China's 19th Party Congress

Xi Jinping warns of severe challenges for China as Party Congress opens

Former presidents Jiang Zemin and Hu Jintao sing the national anthem next to China's President Xi Jinping during the opening of the 19th National Congress of the Communist Party of China.

BEIJING (BLOOMBERG) - Chinese President Xi Jinping warned of severe challenges, as he kicked off a twice-a-decade party meeting on Wednesday (Oct 18) that may signal if he will appoint a successor to rule after 2022.

Mr Xi started the week-long event in the morning with what is known as the work report, seen as the ruling Communist Party's most significant policy document. It covers achievements since Mr Xi took power in 2012, and lays out his vision for everything from party building to the economy to the military.

"Right now, both China and the world are in the midst of profound and complex changes," Mr Xi said." China is still in an important period of strategic opportunity for development. The prospects are bright, but the challenges are severe."

At stake is whether Mr Xi will amass enough power to push through tough reforms as the world's second-largest economy faces structural challenges over the next five years. At the same time, he is seeking to boost China's global clout with infrastructure spending while seeking to avoid a conflict with US President Donald Trump over North Korea.

While economic growth has surprised on the upside in recent quarters, inefficient state-owned enterprises and ballooning corporate debt pose threats to stability. Last year, China saw its slowest full-year growth in about a quarter century, and S&P Global Ratings last month cut China's sovereign rating for the first time since 1999.

Chief China economist Yao Wei at Societe Generale said before the speech that Mr Xi was more concerned about maintaining social stability than long-term economic growth.

"If you look at what he's said the past five years and some of the reform he's been doing especially this year, it's quite clear to us he's not a strong believer in the free market," Ms Yao said. "He's more about the party leads everything. That's really the first, most important principle when it comes to economics."

Throughout the week, more than 2,000 delegates to 19th Party Congress will discuss and approve Mr Xi's report and revisions to the party charter. They will also appoint a new Central Committee, which will elect the party's Politburo and its Standing Committee - China's most powerful body - the day after the congress ends on Oct 24.

Mr Xi is set to emerge as one of the country's top three leaders along with Deng Xiaoping and Mao Zedong, who founded the People's Republic of China in 1949. He will be looking to secure a majority of allies on the new Standing Committee, which may potentially include possible successors who could rule until 2032.


Mr Xi's speech included sections on politics, the economy, national defence, foreign policy, and Hong Kong and Taiwan.

Last week, he briefed Communist Party leaders on a draft of the work report, which included input from more than 4,700 people. It described the past five years as "an extraordinary period" with ground-breaking changes that put China's development at a "a new historical starting point".

On the economy, past practice shows the report will likely endorse detailed policies laid out in previous documents, including the 13th Five-Year Plan that began last year. It is likely to reaffirm the goal of attaining "moderately prosperous society" by 2020.

One clue to gauge Mr Xi's power will be the wording used in the speech today to describe his political ideology. If the party constitution is revised to include Mr Xi's name along with his philosophy as a "guiding principle", it would be an accolade that only Mao received previously while in office.


Another document that helped lay the groundwork for Mr Xi's report was a speech made late July to a party congress workshop attended by more than 300 provincial and ministerial level officials. It said China has evolved from "standing up" under Mao, to "getting rich" under Mr Deng and is now "becoming strong" under Mr Xi.

Mr Xi is expected to recommit to the anti-corruption campaign, which has ensnared some 1 million officials since 2012 and sidelined many of his would-be rivals.

Mr Tuo Zhen, spokesman for the Party Congress, said at a briefing on Tuesday that the anti-corruption campaign "has achieved an unstoppable momentum" after five years.

He also had a chance to summarise other major domestic and international programmes he launched, from military reforms to the Belt and Road Initiative infrastructure initiative now involving about 70 countries.

"The past five years have seen a great change in China's position in the world," said Professor of Philosophy and Law Gu Su at Nanjing University. "The country has gradually jettisoned the lay-low stance it's been practising for three decades, and adopted a more proactive approach.

"It'd be interesting to see whether he'll officially set the tone for this new foreign policy approach."

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