Premier makes a big call

Why did Li Keqiang host an unprecedented video call?

Chinese Premier Li Keqiang attends a news conference via video link in Beijing

Li gives a growth warning to 100,000 or so officials

Despite denials from the Kremlin, rumours abound that Vladimir Putin is terminally ill, a view triggered by an audio recording obtained by New Lines Magazine (it quotes a Russian energy oligarch  and has widely been reported on by international media including The Times in the UK). The speculation extends to what this might spell for the longevity of  Putin’s presidency. 

The rumours from Beijing in recent weeks haven’t come close to claiming that Xi Jinping’s time in office is reaching its closing days. But the gossip is growing that there could be some kind of policy split in elite political circles.

Commentators outside China have seized on an unusual video call last week from Li Keqiang, the Chinese premier and second in rank behind Xi, as further evidence of tensions at senior levels.

Li spoke to more than 100,000 government officials across the country last Wednesday, warning of an economic crisis that could be worse than two years ago after Covid first emerged in China.

Risks to growth were slipping out of a reasonable range, Li told his audience during the online conference, predicting a long and difficult road to recovery if the economy didn’t keep growing over the rest of the year.

He warned more specifically on the pressures on local government finances, saying that the central government would not be offering rescue funding.

“This year’s transfer payments to local governments are the largest in recent years… I am here to let you know the bottom line. There is a reserve fund managed by the premier for natural disasters. Other than that, municipalities must manage to raise funds on their own,” he outlined, according to transcripts of the speech seen by international media outlets.

The remarks to the emergency meeting were much more frank than the official readout published by state media. Political commentators have painted the instructions as confusing for civil servants tasked with implementing policy at a time when President Xi has pushed repeatedly to prioritise the zero-Covid policy.

Xi’s reluctance to step back from his policy of confronting the virus is grounded in warnings that millions of deaths could occur if Covid spreads unchecked (2.6 million people could die in three months, researchers from Fudan University warned in May; for context, according to Statista, 10 million die in average years in China ).

But a retreat from the policy could also look like political weakness in the lead-up to the National Party Congress later this year, where Xi is expected to secure a third term as president.

Li is widely believed to have been sidelined by his senior colleague, playing second fiddle to Xi for a decade. That has led to speculation that his higher profile in recent weeks is part of an effort to make himself heard in his final months in office. There’s even talk that Li wants to position himself before the leadership changes later this year, in hope of securing another senior job in the reshuffle.

The cloudiness of elite-level politics in China means that there are always alternative perspectives on what is actually happening.

One of these at the moment is that Xi is demonstrating his personal authority by pushing Li forward to give the bad news about the economy (and take more of the blame for it). Another is that he is simply throwing Li a bone by allowing him a little more prominence during his last months in office.

Last week’s conference call stirred different responses as well. Zong Liang, chief researcher at the Bank of China, told CNBC that it was the largest meeting of its type for many years and that it was unprecedented for Li to address so many levels of government at the same time. Yet Bloomberg’s take was that plenty of senior officials hadn’t bothered to dial in. “Perhaps the most telling detail from Li’s mammoth meeting was who didn’t show up,” the news agency noted. “The top-ranking Communist Party official for many cities was absent because they had to focus on ensuring Covid control, said one of the people, adding that it signalled that pandemic work still trumped the economy.”

Other China-watchers have been looking for clues to the political mood, including David Bandurski, a director of the China Media Project in Hong Kong, who has been scrutinising the front pages of the People’s Daily for signals.

He says that Xi has been less prominent in recent weeks, with fewer large headlines with his name and fewer photographs. In some cases he has been missing altogether – at least five times in May by the middle of the month, Bandurski noted. 

“More than five absences for Xi from the People’s Daily front page in a given month would be something unusual, and this is especially the case with the approach of the 20th National Congress this fall, which should usher in wave after wave of promotion of the top leader and his ideas, policies and speeches,” he added.

Yet Bandurski wonders himself how much to read into statistics like these, asking how often Xi would need to be missing from the front pages to signal a major shift in the political scene.

And for the headline hunters, there was another different perspective from Bill Bishop, who writes the Sinocism newsletter, in highlighting how Li’s speech last week merited only a minor mention on the People’s Daily front page, below three much larger pieces featuring the Chinese president.

Uncertainties like these seem inevitable for even the most seasoned commentators. Mysteries like why Xi disappeared from public life for more than two weeks during a hugely significant leadership transition in 2012 are still unresolved, for instance.

But in the meantime Li’s warning on the economy has continued to provoke comment. Critics of the zero-Covid stance are seeing it as a subtle sign that there could be a softening of virus containment efforts earlier than many have been forecasting. Probably the more substantive subtext, however, is that the Politburo is preparing the ground for a failure to hit the government’s growth target for the economy this year.

And as for talk of a paralysing split between president and premier – it seems safer to assume it’s more a matter of emphasis in communicating policy priorities at any given moment. Li still backs the broader policy of Covid controls, for example, but last week he wanted to highlight how this means that efforts to revive growth are going to be even more crucial.

The urgency of this task has been given more focus by the State Council over the last two weeks, with the release of a 33-point plan covering fiscal and monetary policies, investment and consumption, food and energy security, supply chain stability and people’s livelihoods. Government departments reported back with more details on these plans this week in response to an end-of-the-month deadline set by Li himself.

Local governments and agencies should “effectively stabilise the economy in the second quarter” and lay a “solid foundation” for the latter half of the year, the State Council demanded. And in a further sign of how the Chinese premier is taking the lead in efforts to rescue the economy, there were instructions to the state banks this week to set aside Rmb800 billion ($120 billion) in credit for infrastructure projects as the government turns back to construction to boost growth.

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