“In China, politics is more important than the economy.” Senior executive of a government owned company. Interviewed by Mike in Fall 2010.
News flow this week will likely centre on Xi Jinping’s visit to the US. Like most visits abroad by top Mainland leaders the target audience is the Chinese public. And it looks like there will be a lot of photo ops with Xi Jinping spending a lot of time with his counterpart US Vice-President Joe Biden, tours of the White House and time with President Obama, a visit to Iowa, and than onto Los Angeles where he is due to meet the mayor. He may attend an NBA game which would make him the first member of the Politburo’s Standing Committee to do so. (Let’s hope my Washington Bullets (oops Wizards) show Xi the love that accompanies a home-town win. But with 6 wins and 22 losses this season perhaps it makes sense to see a Laker’s game instead).
For those that do not know, the reason for this week’s media hoopla will be that Xi is by almost all accounts due to take over as secretary of China’s communist party during the 18th congress of the Communist Party of China (CPC), which is due to take place this October 2012. It is a five-year position and based on recent history he will likely be reappointed as party secretary after his first five year stint meaning that he will be leading China until 2023. Along with other titles that he has and will likely get, he will arguably be the most powerful person in the world.
“The most powerful person in the world” is a pretty big statement. But very likely true as the Communist Party of China basically controls the countries’ politics, economy, etc. In China the Communist Party is synonymous with government, and when news reporters and your Mainland colleagues and friends refer to the government they could just as well interchange ‘government’ with ‘communist party’.
Although China is a multi-party country, only one party matters. At the end of 2009 it had 78m members or about one out of every 18 Chinese citizens. It had over 3.8m grassroots organizations which include party cells or committees at both sate-run, private and many times foreign owned companies, as well as schools, universities and virtually all meaningful organizations in China.
The connection to investors is direct. This is because the government / party control the vast majority of large companies listed in China. As at Sept 2011 (when I last ran the numbers) the central, provincial and local governments controlled 68% the market capitalization of all companies worth over US$2bn listed on the three main Chinese markets - Hong Kong, Shanghai, and Shenzhen. In a global context - the Chinese government/Communist Party control more of the world’s market capitalization than any other single entity. In Sept 2011 I calculated this at about 5.7% of total world equity capitalisation of the 54 exchanges that report to the World Federation of Exchanges data base (http://www.world-exchanges.
While he’s the center of attention in the world’s English language press this week, I’ll contribute my two-cents by regurgitating my own research, writings, and memory of things I’ve read and heard form people closer to the political action than myself:
- Xi Jinping will turn 59 in June 2012.
- He is a native of Shaanxi - one of China’s poorer provinces.
- He is married to Peng Liyuan who is one of China’s more popular folk singers (she’ll be 50 years old this year). Until recently she was better known than her husband. According to wikipedia the two spent a lot of time apart with Xi Jinping living in Fujian and Zhejiang with his wife staying in Beijing. They have one daughter - Xi Mingze (nicknamed Xiao Muzi - literally “little wood”) - who entered Harvard University in 2010 under a different name.
- Xi Jinping has four siblings: Xi Zhengping (brother; Deputy Director, Organization Department, CPC Shaanxi Provincial Committee), Xi Zhengjing (brother; Director, Justice Bureau, Hainan Province), Xi Qiaoqiao (sister; Chairman, Beijing ZhongMinXing Real Estate Development Co.), Xi Yuanping (brother; Chairman, Beijing Yue Ban International Consultancy Co.), Xi An'an (sister; Chairman, Guangzhou New Postcom Equipment Manufacturing Co. - See http://www.newpostcom.com.cn/
- Xi Jinping,, spent two years as party secretary of Fujian province. This is one of the most important governorships in China as Fujian province sits across a small body of water from Taiwan. The current person in this position is Su Shulin, the ex-head of China’s second largest energy conglomerate Sinopec Group.
- Xi Jinping has always been well liked by the Chinese military. This is in contrast with other leaders who had to first gain military backing before taking the top spot. He has also not spent much time in Western China which is in contrast to other recent leaders.
- He is generally believed to be reform minded, and international leaning according to press reports. He is also has a reputation for being tough on corruption.
Guanxi (i.e. Important Relationships)
- Xi Jinping is close to and possibly has a mentor relationship with Li Yuancho, who is the current head of China’s Central Organization Department. This is possibly the most important department of the Communist Party/Government. (See footnote below on the Central Organization Department). As noted above, one of Xi Jinping’s brothers is a high-ranking official in the Shaanxi provincial organization department. This gives him additional contacts within this important organization.
- Xi is the first post Deng leader? Years ago I read or was told that Deng Xiaoping handpicked, or perhaps recommended Hu Jintao to succeed Jiang Zemin as General Secretary of China’s communist party, but that he was the last. This would/could make Hu Jintao the last of the direct Deng Xiaoping proteges.
- His father mentored many of China’s future leaders - the two most important being current party and government leaders Hu Jintao and Wen Jiabao. (See below)
- It is believed that Xi Jinping is supportive of princelings rising to party and government leadership positions. (Princelings is a term used to describe the sons, daughters and other relatives of prominent government and communist party cadres, officials and business leaders)
- He is a princeling himself being the son of Xi Zhongxun, who was one of the first wave of students to join the Communist Youth League and later Communist Party in the 1920s. Xi Zhongxun was the Deputy Prime Minister of China between 1959 and 1962 and Governor of Guangdong province between 1979 and 1981. He mentored many of China’s future leaders - the two most important being current party and government leaders Hu Jintao and Wen Jiabao. He also supported the reforming students during the 1989 Tiananmen square incident, and was rarely seen thereafter. In the early 60s he fell out of favor with Mao and the Communist Party. Wikipedia also credits him for proposing and helping to create China’s first special economic zone - Shenzhen. (For those that don’t know, Shenzhen is one of the most important cities in China today. I personally consider it the modern version of Shanghai - a city created by modern times and representing a break from the old way of doing things. Not only is the Shenzhen stock exchange located there, but also many of China’s largest companies non-SOE companies are headquartered here including Ping-An (insurance and financial services), ZTE (technology) and Huawei (technology).
- However un-like many princelings, Xi Jinping has spent most of his career away from cushy jobs in Beijing or even Shanghai. His rose to power in Fujian and Zhejiang.
Two pictures of Xi Jinping and his wife are from internet searches. I'm not sure of the dates. The others were taken early today, and are from the front window of a local shop selling books on Xi Jinping and other current leaders of China. The bookstore is close to a HK-Guangdong bus terminal. Many PRC citizens buy books in Hong Kong that are banned or altered in Mainland China.
Footnote: Central Organization Department: (taken from “Inside China’s Corporations”, available on Amazon)
The Central Organization Department of the Communist Party of China Central Committee controls staffing positions within the CPC and is considered one of the most important Party organisations. It controls all personnel assignments within the party, and compiles detailed and confidential reports on future CPC leaders. It is one of the key agencies of the Central Committee, along with the Central Propaganda Department, the Central Discipline Inspection Commission and the Central Military Commission. In its placement duties, the Organization Department can be compared to a head-hunting agency or the human-resources’ office of a large international corporation.
An analogy written by former Financial Times Beijing bureau chief, Richard McGregor, explains the Organization Department by conjuring up the image of a parallel body in Washington:
“The imaginary department would oversee the appointments of US state governors and their deputies; the mayors of big cities; heads of federal regulatory agencies; the chief executives of General Electric, ExxonMobil, Wal-Mart and 50-odd of the remaining largest companies; justices on the Supreme Court; the editors of The New York Times, The Wall Street Journal and The Washington Post, the bosses of the television networks and cable stations, the presidents of Yale and Harvard and other big universities and the heads of think-tanks such as the Brookings Institution and the Heritage Foundation.” Taken from Richard McGregor's excellent book, "The Party; The Secret World of China's Communist Rulers".
The Organization Department’s predecessor was established by Chairman Mao Zedong and replicated the Soviet Union’s nomenklatura system. When asked how top-level SOE people were appointed, we were consistently told that the Organization Department was a key determinant, and that many times the State Council gets involved, especially for the most senior appointments at the SOEs.
The importance of the organisation can be seen in its past leaders. Five of the previous 14 heads of the department were promoted to the Politburo Standing Committee, and two – the Great Helmsman, Deng Xiaoping, and reformer, Hu Yaobang – were later promoted to the Party’s top positions, and hence top positions in China: CPC General Secretary. (Hu was forced to resign in 1987, for sympathising with pro- democracy student protests). Other past heads include: He Guoqiang, currently the eighth ranked member of the Politburo’s Standing Committee and Secretary of the Central Commission for Discipline Inspection, the CPC’s internal affairs division that is largely responsible for investigating corruption and bringing charges against dishonest Party members.
14 Feb 2012; Hong Kong