Xi’s Promotion of Shanghai Chief Puts Loyalty Over Everything

Zibang Xiao
·4 min read
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(Bloomberg) -- Li Qiang’s rise to become China’s No. 2 official, months after overseeing Shanghai’s chaotic Covid lockdown, made clear the top criteria for Communist Party promotion: loyalty to Xi Jinping.

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The Shanghai party chief walked out on Sunday directly behind the Chinese leader, as Xi unveiled a seven-man Politburo Standing Committee filled with his allies. Li, 63, is now set to become premier in March, despite never having served as vice premier -- a prerequisite for the coveted post for decades.

In that position, Li will run China’s State Council, which coordinates all government ministries including the central bank. In reality, Xi has diluted the role in recent years to ensure major decisions fall under party committees led by himself or his aide Liu He.

Putting his former chief of staff into the job would further erode the lines between the party and government and underscore Xi’s dominance after a decade in power. That raises questions about the direction of China’s economy, as Xi’s call to rein in the private sector, maintain strict Covid Zero curbs and prioritize national security over pragmatism weigh on growth.

The Chinese leader’s influence over government policy is now “unprecedented” in the post-Mao era, after he installed allies into key posts, according to Neil Thomas, a senior analyst at Eurasia Group. Li’s lack of experience in the State Council could mean “the quality of economic policy could decline,” he said.

“The fact that that an official like Li Qiang, who oversaw what was a very brutal lockdown of Shanghai to control the epidemic, could still be elevated is a metaphor for the maniacal approach to the party’s objectives where almost any means justify the ends,” said Drew Thompson, visiting senior research fellow at the Lee Kuan Yew School of Public Policy at the National University of Singapore.

Li’s rise in party politics can be traced back to when he was Xi’s chief of staff in Zhejiang in the early 2000s. After Xi took power in 2012, Li became governor of the wealthy coastal province the following year.

The business community had good feedback about Li in that role, describing him as dependable and open minded, the Singapore-based Lianhe Zaobao newspaper said in a report last week. Back then, Li Qiang vowed to trim government interference in macro economic activity and allow private firms to enter more sectors.

Liu He, Xi’s economic czar, also gave Li a personal endorsement in 2015 for his efforts to develop “special towns,” or small cities with a business-friendly climate and a beautiful environment. While that model mushroomed across the country, many have become unfinished ghost towns, leading to approval for such programs to tighten last year.

Despite that, Li’s rise to the top echelons of Chinese politics seemed guaranteed at the last congress when Xi promoted him to Shanghai party chief: all party secretaries of the financial hub bar one have advanced to the Standing Committee since 1987, including former Premier Zhu Rongji and Xi.

When Li’s initial lighter-touch approach to China’s strict Covid Zero strategy was breached by the more transmissible omicron variant earlier this year, that ascent was cast into doubt. As cases surged, Li sealed off the financial hub for two months to eradicate the virus, leading to rare social unrest and causing the city’s economy to shrink by almost 14% in the second quarter.

In Shanghai, many believe the central government rather than Li drove that decision for the long shutdown, said Niu Chunbao, a fund manager at Shanghai Wanji Asset Management Co. “Citizens mostly think Li is a person that attaches importance to growth and markets and makes decisions based on science -- while at the same time being loyal to Xi,” he added.

That loyalty was, in the end, what counted as Xi broke with decades of retirement norms to clear out four spaces on the Standing Committee to usher in his top loyalists, making it clear his main priority was securing his own power.

“It’s really not surprising, if you look at how Li Qiang rose up in the ranks -- he is one of Xi Jinping’s most trusted aides,” said Alfred Wu, associate professor at the National University of Singapore. “One point everyone is now clear about is Xi doesn’t just want a third term, he wants fourth and fifth terms.”

--With assistance from Rebecca Choong Wilkins, Fran Wang and Sarah Zheng.

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