China’s Next Cabinet Shapes Up

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The ceiling of the 10,000-seat auditorium in China's Great Hall of the People.

When China’s Premier Wen Jiabao sends his second – and last – list of cabinet recommendations to the National People’s Congress in March, the key finance portfolio is expected to go to rising star Li Keqiang, who is also the Executive Vice-Premier designate. Li, 52, a Hu Jintao protégé and leader of the so-called Communist Youth League faction within the Communist Party, will also be in charge of overall “macro-economic adjustment and control,” a code word for cooling down the overheated economy and promoting balanced growth.

While Li has a doctorate in economics from Peking University, the former party secretary of Liaoning and Henan provinces has no practical experience in banking, the stock market or monetary policy. However, Hu and Wen have decided to give Li this high-profile portfolio to highlight the latter’s status as a top representative of the Fifth-Generation leadership (meaning cadres born in the 1950s to early 1960s). There are only two fifth-generation stalwarts in the Politburo Standing Committee, the Chinese Communist Party’s inner sanctum.

Li is outranked only by 54-year-old Xi Jinping, the former party secretary of Shanghai, who is now secretary in charge of the CCP Secretariat. Xi is due to be given the concurrent position of state vice-president at the NPC. As things stand, Xi, the head of the so-called Gang of Princelings – a reference to the offspring of party elders – is slated to succeed Hu as CCP General Secretary at the 18th CCP Congress in 2012; and Li is expected to secure the nation’s No. 2 position of prime minister on Wen’s retirement in early 2013.

A senior political source in Beijing said, however, that the competition between Xi and Li is not yet over. The source said hat in almost daily meetings of the politburo standing committee – where major domestic and foreign issues are discussed – Li had impressed his colleagues with his thorough grasp of the issues and his cogent analysis of policy alternatives.

“Xi speaks much less than Li does,” the source added. “As a prime princeling, Xi is an embodiment of the party’s legitimacy and a symbol of stability.” He added, however, that the former party boss of Shanghai and coastal Zhejiang Province has yet to convince his colleagues of his “ability to handle complex issues, let alone ring in changes in either politics or economics.”

Meanwhile, Wen is close to finalizing other key cabinet appointments. The portfolios of the three other vice-premiers, Hui Liangyu, Wang Qishan and Zhang Dejiang, will respectively be agriculture, foreign trade and infrastructure and industry. Hui, 63, is the only incumbent vice-premier staying on.

The 59-year-old Wang, a former mayor of Beijing and vice-governor of the People’s Bank of China, was earlier thought to be a natural choice for finance. In any case, analysts say Wang, a princeling with a charismatic yet hard-driving personality, is a good replacement for departing trade czar Wu Yi, the “iron lady” who demonstrated an aggressive streak during recent negotiations with the U.S. and EU.

Zhang, the former party secretary of Guangdong, will replace the soon-to-retire Zeng Peiyang as the State Council’s point man on industry and large projects. There was speculation earlier that Zhang, 61, may get Wu Yi’s portfolio. However, the leadership have apparently decided that Zhang, a graduate of Kim Il-Sung University who does not speak English, may not know enough about the West to do well in the tricky area of trade negotiations.

Li has already formed a large think tank on issues of finance and macro-economics. He faces an uphill battle reining in inflation, which is set to worsen in 2008. Moreover, the State Council needs to crack the whip on recalcitrant regions and industries in order to bring about a soft landing particularly for overheated sectors such as properties. Should Li – and his cabinet colleagues – succeed in maintaining a high growth rate while taming inflation, he will give Xi a lot of pressure in the contest to be top dog of the fifth generation.