing of productivity through reform and there is great potential for making sure the benefits of reform will reach the entire population.”

Li acknowledged that (undefined) vested interests might try to block the reform effort, but also said: “However deep the water may be, we will wade into it because we have no alternative.”

Indeed, Li even seemed to suggest that China’s model of state capitalism needed to be pared back: “We need to leave to the market and society what they can do well.” Commentators suggested that could signal the end of the guojinmintui (‘the state advances, as the private sector retreats’) trend.

“Reform is about curbing government power. As a self-imposed revolution, it will require real sacrifice and will be painful. The core of the plan is to transform government functions, redefine and rationalise the relations between the government and the market and society,” Li claimed.

As an early indicator, Li made a commitment to slash the 1,700 processes that require government approval by a third.

Li’s legal training has also led some commentators to express hope that the new premier will push for more respect for the rule of law under the Chinese constitution.

“No matter who you are or what you intend to do, you should not exceed the boundaries of the rule of law,” Li told reporters.

He also reaffirmed that he wanted to rebalance the economy away from exports and stimulative capital spending, and place more focus on growing domestic consumption and more sustainable growth.

That sounded very much like his predecessor Wen, as did the remarks on income inequality and the need to address the growing wealth gap, particularly between rural and urban Chinese.

Li talked tough on the country’s worsening environment too, being blunt about failures in China’s growth model: “I feel quite upset [about the smog that recently shrouded Beijing and other parts of the country]. To tackle the problems we need an iron fist, firm resolution and tough measures.”

The press conference was held on a severely polluted day in Beijing, with smog blanketing much of the capital. But Li claimed that polluters will be punished “without mercy” while sellers of contaminated food would also “pay a high price”. Again, there was a sense of balance to his comments. “It’s no good to be poor in a beautiful environment, nor any good to be well-off but live with environmental degradation,” Li noted.

And of course, there was the standard commitment to maintain the war against corruption.

“Since ancient times, holding government office and making money have been two separate paths,” Li said. “Power will be exercised in an open and transparent fashion so that we can insulate against abuses of power. A clean government should start with ourselves.”

Li’s views on urbanisation

If due legal process is a Li specialty, another is urbanisation. Part of his doctoral thesis dealt with the topic and Li spent much time talking about it at his press conference. It was one of 11 questions he was asked but it elicited the longest response (seven minutes).

Li was at pains to distinguish between two types of urbanisation. He didn’t favour mega cities like Beijing and Shanghai getting any larger. They were already too big, Li said, causing environmental and other problems. Instead, urbanisation should be focused on the smaller town and cities in China’s hinterland, as a way of raising the living standards of the rural population.

China is expected to see 350 million people move to towns and cities in the next 15 years, much of it during Li’s decade as prime minister. ‘The scale of urbanisation in China is unprecedented in human history,” Li said. “Urbanisation is the logical product of modernisation. We want to pursue a new strategy of urbanisation, and place poor people at the centre of it. We will support job creation and the provision of services. It’s not about building sprawling urban cities, but a balance between small, medium and large cities.”

The challenge, Li said, is to avoid a situation “in which high-rises co-exist with shanty towns”. Perhaps his experiences in Henan (dealing with rural poverty) and in Liaoning (pioneering the affordable housing drive) will help prevent such an outcome.

Still, the overall direction of this urbanisation strategy is consistent with Li’s talk of rebalancing the economy. An emphasis on turning towns into fourth-tier cities should boost domestic consumption, weaning the economy away from its current dependence on capital spending and exports.

The verdict?

Discussions on weibo took a lively turn after Li’s press conference. Although many sounded positive about his performance, there was still a sense of doubt that Li will be able to deliver on major reforms. His debut was short on detail and there was little sign of ‘new’ policies.

The consensus online was that only time will tell if Li can deliver something different. A typical netizen comment was “Let’s talk again in five years”.

However, one of the most widely- forwarded comments was made by a female doctor. “My husband had thought about selling all our belongings and emigrating. After listening to Premier Li’s press conference, we decided to believe it one more time and see how it goes.”

Will Li and his boss Xi Jinping repay their faith?

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