China names conservative leaders, snubbing reformers in power swap

China’s ruling politburo appeared to take a notably conservative swing when its seven-strong line-up was revealed in Beijing today, with noted reformers passed over for members of the old-guard.

The ruling committee of the Communist Party of China, which has been slimmed down from nine to seven members to ease decision making, was divided between three broadly conservative members, three relatively neutral technocrats and one ally of outgoing premier Hu Jintao.

While some advocates of political reform took solace in the presence of several economists and political scientists, the line-up is most notable for its avoidance of any liberal or dissenting voices.

Top chair at the table went to Xi Jinping (pictured above), one of the Communist Party’s ‘princelings’ – a second generation member of the leading body – who some Beijing-watchers credited as the moving force and patron of many of new conservative members of the committee.

The consensus-led and opaque Chinese approach to policy making meant many were reserving judgement on the handover, however.

‘We are unlikely to have a clear answer to the question of whether the new leadership wants or has the authority to push through significant change for several months,’ said Capital Economic’s Mark Williams.

‘We are not certain that personalities will matter that much,’ added Societe Generale China analyst Wei Yao.

‘The opening speech at the Party Congress from outgoing President Hu Jintao indicated that the Party has decided on the path it plans to take.

‘Phrases regarding party ideology and doctrines are largely unchanged , but, on the margin, we do see signs of a better understanding of the pressing challenges at hand and we believe more attention is likely to be paid to sustainability and reforms.’

For investors, the party congress moved its stated aim to ‘broaden and deepen economic reforms’ from sixth item on the agenda previously to first item this year.

A previous commitment to ‘the state sector being the mainstay of the economy’ has become a commitment to ‘balance the relationship between the state and the market and to let the market mechanism play its role’.

For the first time the congress also referred to a household income target, the first explicit reference from the party platform to income distribution being prioritised alongside growth.

While that is likely to lead to further wage inflation at the bottom of the income scale, it is good news from the perspective of social stability.