Battle for China Resumes: Xi Jockeys for Position Ahead of PSC Selections

A big power transition is coming up in China and Xi Jinping is making sure he controls the changeover, including a crackdown on Li Keqiang's power base.

DM: Xi move on faction suggests China elite struggle: experts

Allies of Chinese President Xi Jinping are moving against a Communist organisation that is the power base of Premier Li Keqiang, in what analysts say may be a sign of faction-fighting at the top of the ruling party.

The Communist Youth League (CYL) has long been a proving ground for young up-and-comers to demonstrate their political talent, particularly those who -- unlike Xi -- are not party "princelings" with the advantage of high-ranking parents.

...On its website, the CCDI published an extensive self-criticism by the CYL's central committee, acknowledging that it must have a greater "sense of responsibility and mission" to the party leadership and the country's young people.

The declaration came after an investigation into the CYL found evidence of embezzlement and influence-peddling, according to the Global Times newspaper, which is close to the ruling party.

The CCDI is headed by Wang Qishan, widely considered to be Xi's top lieutenant.

Analysts say that the charges, although likely legitimate, may also be a convenient cover for the CCDI's real goal: helping Xi jockey for position ahead of next year's 19th Party Congress, which will decide the new line-up for the Communist Party's Politburo Standing Committee (PSC), the top organ of political power in China.

"To investigate the CYL is a highly political endeavour," said Jean-Pierre Cabestan of Hong Kong Baptist University.

"This operation will certainly contribute to consolidating Xi's position."

Five of the current seven PSC members are expected to retire at the Congress, and many experts believe Xi and Li are locked in a struggle to fill the vacancies with their own supporters, not to mention protect their own positions.

This competition is unlike the 2012 situation where Bo Xilai (and his Maoist faction) was trying to usurp power. However, it will have a direct impact on economic policy.

See: Xi Jinping’s Inner Circle

The financial reforms proposed at the Third Plenum, which encourage the establishment of private banks and joint ventures with foreign financial institutions, is perceived as the driving force for deepening market reforms. The financial liberalization will provide much-needed loans for private firms, especially those in the service sector. Wang Qishan’s expertise in finance and his international reputation make him indispensable to
Xi. Furthermore, some of Wang’s protégés are now well positioned in China’s financial and economic leadership, including Minister of Finance Lou Jiwei, Governor of the People’s Bank of China Zhou Xiaochuan, Director of the Development Research Center of the State Council Li Wei, newly appointed Chairman of the Bank of China Tian Guoli, and newly appointed President of the Merchant Bank Tian Huiyu (Wang’s former mishu). All of the above observations show that Wang has been the most effective political ally for Xi, and their four-decade-long friendship seems to have had an impact far beyond the domain of personal and political associations.

Li Keqiang wanted tougher reform policies and deleveraging. Perhaps he will go down as China's Mellon, who told Hoover to knock off the internventions and let the economy bottom out. Instead, Hoover pressed on with massive government intervention and then America elected the ultra-Hoover, FDR, who extended the depression well beyond what should have been the 1934 bottom.

Related (with links to prior coverage): Pettis Says China Has 2 Years to Adjust; Xi Must Consolidate Power