China’s New Premier Needs to Revive Growth. How Far Will Loyalty Get Him?

Before Li Qiang was appointed China’s No. 2 leader this past week, he oversaw Shanghai, a city that, for a time early last year, was celebrated for trying to contain Covid with relative restraint. City officials wanted to avoid the economic devastation of a full-scale lockdown and instead opted for limited restrictions that applied to, in one instance, a single milk tea shop.

But as cases spread, the central government in Beijing intervened. Suddenly, the pragmatism and business-friendly character that had long defined Shanghai’s spirit gave way to “zero Covid,” the top leader Xi Jinping’s single-minded pursuit of eliminating the virus. Mr. Li, who vowed to “firmly implement” Mr. Xi’s orders “without hesitation,” imposed a citywide lockdown that confined 25 million people to their homes for two months.

Mr. Li’s pivot in Shanghai demonstrated his loyalty to Mr. Xi, a quality that appears to have kept him close to the top leader for two decades and that culminated in his elevation to premier on Saturday. But it also shows how he is at the center of the tension between Mr. Xi’s emphasis on authoritarian Communist control over society and the free market, business-friendly policies that underpinned China’s rise.

The direction of the world’s second-largest economy now depends on how these tensions play out.

The party has sought to demonstrate that Mr. Li has Mr. Xi’s trust. When Mr. Xi was reappointed as president at the National People’s Congress last week, the two men were seen sitting next to each other on the stage, chatting animatedly. But the position of premier has also been diminished under Mr. Xi.

Mr. Li “will only focus on domestic livelihood issues,” said Alfred Wu, an associate professor at the Lee Kuan Yew School of Public Policy in Singapore, who specializes in political and economic issues in China. Mr. Xi will be in charge of virtually everything else.

Even within that limited scope, Mr. Li faces serious challenges. To revitalize China’s economy, he needs to restore confidence that had been battered by Covid restrictions as well as clampdowns on tech and real estate. Mr. Li, at his first news conference as premier on Monday, sought to reassure private companies of their importance to the party and Beijing’s commitment to market-oriented economics, despite Mr. Xi’s emphasis on national security and Communist ideology.

Mr. Li pointed to his long experience working in cities and provinces with strong private businesses and entrepreneurs. “I have some understanding of their aspirations and apprehensions in the course of their development,” he said at the briefing.

Mr. Li’s record points to a commitment to promoting business. As Shanghai’s party secretary, he pushed successfully for the creation of another stock market in the city. Under Mr. Li’s watch, Elon Musk built in Shanghai what is now Tesla’s largest electric car factory. The factory began manufacturing cars in less than a year after construction crews took turns working around the clock under floodlights, as is common for priority projects in China.

At times, he has sounded like an advocate of free markets. “When facing the market, the government must respond if there’s a request, but must not disturb if there’s nothing,” he told the official Xinhua news agency in 2018.

Mr. Li, 63, spent his entire career until last autumn working his way up through a series of municipal and provincial administrations on China’s prosperous eastern seaboard, along the way cultivating his relationship with Mr. Xi.

He began his career in an irrigation station, then a tool factory in Rui’an, a county on the outskirts of Wenzhou, one of the most entrepreneurial cities in China. He worked his way up to the post of Communist Party leader of Wenzhou, a position he held for three years until 2004. Then Mr. Li moved to Hangzhou, the capital of Zhejiang, and became chief of staff for several years to Mr. Xi, the province’s party leader then.

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Robert Lawrence Kuhn, an American author, businessman and a host of a show on Chinese state television, visited Zhejiang Province on a book tour in 2005 and met Mr. Xi, and several of his aides, including Mr. Li. A year later, during an interview with Mr. Xi for another book, Mr. Kuhn found only Mr. Li at Mr. Xi’s side.

“He was not just there to carry his briefcase, he was very much engaged” in the discussion, Mr. Kuhn recalled about the meeting, referring to Mr. Li. Mr. Kuhn said that Mr. Li was someone Mr. Xi “trusted above all others, at least at that time.”

Mr. Li moved quickly up the ranks of the province’s Communist Party after that, and only two months after Mr. Xi became China’s top leader in 2012, he named Mr. Li as the governor of Zhejiang. Three years later, he promoted Mr. Li again, to become Communist Party secretary of Jiangsu Province, a prosperous hub of heavy industry just north of Zhejiang. And in 2017, he chose Mr. Li as Communist Party secretary of Shanghai — long a steppingstone to the Standing Committee of the Politburo, including for Mr. Xi himself.

The big question that lies ahead for Mr. Li is whether he will retain the same access to Mr. Xi and influence in Beijing that he once had as a senior aide in the much smaller world of provincial government.

“You can’t assume that because he was able to speak frankly to Xi in the past, that means he will be able to do so in the future,” said Kenneth Jarrett, a former American diplomat and business leader in Shanghai who has met Mr. Li many times in Zhejiang and later in Shanghai.

There are apparent limitations to Mr. Li’s influence on matters of national importance. At the start of the pandemic, Mr. Li played a key role in an agreement between BioNTech, a German biotech company, and Fosun Pharma, a private-sector pharmaceuticals company in Shanghai, to manufacture BioNTech’s mRNA vaccines in Shanghai, said Joerg Wuttke, president of the European Union Chamber of Commerce in China.

With Mr. Li’s help, Fosun moved quickly to build a factory in Shanghai. By December 2020, the factory started to produce large quantities of an mRNA vaccine. But the vaccines were never certified for use, partly because of Beijing’s obstructions, according to Mr. Wuttke.   

“He was a matchmaker, but the marriage was never consummated,” said Mr. Wuttke.

Mr. Li’s reputation was also badly hurt by the lockdown on Shanghai last spring, which was often chaotic and bungled, with some residents locked in their homes without access to food and critical medicines. The city was later also the site of rare protests against “zero Covid” and, specifically, Mr. Xi’s authoritarian leadership.

Mr. Li has since been credited with helping to lead the push in early December for China to quickly abandon its “zero Covid” policy, several people who know Mr. Li said in interviews in early January, speaking on condition of anonymity to discuss elite Chinese politics.

Mr. Li’s move should not be construed, however, as a broader sign of his sway in the central leadership, said Neil Thomas, an expert on Chinese elite politics. By then it was clear that the rapid spread of Omicron had made lockdowns and mass testing unsustainable and futile.

“When it really counted for the Chinese economy, he wasn’t able to convince Xi Jinping to reverse zero Covid,” he said, referring to Mr. Li’s deference to Beijing’s authority during the Shanghai lockdowns.

“Xi is likely to listen seriously to what Li Qiang has to say about economic policy, but ultimately, Xi is still going to call the shots,” Mr. Thomas added.

Chris Buckley contributed reporting and Li You contributed research.

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