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Abu Dhabi, UAEMonday 10 December 2018

China's 'strongman' leader Xi puts on more muscle

President's 'New Era' is expected to see the emergence of a stronger, more assertive China capable of vying with the US

Delegates attending the closing of the 19th Communist Party Congress at the Great Hall of the People in Beijing.  Nicolas Asfouri/ AFP
Delegates attending the closing of the 19th Communist Party Congress at the Great Hall of the People in Beijing. Nicolas Asfouri/ AFP

China's leader Xi Jinping has often been referred to as a "strongman president" but he is emerging from the latest Chinese Communist party's National Congress with greatly enhanced powers that even a dictator might envy.

As the 19th Congress drew to a close today, how he uses those powers is of critical importance to the rest of the world.

What Mr Xi has called the "New Era" ushered in by his second term of office is expected to see the emergence of a stronger, more assertive China capable of vying with the US in terms of global economic and military power and of realising the "Chinese Dream" of past greatness, as Mr Xi calls it.

BEIJING, CHINA - OCTOBER 24:  Chinese President Xi Jinping vote at the closing of the 19th Communist Party Congress at the Great Hall of the People on October 24, 2017 in Beijing, China. The 19th CPC National Congress is going to run 7 days and a new central committee of CPC will be produced.  (Photo by Lintao Zhang/Getty Images)
Chinese president Xi Jinping. Lintao Zhang/Getty

Turning China into a "market economy" will rank lower in the 64-years-old leader's scale of priorities than was the case with past Chinese presidents, analysts say. State-owned firms could actually see their powers strengthened in line with greater central control. But none of this implies an inward-turning China.

Whether in projecting China's power overseas via the ambitious "One Belt-One Road" infrastructure scheme, creating new ways to finance energy imports from the Middle East and elsewhere, or giving the Chinese currency a wider international role, Mr Xi is likely to promote a "global China".

His administration is likely to be more authoritarian than those of immediate predecessors Hu Jintao and Zhang Xemin, with greater emphasis on Communist Party control over the apparatus of government, says Yuqing Xing, an economics professor at Tokyo's Graduate Research Institute of Policy Studies

Mr Xi "has coinsolidated his power," Prof Xing tells The National. He is already the president, general secretary of the Communist Party of China and chairman of the central military commission. In addition, "he is chairing many committees covering economic areas, national security and others".

Mr Xi "appears to have absolutely mighty power", says Prof Xing, a prominent academic who has worked with the Asian Development Bank and has been a visiting research fellow at universities in China, Singapore and Finland as well as at the United Nations University in Tokyo.

The adulatory language used by Community Party-controlled newspapers in China about Mr Xi is "something that has not been seen in decades" notes Prof Xing. And it marks a distinct break from the view of the former Chinese leader and economic reformist Deng Xiao Ping.

Deng also brought about a separation of party and state following the iron rule of the revolutionary Chinese leader Mao Tse Tung, Now this separation is likely to be reversed and Mr Xi is likely fuse the two and strengthen his control over the party, Prof Xing suggests.

Mr Xi's marathon three-and-a-half-hour speech to the Congress in Beijing suggested that " China will play a bigger role in the centre of the international stage,” says Prof Xing. β€œIt will build a powerful modern army so that they ca match American military power."

As he enters his second five-year term, Mr Xi faces potential challenges to his position from wealthy and powerful Chinese tycoons living overseas (rather like those that the Russian president Valdimir Putin has faced from his oligarchs) and he has strengthened state security to ward off such threats.

While some worry about an "over-concentration" of power in China, others argue that Mr Xi will be able to justify this by pointing to political disarray in the US and Europe caused by populist politics. China will regain its former reputation as a "role model" for developing countries, they say.

"China clearly is not vulnerable to the vicissitudes of competitive democratic politics with Xi Jinping's role as 'core' leaders [confirmed] at the 19th Party Congress," the chief equity strategist and managing director Christopher Wood at the brokerage CLSA in Hong Kong tells The National.

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What does all this mean for the Chinese economy, the world's second-biggest behind the US and ahead of Japan - and which has maintained one of the highest growth rates in the world under several successive presidents including Mr Xi Jinping?

"Economic growth in China "cooled slightly to 6.8 per cent in the third quarter of this year from the second quarter's 6.9 per cent," notes Andy Rothman, an investment strategist with Matthers Asia who worked in China for more than 20 years. China's growth has been so consistent as to become "boring" but "boring is good", he says

The "modest loss of momentum in the third quarter had been expected as the government reins in the heated property market and cracks down on riskier lending," he says. The Chinese economy is meanwhile characterised by "strong wage growth, low household debt, mild inflation and consumer optimism " all producing strong retails sales.

Mr Xi's stewardship of the Chinese economy during his first term of office is generally acclaimed, analysts say "Supply side reforms should make the economy much better balanced going forward," says Mr Wood.

"It is a massive positive that there is now accelerating evidence of the long-discussed 'rebalancing' in China's economy with consumption driving growth much more than than investment. Feared overheating in the Chinese property market, meanwhile, is being addressed.

Zhengzhou has banned people from buying third properties in some areas. It is one of six major Chinese cities to issue property reforms to curb speculation. Yawen Chen / Reuters
Zhengzhou has banned people from buying third properties in some areas.Yawen Chen / Reuters

Further progress toward a fully marketised economy in China is problematic, however, according to Prof Xing. "Last Congress [in 2013] Mr Xi made a speech that made people feel exited about market orientated reform and strengthening the rule of law. But now I think that may not be as we expected. There will be ideology control."

What of China's future trade and investment policy under Mr Xi? "This is a very interesting issue," says Prof Xing. "China started to promote overseas investment from the beginning of the 21st century but from 2015 China it faced serious capital outflows. Now the Chinese government has suddenly discouraged capital outflow."

This has created an apparent dilemma whereby if Mr Xi tried to promote overseas investment by Chinese companies more aggressively he would need to relax capital controls, and that could drain the country's foreign exchange reserves dramatically, as happened a year or so ago.

But he has moved to avoid this by declaring that Chinese official overseas aid will be denominated in yuan rather than dollars. Chinese companies will still need dollars to acquire firms in, say, the US or Japan but, by launching his One Belt One Road project, China's leader has created an incentive for firms to invest in countries where yuan are accepted, says Prof Xing.

This is a case where Mr Xi's "Global China" policies are paying off, he adds.