By Willy Lam.

Li Keqiang, China’s first “Ph.D. premier,” was confirmed as head of the State Council, or central government, at the recently concluded National People’s Congress held in Beijing’s Great Hall of the People. The fact that the 57-year-old Anhui native garnered 99.69% of the support of the 3,000 parliamentarians seems to show that this youngest head of government since the Cultural Revolution enjoys relatively broad support among the party-and-state establishment.

However, Li, a key member of the Communist Youth League (CYL) Faction led by ex-president Hu Jintao, is a man in a big hurry. As the economic tsar of more than 1.3 billion people, the technocrat is tasked with liberalizing an economic structure that is still burdened with a huge state sector as well as heavy-handed government fiats.

By early this year, there are already signs that the Chinese economy has successfully weathered the doldrums caused by the dicey recovery in the United States and the European Union. Performance in the crucial export and domestic consumption sectors have been better than most Western economists expected.

However, Li, who is also a member of the Chinese Communist Party’s (CCP) supreme ruling council – the Politburo Standing Committee (PBSC) – faces tremendous obstacles in attaining his goal of rationalizing the economic structure through boosting market-oriented elements and curbing the monopolistic powers of state-owned enterprise (SOE) conglomerates.

This is despite the fact that in terms of education and depth of knowledge of the global economy, Li is perhaps the best qualified premier in recent Chinese history. The “Fifth-Generation” leader has a doctorate in economics from prestigious Peking University, in addition to being the only Politburo member who speaks English well.

One ingrained problem facing every Chinese head of government is that he has much less power than prime ministers in most other countries. Firstly, the Chinese premier has direct oversight over only ministries and departments related to the economy. He has little control, for example, over the Ministry of Foreign Affairs, the police and state-security apparatus, or departments handling culture, ideology and propaganda.

More significantly, major matters of state are decided by the seven-member PBSC, where General Secretary and State President Xi is the undisputed first among equals. The relationship between Xi – who heads the so-called Gang of Princelings (a reference to the kin of party elders) in party politics – and Li is said to be cordial. However, the PBSC is dominated by princelings as well as protégés of ex-president Jiang Zemin, who is one of Xi’s principal patrons.

Equally crucial is the fact that the premier has limited personnel powers. Senior administrators up to the level of heads of ministries and departments are selected by the CCP’s Organization Department, which is currently under the control of PBSC member and Head of the Central Committee Secretariat Liu Yunshan, a noted conservative.

Moreover, out of the 25 heads of ministries confirmed by the NPC, only nine are new faces. Several ministers are protégés of retired senior leaders. For example, Zhou Xiaochuan, Governor of the People’s Bank of China, which is the country’s central bank, is staying on for at least a couple of years despite his having reached the mandatory retirement age of 65. Zhou is a protégé of ex-president Jiang Zemin. Both Zhou and the new Minister of Finance Lou Jiwei also enjoyed the patronage of ex-premier Zhu Rongji.

The consolation for Li is that quite a number of CYL Faction stalwarts have made it into the cabinet. They include Vice-Premiers Liu Yandong and Wang Yang, as well as State Council Secretary-General Yang Jing. Other CYL Faction affiliates include Minister of Supervison Huang Shuxian, Justice Minister Wu Aiying, Minister of Civil Affairs Li Liguo, Minister of Land and Resources Jiang Daming, Minister of Transport Yang Chuantang, and Culture Minister Cai Wu.

Immediately after the 18th Party Congress, Li made an impassioned plea to his colleagues to “breach mighty fortresses” in order to push forward reform. “We can only go forward as there is no way back,” he said. “The next steps of reform will involve not only liberation of thought and updating concepts but also breaking up bastions of vested interests,” Li added.

So far, however, Li has met with limited success in his effort to tame the holders of vested interests. Take, for example, long-mooted plans to streamline the bloated State-Council bureaucracy, which were first conceived by ex-Premier Wen Jiabao and then-vice premier Li at the beginning of Wen’s second five-year tenure in March 2008.

Despite reports in the Chinese media earlier this year that the central government’s 27 commissions and ministries will be cut to below 20 at the NPC, only two such units have been slashed. Moreover, the State Council will continue to have 16 ministerial-level “general administrations” and bureaus.

Perhaps the most eye-catching change is that the much-maligned Ministry of Railways, which has been dubbed a “state within a state” that has run up debts of 2.66 trillion yuan – will be folded into the Ministry of Transport. The merger of the two ministries, which was first proposed in 2003, did not take place due to the vehement opposition of then Minister of Railways Liu Zhijun. Liu is now facing a possible suspended death sentence due to allegations of massive corruption.

Other moves include the amalgamation of the Ministry of Health and the National Commission on Family Planning to form the National Health and Family Planning Commission. The General Administration of Food and Drugs has been established after the merger of existing units dealing with food and drug safety as well as the quality supervision and inspection of commercial products. The General Administration on Press and Publications and the State Administration of Radio, Film and Television have been combined to form a new General Administration of Press and Publication, Radio, Film and Television.

However, earlier suggestions about setting up “super-ministries” to handle monetary policy, energy as well as environmental issues have not materialized. This is despite the fact that the record high level of air pollution in Beijing and nearby cities since January has demonstrated the central government’s failure to police polluting-generating companies, including oil and coal enterprises.

Equally significant is the Xi administration’s apparent failure to reform the 120-odd yangqi, or centrally-held state owned enterprise (SOE) groupings, many of which have ministerial status. Having monopolized lucrative sectors ranging from oil and gas to finance and telecommunications, the yangqi are seen as arrogant and non-transparent behemoths that militate against free-market precepts.

Even the official media has complained that conglomerates such as the three oil majors – CNPC, Sinopec and CNOOC – have made so much money that “they should to return wealth to the people”. In the latest round of structural reform, the National Energy Administration – which will continue to be subsumed under the National Development and Reform Commission – has been given extra regulatory authority over the electricity sector. However, there are no indications that the NEA can effectively rein in the excesses of the three oil-and-gas monopolies

In his Government Work Report to the NPC, former premier Wen pledged to “deepen the reform of state-owned enterprises.” He reiterated his pledge that private-owned enterprises should operate on the same level playing field as giant SOE groupings. “We must unswervingly provide encouragement, support and guidance to the development of non-state-sector [enterprises],” he pointed out.

The goal, he said, was that firms of different ownership systems would be in a position to “make use of production factors fairly and that they can participate in market-oriented competition on a fair basis.” However, while an estimated 90 NPC members are non-state-sector businesspeople with assets of more than 1.8 billion yuan, it is unlikely that the government’s treatment of private firms will improve significantly in the near future.

In the international press conference that Li after the closure of the NPC, the new premier vowed to drastically change the role of the government. Saying that his team would replace state fiats with “the hand of the marketplace,” Li admitted that this transformation would be “very painful because this is [a kind of] self-revolution.” “There is great space for further unleashing productivity through reform,” he said. “Talking the talk is not as good as walking the walk. We need to pursue market-oriented reforms.” As the NPC delegates left Beijing and returned to their usual jobs in the provinces, however, a big question mark still hung on whether the untested premier could accomplish even a fraction of what he had promised the people.

Willy Lam is an Adjunct Professor in the History Department and the Centre for China Studies, Chinese University of Hong Kong, and a Senior Fellow at the Jamestown Foundation, Washington DC. 

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