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CEO Daily: Saturday, 22nd April

Good afternoon.

Chinese president Xi Jinping is often portrayed in Western media as something of a control freak. The Economist last year proclaimed him “Chairman of Everything” (and was promptly banned in China). That image may be undeserved. But with the approach of a crucial Party Congress this fall, it’s not hard to understand why the Chinese leader would focus on order and stability.

The Party Congress, the 19th to be held since China’s Communist Party was founded in 1921, affords Xi a make-or-break opportunity to pack the party’s 350-member Central Committee with his own allies. He’ll also have a chance to promote his own people to two key sub-groups, the Politburo and the Politburo’s Standing Committee, as well as the army’s ruling council. Results of the reshuffle will determine whether Xi has enough support to extend his influence beyond 2022, when his term as party secretary is set to expire.

To achieve maximum influence at the Congress, Xi must preserve steady growth of China’s economy; project an image of strong leadership in global affairs, especially in China’s dealings with the United States; and enforce absolute loyalty within the party.

For now, most analysts seem to be betting that Xi will succeed on all three fronts. China’s GDP grew 6.9% in the first quarter, its strongest quarterly performance in 18 months. Meanwhile, Donald Trump’s vow to scrap or re-write long-standing U.S. trade agreements and scale back American security guarantees to traditional allies has enabled Xi to position himself as a champion of global cooperation. Xi’s first meeting with Trump, in Mar-a-Largo, Florida, ended amicably, and Trump quickly abandoned threats to declare China a currency manipulator and slap tariffs on imports from China.

But a lot can happen in a few months–and there are plenty of potential Black Swans out there. Many analysts warn China’s growth is the result of ballooning credit, not genuine consumer demand. Skeptics point to the recent collapse in the share price of Hong Kong-listed China Huishan Dairy and record bond defaults as signs of economic distress. Trump added to the uncertainty with his announcement Thursday that he is launching a trade probe against China and other exporters of cheap steel into the United States.

Meanwhile, allegations of corruption among senior party officials by Chinese tycoon Guo Wengui last week spiraled into a bizarre feud involving senior Chinese diplomats, an abruptly terminated interview with Voice of America, and a hail of counter-attacks in China’s state-owned media. The controversy stirred speculation among US China experts of serious behind-the-scenes turmoil in Chinese politics. Fortune‘s Scott Cendrowski has more background on the dust-up here.

Enjoy the weekend!

Clay Chandler
@claychandler
clay.chandler@timeinc.com

More U.S.-China-Korea news

  • Ant Financial raises its bid for Moneygram. 

Ant Financial, the digital payments affiliate of Alibaba, raised its bid for Texas-based MoneyGram by 36% to $1.2 billion. The increased offer was an effort to fend off a rival bid from Euronet Worldwide, which had sought to derail Ant’s acquisition in part by arguing that allowing a Chinese company to gain control of the company would pose national security risks. MoneyGram is Ant’s first major bid in the U.S. The company avoided running afoul of Chinese tightening capital controls by raising $3 billion overseas. Financial Times

  • China’s Internet giants pushing overseas. 

The Economist notes that China’s three Internet giants are parlaying their domestic scale into global advantages and becoming formidable players in markets beyond China’s shores. The three companies are often referred to as the BAT — for Baidu, Alibaba and Tencent. But maybe it’s time to reverse the acronym and call them the TAB. The Economist notes that in the bloody domestic turf wars amongst each other, Tencent and Alibaba are pulling ahead of Baidu. The article notes that some people are starting to call Baidu is China’s Yahoo. Economist

  • Tencent gaining on Alibaba’s Alipay in China. 

Alibaba’s Alipay has long been the leader in mobile payments inside China. But Juro Osawa and Mike Sullivan report that Tencent is rapidly catching up. In the fourth quarter, Tencent more than quadrupled its mobile payment market share in China to 37% up from just 8% in the fourth quarter of 2014, according to research firm Analysis International. Alipay’s market share has tumbled during that period to 54%, down from 80%. At this rate, it seems all but certain Tencent will eventually overtake Alipay as the market leader. The Information