By Clay Chandler
October 14, 2017

CEO Daily subscribers are a remarkably high-powered group, which I know from the sophistication of e-mail feedback to Sino-Saturday posts. I also know not all of you follow China stories day to day (and some of you don’t want to read about China at all).

Even so, if you spend only one week this year trying to parse what’s going on in the second-most powerful country in the world, this should be it. On Wednesday, more than two thousand delegates from China’s ruling Communist Party will assemble in Beijing for their quinquennial party congress, the 19th such session held since the founding of the People’s Republic in 1949. In Chinese politics, this is the equivalent of Super Bowl Sunday. Over the course of the next week, party leaders will make a host of key personnel and policy decisions that will set the agenda for China’s next five years.

What we know about this year’s party congress is that delegates are virtually certain to affirm a second five-year term as general secretary for “core leader” Xi Jinping. Nearly everything else about this gathering is shrouded in mystery. China scholars—and anyone who does business in or with the Middle Kingdom—will be seeking clues to China’s future from party appointments to a host of crucial economic and security functions, as well as changes in the membership of the party’s 25-member Politburo, and its inner sanctum, the Politburo standing committee.

The Council of Foreign Relations has published an excellent primer on the 19th party congress, complete with astute handicapping of which cadres are up for promotion. I’d also recommend Harvard University’s Fairbank Center for Chinese Studies’ handy visual guide to China’s current party leadership structure. Andrei Lungu, president of the Romanian Institute for the Study of the Asia Pacific, has a detailed assessment of potential personnel changes in The Diplomat here.

Among the policy issues China watchers will be following this week: whether Xi will name a successor (unlikely); whether Xi intends to ease off his anti-graft campaign or double down (probably the latter, but with more attention to corruption among the party’s rank and file); whether he’ll expand on the “China Dream,” his vision for how to make China great again (expect an appeal for renewed patriotism); whether he’ll offer new details on his ambitious “Belt and Road” strategy to build a new network of road, rail and maritime links connecting China with the rest of Eurasia; and whether Xi will try to bend party rules to allow his right-hand man, Wang Qishan, to remain in power beyond the party’s unofficial retirement guidelines. Wang’s future may signal Xi’s own intentions to remain in power “forever”—or at least beyond a second term—along the lines of Russian strongman Vladimir Putin.

A number of leading China analysts have warned in recent weeks that Xi could emerge from the 19th party congress more powerful than ever, and in position to reimpose a form of authoritarian leadership the country hasn’t seen since Mao Zedong. Financial Times‘ Asia Editor Jamil Anderlini declares China under Xi is “turning back to dictatorship.” The Economist asserts Xi has far more power than U.S. president Donald Trump and that the world should be afraid, very afraid of that.

For my money, the most intriguing assessments of Xi’s bid to consolidate his political power suggest his main concerns aren’t party rivals or Donald Trump but the leaders of private Chinese technology companies like Alibaba, Tencent or Baidu. The Wall Street Journal reports Beijing is pushing some of China’s biggest tech companies, including Tencent, Weibo and a unit of Alibaba, to offer the state a stake in them and allow government officials a direct role in their corporate decisions. In a sharp essay in the Journal, my friend Richard McGregor argues persuasively that Xi sees China’s entrepreneurs as “the rising power destined to battle the established power of the party and the state.” He notes that “as China’s private sector has blossomed, the state has hardened its Leninist core, which dictates that the communist party should face no rival centers of power.”

The dilemma for Xi, of course, is that if he squeezes China’s private companies too hard, he risks killing the growth and innovation that undergirds the legitimacy of his party. It’s the global economy’s most complex and important balancing act, and at least for the next week, is worth some extra scrutiny.

Clay Chandler
@claychandler
clay.chandler@timeinc.com

Technology and Innovation

Alibaba‘s $15bn bid for world domination. The Chinese e-commerce giant will spend $15bn to build its Damo Academy, a network of overseas research hubs to compete with global leaders in e-commerce, logistics and cloud technology. The firm will hire 100 researchers to work on artificial intelligence (AI), quantum computing and fintech from bases in China, Israel, the United States, Russia and Singapore. Reuters 

Creeping influence. Chinese internet regulators are looking into taking 1% stakes and management roles with corporate decision-making powers in social media giants Tencent, Weibo and Alibaba Group’s Youku Tudou, as the tech companies rapidly expand beyond their niches into finance, health care and transportation services that affect hundreds of millions of Chinese citizens. Wall Street Journal 

Putting a face to it. China is building a facial recognition system that will be able to match the faces of their 1.3 billion citizens to their ID photos with 90% accuracy. The system will also connect surveillance camera networks with data storage centres across China through cloud technology. South China Morning Post 

No room at the inn. Airbnb has removed all their rental listings in Beijing for the month of October to comply with tightened security in the Chinese capital ahead of the five-yearly Communist Party Congress starting Oct 18. Reuters 

Sleeping giants. Tujia, China’s answer to Airbnb, has raised $300m in its latest funding round lead by Ctrip and All-Stars Investment, bringing the value of the online platform business to $1.5bn. Financial Times 


Trade and Economy

Rules of engagement. China has criticized the European Union’s new trade rules against lower priced Chinese imports for lacking awareness of World Trade Organization (WTO) regulations. The Ministry of Commerce spokesperson also said that the United States shows “Cold War thinking” in deferment on a decision on anti-dumping tariffs on imports of Chinese aluminum foil and on China’s non-market economy status. Reuters 

Fall from grace. Wang Jianlin has lost his title as the richest man in China, according to the latest Hurun Report, China’s most recognized rich list. Wang, who founded real estate conglomerate Dalian Wanda, has fallen to fifth place with a net worth of $23bn, down more than a quarter from last year. Replacing him in pole position is property magnate Xu Jiayin of Evergrande, whose wealth surged to $43 billion in the last year. Financial Times 

Lotte, stock and barrel. Lotte in talks with several interested parties to sell its Lotte Mart stores in China by year-end. The South Korean conglomerate, the country’s fifth largest, is bowing out of China after having to shutter a number of stories due to political tensions between the two countries. Reuters 

Down the China path. BMW’s iconic Mini cars may soon be produced in China, if ongoing outsourcing talks between the German automaker and Chinese manufacturer Great Wall pan out, according to Bloomberg. If so, it would mark the first time the cars are produced outside of Europe. Bloomberg 



Politics and Policy

Voice of the people. More grassroots delegates such as workers, farmers, technicians, nurses and teachers from “frontline production and manufacturing” will attend China’s 19th National Congress starting Oct 18. Of the 2,287 delegates have been selected to attend the Beijing congress, 33.7 percent will comprise grassroots representatives, a 3.2 percentage point increase from five years ago. China Daily

Prodigal sons. Chinese fugitive Kong Guansheng, one of China’s most wanted, has returned to turn himself in. Kong fled to Hong Kong in 2012 after being suspected of embezzlement in his former role as general manager of a state-owned petroleum company, and is the 48th of China’s Red Notice list of 100 economic fugitives to return since the list was published in 2015. Xinhua

On the sidelines. Chinese dissident Guo Wengui met with former White House chief strategist Steve Bannon twice within a week, according to photos tweeted by Guo. The two men first met in Washington after a National Press Club event and again in New York, when Bannon and his team visited Guo’s home for dinner. South China Morning Post 

Summaries by Debbie Yong. @debyong
debbie.yong@timeinc.com

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