China’s 19th Party Congress and Implications for Hong Kong
Photo Credit: South China Morning Post
By Tai Wei Lim

China’s 19th Party Congress and Implications for Hong Kong

Oct. 13, 2017  |     |  0 comments

In the run-up to the 19th National Congress of the Communist Party of China, there are three considerations that are highly relevant to the consolidation of power by President Xi Jinping. Firstly, President Xi is trying shore up support amongst China’s political elites for his ideas. Loyalty to him is also very important. Loyalty is a major ingredient of the selection process for leadership positions. Secondly, experience amongst his supporters is just as important as loyalty. President Xi does not want any candidates who have the potential to undermine his political legacy. Thirdly, party bureaucrats/technocrats and trusted advisors with skills and performance appear to be traits that are preferred by President Xi.

The 19th Party Congress will be a public line-up of top officials who reflect these values and will be handpicked by President Xi to navigate China’s future.

It is also possible to detect the following trends. Firstly, the new leadership candidates appear to have a significant number of individuals who have worked in Fujian and Zhejiang provinces, thereby leading some to nickname this phenomenon as the so-called “rise of the Fujian-Zhejiang factions” in the upcoming politburo and senior leadership line-up. Secondly, there seems to be a group of leading economic reformers who are primed as candidates for the Politburo composition. Reducing poverty, creating prosperity, managing risks in the economy, and running the world’s second largest economy necessitate the integration of economic reformers into leadership positions. The underpinning idea is not just inserting technocrats but technocratic loyalists.

Ultimately, it is the trust factor that will be the most important criterion for picking new leaders. President Xi is putting men he can trust into positions of power. Reliable political allies and loyalists are what he is looking for. This is also to do with the element of familiarity. President Xi is locating former political allies or friends whom he had contact or had worked with when he was in Fujian and Zhejiang provinces. Familiarity may also extend to candidates President Xi had met during other formative periods of his life, such as individuals who were his college dorm mates.

There is also a meritocratic element to the process in terms of performance track record. President Xi is looking for candidates who had good performance in the past at the provincial level. Performance in terms of economic achievements in these provinces and the ability to bring restive regions to order are potentially valued. Consensus-driven leadership decisions and collective decision-making do not seem to feature prominently this round. Continuing economic reforms and achieving the goals of a moderately prosperous society by 2021 and military modernization will drive the need for strong competent leaders. Wang Qishan, China’s top graft buster and Xi’s key ally is perhaps a good example of a leader who embodies these qualities in the context of the leadership transition leading up to the 19th Party Congress. Wang is currently the head of the party’s commission for discipline inspection.

At the moment, President Xi does not seem to have chosen his direct successor. It is a little different from previous practices but the candidates for this round of leadership appointments may yield some potential options for the near future. The more important implication perhaps is the issue of leaving Xi’s imprint on the political system. The 19th Party Congress is also about leaving behind a legacy. President Xi is interested to insert his ideas into the Party Charter. The ideas are laid out in his speeches and his book Xi Jinping: The Governance of China. President Xi is keen on shoring up party governance and party discipline. All these firmly indicate that President Xi is the top and core leader of China.

Since the Occupy Central movement of 2014, Beijing has hinted that it wants to play a larger role in Hong Kong’s economy.

Ideologically, Chinese state-owned media has indicated some desire to develop “socialism with Chinese characteristics.” Such ideological elements are likely to be tied closely with the leadership transition and legacy building processes. There is also a sense of maintaining the status quo in cases where political mechanisms are working well. “If it ain't broken, why fix it?” appears to apply to some, but not all, of the features of the system put in place during Xi’s tenure. Avoidance of risk has been reported in the international media as a major feature that is not so explicitly stated in the 19th Congress.

During the run-up to the 19th Party Congress, the Chinese elite leadership has continued to receive world leaders as well as important individuals like Steve Bannon, a former member of US President Donald Trump’s White House and the National Security Council. Chinese leaders’ efforts in spending time on bilateral ties at a very busy and critical period seem to indicate a level of confidence in the leadership transition.

Implications for Hong Kong

After the Congress, China is likely to have a stronger hand in managing its administrative regions. For example, China is likely to show a desire to align Hong Kong’s economic development closer to its own interests and national priorities. The stability of leadership after the transition period means the elite leaders will have more political legitimacy from the Party and also clearer lines of authority to put in place their visions, plans, and initiatives for China and its Special Administrative Regions and/or autonomous regions like Hong Kong.

Since the Occupy Central movement of 2014, Beijing has hinted that it wants to play a larger role in the city’s economy. This has also been hinted by Zhang Dejiang, Chairman of the Standing Committee of the National People’s Congress, at various times. The entry of mainland firms and companies may be a function of this political desire; it may also be a natural outcome of mainland Chinese companies’ internationalization and their strategy to utilize Hong Kong as a convenient platform to reach overseas markets and/or make investments overseas through Hong Kong. This role may benefit Hong Kong economically but it may also mean closer coordination with the mainland authorities and China’s massive economy. Hong Kong will be tied to China’s future goals and fate.

Perhaps Chinese companies are starting to move into Hong Kong in anticipation of its newly-minted status as China’s premium offshore renminbi trading center. They could perhaps be utilizing Hong Kong as a financial platform within the rubric of China’s ambitious Belt and Road Initiative (BRI). Hong Kong itself has a “super corridor” vision to become an intermediary to tap into the BRI. Hong Kong’s tycoons may have to share economic power and resources with mainland tycoons as red chip companies and mainland firms move into its economic space, with the Chinese mainland determined to play a larger role in Hong Kong’s economy.

Hong Kong will try to find a new role as China’s main offshore renminbi trading center while holding on to traditional strengths like the rule of law, a partial English-speaking populace, long history of dealing with the West, relative freedoms within China, financial center experiences, etc. There will be some degree of a new normal for Hong Kong as it competes with China’s first tier cities like Shanghai, Beijing, and Shenzhen, not to mention other East Asian first tier cities like Seoul, Taipei, Singapore, and Tokyo.

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