Is China About to Abandon the Reform Effort?

FT: Questions over Li Keqiang’s future amid China market turmoil
Among party officials and politically connected people in Beijing, the hottest topic of conversation is whether Mr Li will take the fall for Beijing’s perceived mismanagement of the stock market crash and the country’s broader economic slowdown.

“Premier Li’s position has certainly become more precarious as a result of the current crisis,” said Willy Lam, an expert on Chinese politics at the Chinese University of Hong Kong. “If the situation worsens and if there comes a point where [President Xi Jinping] really needs a scapegoat, then Li fits the bill.”

Mr Li and Ma Kai, vice-premier, were the architects of a now discredited plan to rescue China’s stock markets in early July, when the government rolled out a series of unprecedented measures to prop up plunging stock prices, according to people familiar with the matter.

“There are constant rumours that Premier Li is about to be booted out but that is partly because he is given all the toughest jobs to do,” said Kerry Brown, director of the China Studies Centre at the University of Sydney. “It would be incredibly risky to replace him at this point but it is possible they will find a face-saving way to move him aside at the next party Congress in 2017.”
There is precedent here. Zhu Rongji was sacked for pushing a similar package of reforms as Li, and served only one term as premier due to displeasing the party insiders. Much of Li's reform effort was a restart of Zhu's earlier efforts, not always literally, but often in spirit.

If there is merit to the rumors, at some point in the near future (ahead of a 2017 switch), power will begin shifting away from Li and possibly also the PBOC.

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