Li Qiang becomes China’s prime minister and sets about restoring the economy

BEIJING, March 11 (Reuters) – Shanghai’s former Communist Party chief Li Qiang took office on Saturday as the country’s No.2, tasked with reviving the battered economy as a close ally of President Xi Jinping. Three years of Covid-19 restrictions.

Widely regarded as pragmatic and business-friendly, the 63-year-old Li faces a daunting task of lifting China’s uneven recovery in the face of global interventions and faltering confidence among consumers and the private sector.

Li’s appointment comes as tensions with the West rise over a range of issues, including U.S. moves to block China’s access to key technologies and many global companies diversifying supply chains to hedge their China exposure due to political risks and disruptions from the Covid era.

The career bureaucrat replaces Li Keqiang, who is retiring after two five-year terms, when his role has gradually diminished as Xi tightens his grip on power and steers the world’s second-largest economy in a more statist direction.

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Li Qiang is the first premier since the founding of the People’s Republic who has never served in the central government, meaning he could face a steep learning curve in his early months on the job, analysts said.

However, close ties with Xi between 2004 and 2007 – when Li was Xi’s chief of staff, when he was the provincial party secretary of Zhejiang province – would give him the power to get things done, leadership watchers said.

“My reading of the environment is that Li Qiang will have more opportunities and power in the organization,” said Trey McArver, co-founder of Trivium China Consulting.

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A slate of believers

Xi, 69, is installing loyalists in key posts in the biggest government overhaul in a decade, as a generation of reform-minded officials retires and further consolidates power after he was unanimously elected president for a third term on Friday.

On Saturday, Li received 2,936 votes, three against and eight abstentions, according to a tally projected on a screen inside the Great Hall of the People in central Beijing.

He will be in the spotlight on the international stage during the prime minister’s traditional media question-and-answer session after the end of the parliamentary session on Monday.

Li was put on track to become prime minister in October when he was appointed to the number-two role in the Politburo Standing Committee during the Communist Party Congress twice in a decade.

Several Xi-approved officials, including deputy prime ministers, the central bank governor and other ministers and department heads, are set to be confirmed on Sunday.

Random recovery

China’s economy grew just 3% last year, and on the opening day of parliament Beijing set a 2023 growth target of around 5%, its lowest target in nearly three decades.

A key task for Li this year will be to beat that target without triggering severe inflation or piling up debt, said Christopher Bedore, deputy China research director at Kavegal Draconomics.

Although China has not signaled plans to unleash the stimulus to kick-start growth, Fedor said potential setbacks, such as a decline in exports or continued weakness in the property sector, could force Li’s hand.

“The leadership has already accepted two years of exceptionally weak economic growth in the name of COVID containment. Now that containment is gone, they will not accept another one,” he said.

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China’s post-pandemic recovery has been uneven, with February inflation unexpectedly soft, while Chinese e-commerce giant Inc warned on Thursday that it will take time to rebuild consumer confidence.

Some of Beijing’s most successful private companies, such as Alibaba ( 9988.HK ), have been hit by sudden crackdowns and regulatory bans in recent years, and Li will have to work hard to restore confidence in the private sector.

Global business is also wary. For the first time in its 25 years, the American Chamber of Commerce in China said earlier this month that the majority of responding companies no longer see China as a “top three investment priority.”

China is trying to present a business-friendly face.

On Friday, Xinhua news agency reported that an official from China’s State Planning Agency met with the vice president of US chip company Qualcomm Inc. and said it would provide a good business environment for multinational companies.

Reporting by Larry Chen and Tony Munro; Editing: William Mallard & Sri Navaratnam

Our Standards: Thomson Reuters Trust Principles.

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