As top leaders gathered at China’s most significant financial conference, the Chinese Communist Party (CCP) indicated it will exert more control over the $61 trillion financial sector. While the meeting highlighted the challenges confronting CCP leader Xi Jinping regarding the ailing economy, experts say that it did not provide solutions to China’s financial difficulties.
Mr. Xi convened this year’s conference, CCTV said, which was delayed by a year due to the regime’s COVID-19 restrictions.
Since the inaugural conference in 1997 following the Asian financial crisis, these meetings have set the direction for the country’s financial policies. Business leaders, investors, and financial and political experts have closely followed these gatherings, seeking insights into Beijing’s strategies for rejuvenating the ailing economy.
“Nothing to watch for” at the meeting, said Li Hengqing, an economist based in Washington.
Institutional Reform
This year’s conference coincides with Mr. Xi’s major restructuring of the financial system earlier this year.Another significant move announced at the conference was the revival of a financial watchdog, the Central Financial Work Commission. The commission was established in 1997 but disbanded in 2003.
The specifics regarding both commissions, including their composition and leadership, have not been disclosed to the public. According to Wang He, an analyst specializing in China affairs, this lack of transparency is “a common practice of the CCP.” Concealing the information of key Party organs is part of the CCP’s efforts to assert control over society, according to Mr. Wang.
In communist China, “not everyone could be a player in the financial market,” he said, contending that market regulations favor the Party elites.
“China’s financial industry is already in a mess,” said Mr. Wang.
But the fact that politics are intertwined with business means there is no easy solution.
To solve the financial troubles from the root, Mr. Xi may need to crack down on all Party elites who control most of China’s resources and those who support prominent business figures, said Mr. Wang.
Adopting such an approach would essentially mean the dissolution of the CCP itself, he said, adding that it’s unlikely to reach that point.
Tightening Party Control
Instead, Mr. Xi chose to save the CCP by reinforcing its hold on finance.Although Mr. Xi has restructured the financial system, he faces challenges. “The biggest challenge is: where can he find officials who are both politically reliable and capable of managing the [financial] industry?” Mr. Wang said.
Mr. Xi has filled the regime’s top decision-making bodies with his loyalists, but most of them, according to Mr. Wang, have limited financial experience.
Mr. Wang speculated that He Lifeng may assume a leadership role in the financial watchdog, as Mr. Xi entrusted him with the responsibility of concluding the key financial conference this week.
Mr. He, a close confidant of Mr. Xi, assumed the role of vice premier in March. Recent reports from state media have disclosed that Mr. He replaced Liu He, a Harvard-trained economist, as director of the office of the Central Finance and Economic Affairs Commission, which is responsible for overseeing the economy.
‘A Dead End’
Analysts express doubts about the ability of the new economic tsar to reverse the decline in the world’s second-largest economy.Mr. Li pointed to the limited success of policies introduced by Mr. He’s predecessor, such as the “supply-chain side” reform aimed at deleveraging the economy and mitigating industrial overcapacity. “These policies were based on a market economy, but they didn’t work … when the Party’s power continued to expand,” said Mr. Li.
At the key financial conference on Monday and Tuesday, Mr. Xi acknowledged “many hidden risks” in the economic and financial sectors, and he called for an expanded role for the CCP.
“We must strength the centralized and unified leadership of the Party’s Central Committee in financial work … and improve the mechanism of Party’s leadership,” according to a summary of the meeting published by CCTV.
“Achieving the Party’s comprehensive control means returning to the planned economy,” said Mr. Li. “The collapse of the Soviet Union already illustrated that the planned economy doesn’t work.”
Nevertheless, Mr. Xi still favors controlling the economy through top-down, centralized planning, as his priority is to avoid a Soviet-style fall.
“There is a fear that the regime may collapse at any time,” Mr. Li said. “By focusing on the Party’s control, he feels he could solve his governing crisis—temporarily.”
The emphasis on communist ideology and the CCP’s control, however, darkens the prospect of China’s economy.
Facing a sluggish economy and soaring debts, “he [Mr. Xi] is determined to resolve the economic crisis through political dictatorship,” said Mr. Li.
“That is a dead end.”