Heir unapparent: China President Xi Jinping is facing a succession planning crisis

As I’ve noted before, neither of these august assemblies has much actual power. They are the backdrop for an elaborately scripted exercise in political theater in which delegates extoll past achievements of the nation’s real political leaders—and applaud their grand plans for China’s future.

Even so, the Two Sessions are worth watching. They signal broad shifts in Beijing’s policy priorities, and sometimes offer clues to the inner workings of the ruling Communist Party. This year’s meetings are said to be particularly momentous because they mark the start of the government’s 14th five-year plan and take place during the party’s centenary year.

The outlines of a draft five-year plan published in October suggest the over-arching imperative of China’s next planning cycle is to establish technological self-sufficiency, particularly in strategically significant areas like artificial intelligence and high-speed microprocessors. In response to Trump administration decisions to impose tariffs on U.S. Imports from China and ban the sale of critical U.S. Technologies to China, Chinese President Xi Jinping has vowed to lessen China’s dependence on trade (especially with the U.S.) While focusing on developing the domestic economy—an approach he dubs a “dual circulation” strategy.

When the NPC opens Friday, Premier Li Keqiang is expected to refrain from setting an explicit annual GDP growth target for a second consecutive year. China was the only major economy to post positive growth last year, and many economists expect its GDP to expand by at least 8% this year. Reuters reports that the goal of the five-year plan will be “to achieve economic growth averaging around 5%.”

China’s leadership also is expected to unveil its “2035 vision,” a blueprint for achieving Xi’s ambition of doubling the size of China’s per capita GDP over the next 15 years.

The big news out of last year’s Two Sessions was the new national security law Beijing foisted on Hong Kong without consulting the territory’s legislature. At this year’s NPC, many expect Beijing to tighten its grip even further by introducing new reforms limiting participation in Hong Kong’s legislative elections to candidates deemed sufficiently “patriotic” by mainland security officials.

In Shenzhen on Monday, Xia Baolong, director of the State Council’s Hong Kong and Macau Affairs Office, told pro-Beijing leaders from Hong Kong that the central government must “ensure that Hong Kong’s organs of political power are firmly in the hands of real patriots.” China’s state-owned Xinhua news agency reported that attendees unanimously agreed with Xia that “the city’s electoral system should be improved as soon as possible.”

But perhaps the most significant aspect of the Two Sessions agenda is what’s not on it: any discussion of a possible successor to Xi.

In late 2010, the party identified the successor to then-President Hu Jintao by elevating Xi to the post of vice-chairman of the Communist Party’s Central Military Commission. That gave Xi two years to prepare for his leadership role. Had the party followed precedent, a replacement for Xi would have been similarly elevated late last year and be preparing to step up as both president and head of the party before the 20th party congress in 2022.

But Xi has no heir apparent, and there is no sign he faces any internal challenge. The constitution was revised in 2018 to abolish the limit of two five-year terms for the post of state president. And there are no formal term limits on the party head.

And therein lies a potential risk for China, according to Richard McGregor, senior fellow at Australia’s Lowy Institute. “He still has not managed the succession issue,” McGregor warned in an Eastworld Spotlight conversation last week. “That won’t go away. And if he doesn’t manage it in some way, by promoting a number of people who might take over in five or ten years, if he doesn’t start to bring people through the system, that’s going to be a big problem for China. We will have, one day or another, a succession crisis. We don’t know when, but that’s dangerous.”

The COVID-19 pandemic has turbo-charged the digital transformation of the global health care industry and created a bewildering array of new telemedicine ventures to serve the billions of people clamoring for online health care services. But will the new technologies bring better quality care for patients? Join Grady and me Thursday, Mar. 4 at 9 p.m. Beijing time for “The Doctor is Online,” a virtual conversation to ponder “Digital Health in the Post-COVID Era” with co-CEO of Ping An Group Jessica Tan and Executive Vice Chairperson of Apollo Hospitals Enterprise Limited Shobana Kamineni. You can register for the call and find out more here.

More Eastworld news below.

Clay Chandler
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This edition of Eastworld was curated and produced by Eamon Barrett. Reach him at [email protected]

Eastworld news

K-pop

South Korea experienced its first population decline on record last year, as the country’s 305,100 deaths outpaced its 272,400 births. The number of new births in South Korea dropped 10% to a new low last year, while the national fertility rate—a measure of how many children the average woman will bear in her lifetime—also sank to its lowest ever, at 0.84. South Korea’s birth rate has been in decline since the 1970s, and the country looks to be edging towards an era of population decline. Nikkei

Made in China

China had a plan to become a leader in advanced tech manufacturing by 2025. The U.S. Has a plan to prevent it. On Monday, a U.S. National security commission recommended Congress tighten “chokepoints” on global semiconductor supplies to prevent China from surpassing the U.S. In chip design capability. China’s dreams of becoming a chip powerhouse are already floundering. Last week, Wuhan Hongxin, a $20 billion state-backed semiconductor start-up, threw in the towel and laid off all its 240-person staff. But this week Beijing will announce its blueprint for the next five years of economic growth. Reducing China's dependence on vital tech from the U.S. Will likely be a pillar of the plan. Bloomberg

Make in India

Last week, New Delhi announced $1 billion in incentives for computer manufacturers to increase production in India, as manufacturers diversify out of China. Wage inflation has been pushing manufacturers out of China for years while recent trade tensions with the U.S. Have provided another incentive to move shop. India’s government said it would reward computer makers with cash equal to at most 4% of the value of sales, as part of the latest reward scheme. Wall Street Journal

If I did it

Lawyers for Huawei CFO Meng Wanzhou—who has been fighting extradition from Canada to the U.S. Since her 2018 arrest in Vancouver—told a British Columbia court that Meng didn’t defraud HSBC into conducting business with Iran by neglecting to mention Huawei’s secret relationship with another entity, because the relationship was already widely known at the bank. The drawn-out extradition hearing entered its final leg Monday, with seven weeks of hearings scheduled ahead. CBC

Free and fair

Hong Kong authorities charged 47 pro-democracy figures with “conspiracy to commit subversion” on Sunday—a crime introduced by Beijing’s National Security Law (NSL) for Hong Kong last year. Under the law, crimes of subversion carry a maximum life jail sentence. The 47 charged had helped organize an informal primary election last year, which the ruling government warned could be a violation of the NSL. A local court is deliberating whether the 47 will be granted bail before a trial begins in three months. New York Times

Burmese bloodshed

Police forces killed at least 18 protesters in Myanmar on Sunday, as demonstrations against the military coup that took place on Feb. 1 continue. On Tuesday, ruling members of the military met with foreign ministers of other ASEAN countries, including Singapore, Indonesia, Thailand and Malaysia. ASEAN representatives say they’re urging the military to find a solution with the deposed government. Channel News Asia

Markets and movers

Grab - Singapore ride-hailing giant Grab is establishing drive-thru vaccination centers across Indonesia to help the island nation's immunization push. The first Grab center opened in Bali on Sunday and targets to deliver 5,000 jabs a week. Bloomberg

BOJ - Tokyo-listed shares in the Bank of Japan surged by the maximum 18% daily limit on Monday and remained high Tuesday. The unexpected surge suggests BOJ has become the latest “meme stock.” Coins2Day

Covaxin - PM Modi receive a vaccine developed by India's Bharat Biotech on Monday, even though the manufacturer has yet to release any figures on the efficacy of its vaccine. Coins2Day

Hang Seng - Hong Kong’s Hang Seng Index will increase the basket of companies in its benchmark index to 80 from 52, in the biggest overhaul of the index since it launched 50 years ago. The changes, due by May, are designed to reflect the boom in recent tech listings. Financial Times

CNOOC – On Friday, the NYSE announced it would suspend trading of China petroleum giant CNOOC on March 9, complying with an executive order President Donald Trump signed last November. New York-listed shares in CNOOC are down 4% as of Tuesday morning. CNN

Japan – Japan’s Financial Services Agency is revising its rules for listed companies, pushing them to allocate at least a third of board seats to independent directors. Financial Times

Final figure

136%

Macau’s gaming revenues recorded their first annual gain in 17 months in February, rising 136% over the same month last year. But that was an easy win, since Macau forced its casinos to close for two weeks in February 2020 as the pandemic started spreading through the casino city. The 136% gain—revenues reached $915 million—was still lower than the 145% a Bloomberg analyst poll had anticipated. Macau has eased its pandemic restrictions and begun vaccinating its 650,000 residents, but tourism levels remain a long way from recovery. Bloomberg