Is China’s top leadership in the grip of feverish factional war with Premier Li Keqiang, euphemistically described as “economic czar,” compelling President Xi Jinping to shelve his key political and economic campaigns, including “common prosperity?” Currently, facing a challenge from China’s second most important political leader Li Keqiang, President Xi, hailed as the tallest leader of the Middle Kingdom, has been left to fend for himself at the time when brutal zero-Covid policy has impacted the country with economy in haywire and, no end in sight of rabid anti-China sentiments worldwide.
If headlines are to be believed, widespread discontent triggered by China’s dynamic zero-Covid policy has brought a schism within the Communist Party of China’s core leadership with its immediate impact on plans and policies which were hitherto described as gamechanger in China. Xi Jinping’s much touted politico-economic campaign “common prosperity” which otherwise led to unleashing a storm of regulatory activity wherein diverse sectors were targeted—from education to big tech—has been put on the back burner because China’s economy is under huge strain.
Remember how China pulled the plug on Ant Group just before launch of its $37 billion initial public offering (IPO) last year and how the company’s co-founder Jack Ma went into hiding after his remarks on the country’s banking system. Remember how China in its brutal regulatory crackdown in 2021, clipped the wings of its high-flying technology giants like Tencent and Alibaba, food delivery app Meituan, ride-hailing app Didi and numerous online gaming and private tutoring apps—all this in the name of bringing “common prosperity” in China.
Such moves, whose prime objectives were to close the wealth gap by encouraging high-income individuals and businesses to give back more to society, were seen as President Xi Jinping’s efforts to consolidate his power ahead with the 20th Party Congress of the CPC, scheduled for 2022 end. But then the cost of the crackdown was so huge that its effect paled President Xi Jinping’s anticipation.
China’s economy has slowed to a grinding halt, not seen since the 1990s. The Economist estimated that the crackdown wiped out more than $1 trillion worth of collective market capitalization of China’s largest internet groups. The $120 billion private tutoring industry pulled a shutter down on its business, while license freeze on video-game led to closing down of more than 14,000 firms. Chinese tech firms which once attracted best and brightest youth, are today awash with stories of mass layoffs. E-commerce giant JD.com has so far laid off more than 400 employees; Alibaba, yet another e-commerce giant has reportedly retrenched 39,000 employees–15 percent of its total staff strength this year; Tencent, which has around 86,000 employees, has cut down staff strength by 10 to 15 percent.
But then in the absence of accurate state-published statistics on unemployment, it is very difficult to measure the actual position of job losses in China since the crackdown was launched last year. An earlier report by Chinese recruitment site Zhaopin.com, however, suggested that half of the people surveyed said their company had laid off employees in 2021 while a quarter said they were directly affected. Overall, the destruction caused to tech companies under regulatory mechanism and dynamic zero-Covid policy have translated into larger fears of an unemployment wave in China, a factor which was seen during the state sector reforms of the late 1990s.
Year-long crackdown on tech companies has not only taken a huge toll on the Chinese economy and the employment market—which has otherwise been exacerbated by harsh Covid-19 triggered lockdowns in Shanghai, Beijing and other key cities, it has also led to driving away global investors. In this regard, Russia’s invasion of Ukraine has also had a great impact.
Norway’s $1.3 trillion sovereign wealth fund has declined to invest in a Chinese sportswear giant; the UK-based investment firm, Artemis Investment Management LLP has sold all its China investments; Germany’s Fraport AG has sold its stakes in Xi’an Airport to a local buyer, ending a 14-year stint in China. According to CNN, overseas investors offloaded $5.5 billion of Chinese government bonds in February 2022. Earlier in April, yields on China’s 10-year government bond fell below US Treasury yields for the first time in 12 years, while the Yuan hit a six-month low against the US dollar. The International Monetary Fund has already slashed growth forecast for China to 4.4 percent, down from 4.8 percent.
In the midst of such developments, President Xi Jinping has been compelled to put his signature “common prosperity” programme on the backburner. For this, Premier Li Keqiang’s move to come out of his shell and his boldness to call into question some of the decisions of the President is cited as the reason. Premier Li’s stand is that China needed down-to-earth policies, not grandiose plans like the “Chinese dream” till 2050 to become economic power of the world.
While President Xi declared victory over poverty in China, Premier Li believes that extensive work is still needed to alleviate poverty in the country’s urban areas. Under his supervision dozens of stimulus measures have been introduced to revive the economy. On June 2, Premier Li headed the State Council, during its meeting asked state-backed banks to fund $120 billion for infrastructure projects and give some relief to local governments struggling with their fast-drying coffers. And then what could be a major U-turn on the policy front, China is reportedly considering a revival of the Ant Group’s IPO.
According to Reuters, China’s central leadership has given a tentative green signal to Jack Ma-led Ant Group to revive its initial public offering in Shanghai and Hong Kong. Behind such decisions, Premier Li’s name is prominently taken by the Chinese official media. With this, a question being asked conspicuously is whether Premier Li has taken control of China’s economic policy. Because, it was Premier Li and not President Xi who recently held a mega-national teleconferencing with more than 100,000 participants, wherein he called on local authorities to stabilise the economy, support market entities, employment and people’s livelihoods.
Whether such moves have a ripple effect on the 20th National Congress of the CPC has to be seen. The National Congress is taking place later this year and it may herald leadership changes. In this backdrop, in the faction-ridden CPC, Premier Li’s recent moves are creating more headlines in the Chinese media, while President Xi Jinping is busy clearing the path for his third term in office.
