China Convenes the 12th National People’s Congress

On March 5, China opened the first meeting of the 12th National People’s Congress (NPC). Two days earlier, the 12th Chinese People’s Political Consultative Conference (CPPCC) also held its inaugural gathering. The convening of these bodies, the so-called “two sessions,” or lianghui (literally “two meetings”), represents the final act of the once-in-a-decade leadership transition process kicked off by the 18th Party Congress of the Chinese Communist Party (CCP) last November. The NPC will officially elevate new party chief Xi Jinping to the last of his key formal titles, the state presidency, and also will elect the CCP’s new second-in-command, Li Keqiang, to the premiership. The NPC also will appoint new leaders to all of the top positions in the State Council, China’s cabinet. Although not as attention-grabbing  as the roll-out of the senior government appointments, the NPC features an important keynote address by departing Premier Wen Jiabao, as well as the release of important government spending projections for 2013, such as the defense budget and planned outlays for social benefits and other critical programs that signal the CCP’s policy priorities.

Q1: What are the NPC and CPPCC and how do they work?

A1: Some 3,000 delegates will attend the first session of the new NPC, China’s legislature. Although technically designated in the state constitution as the highest organ of state power, the NPC has acquired the reputation of a rubberstamp body because it takes its cues directly from the CCP. Underscoring the NPC’s subordination to the Party, the CCP held a plenary session—the second of the current Central Committee—a week before the opening of the NPC that, according to the plenum communique, “adopted a list of candidates for state leadership positions and a government restructuring plan” that would be “recommended” to the NPC session for adoption.

Still, the NPC has emerged as a forum for debate of key CCP policies and has achieved some modicum of transparency in its operations. Voting approval percentages for senior government appointments generally are publicized, for example, in sharp contrast to the opaque process of Central Committee balloting for seats on the CCP Politburo. For its part, the CPPCC serves as a largely ceremonial advisory body for representing the views of the regime’s officially-recognized non-Communist parties. In this capacity, it also supervises “United Front” work related to the CCP’s management of religious and ethnic minority affairs.

At the opening of the NPC session, Wen Jiabao, as the sitting premier, delivered a keynote address known as the government work report. The same day, the Ministry of Finance (MOF) announced a projected defense budget for 2013 of 720 billion yuan, or roughly $115 billion, a 10.7 percent increase over last year. The MOF also announced a whopping 27.1 percent increase for medical and health care spending, underscoring that China, at least for now,  is not facing “guns vs. butter” pressures. At the close of the NPC session, the government will announce the ministerial and other senior government appointments and unveil whatever governmental restructuring plans have been adopted. Li Keqiang also will make his public debut as premier in the traditional press conference at the end of the session.

Q2: What were the key takeaways from Wen Jiabao’s government work report?

A2: Not surprisingly, the government work report highlighted many of the same themes stressed in the political work report delivered by President Hu Jintao at the Party Congress in the fall. Wen emphasized that China’s plans for expanding urbanization—which the CCP has clearly identified as the key to unlocking the next wave of substantial economic growth—would be handled prudently and that the scale of China’s megacities would be kept in check. He also called for accelerating the reform of the household registration system and the delivery of “basic public services in urban areas to migrant workers” as part of the urbanization drive. In keeping with the emphasis on balanced and equitable growth in Hu’s political work report, Wen noted that the government will work to ensure that real per capita income for urban and rural residents increases in step with overall economic growth.

In terms of key economic targets, the report set a moderate GDP growth rate forecast of 7.5 percent, the same as that for 2012. Several of the other important targets and pronouncements highlight the regime’s continuing preoccupation with ensuring social stability amid rising popular expectations and a still uncertain global economic environment. Wen pledged to keep the officially registered urban unemployment rate at or below 4.6 percent and lowered the official consumer price inflation target to 3.5 percent from last year’s 4 percent. The report also addressed the public outcry over environmental pollution, with Wen arguing the government “should give the people hope through our concrete action.” He announced that China will start monitoring fine particulate matter (PM2.5) in the urban megacities as well as all provincial capital cities, and  will extend the monitoring to all cities at and above the prefectural level by 2015.

Q3: What are the likely key personnel appointments to emerge from the NPC?

A3: In addition to conferring the two top state positions on Xi Jinping and Li Keqiang, the NPC also will announce the new lineup of State Council vice premiers, state councilors, and ministers. Of strong interest will be which posts will be handed to the few remaining Politburo members currently serving without a concurrent party or state portfolio. All eyes will be particularly focused on the new jobs for former Guangdong provincial party boss Wang Yang and former CCP personnel czar Li Yuanchao, who were  widely viewed as the  principal losers in the horserace for elevation to the apex of party power, the Politburo Standing Committee (PBSC), at the Party Congress. Wang is tipped to win a vice premiership, probably overseeing the industry, transport, and energy portfolios, but Li’s prospects are less clear, with earlier talk of appointing him vice president becoming more muted.

In terms of ministerial appointments, whether current central bank governor Zhou Xiaochuan is retained in office, as is increasingly rumored in the foreign and Hong Kong press, is a key appointment to watch. Zhou was dropped from the Central Committee at the Party Congress and has already reached the official retirement age of 65 for government ministers, meaning his retention would mark a highly unusual break from the regime’s very strict enforcement of job criteria and age requirements in recent years. Some media accounts have speculated that Zhou will stay on due to his reputation for promoting financial reform. Given the dearth of any such reforms of major significance in recent years, however, it would seem more likely that there are lingering questions about the qualifications of Zhou’s most likely successors, or that, as in the case of serving securities regulator Guo Shuqing, they already are managing very sensitive tasks in their current responsibilities.

In another  significant twist, it now looks virtually certain that current Foreign Minister Yang Jiechi will succeed Dai Bingguo as the state councilor overseeing China’s foreign affairs apparatus. Yang seemed destined to retire a year ago, but he appears to have received strong support from influential party figures, such as former Chinese President Jiang Zemin, for promotion. Yang probably will be succeeded as Foreign Minister by Wang Yi. Wang has won plaudits for his successful management of Taiwan affairs at the State Council Taiwan Affairs Office and is viewed as a pragmatic and very capable official. Some breathless media accounts have suggested that Wang—who speaks Japanese and previously served as China’s point man for the Six-Party Talks—has been tipped to fix Beijing’s troubled relations with Tokyo and to oversee a shift in China’s policy toward North Korea. But such speculation ignores the fundamental weakness of the foreign affairs bureaucracy in shaping policy in recent years and the fact that such decisions would be made exclusively by the PBSC, which, at least so far, has not signaled an  impending policy change in either of these areas.

Q4: What about the government restructuring plan? Will it be meaningful?

A4: The leadership in recent weeks has embarked upon a full-court press in the official media designed to lower expectations regarding the pending government reorganization. The CCP has stressed that the restructuring will seek to “transform government functions and balance the relationship between government and the market.” Some substantial restructuring will take place. The Ministry of Railways, long a powerful fiefdom that resisted absorption, will be broken up, with its administrative and operations functions being transferred to an expanded Ministry of Transport and its lucrative freight business and passenger transport coming under state-owned firms managed by the state-owned Assets Supervision and Administration Commission. In a nod to public concerns, the various government organs overseeing food and product safety also probably will be amalgamated into a single entity.

Nevertheless, bolder proposals, such as the creation of an overarching body to direct and implement broad and comprehensive economic reforms, or various other “super-ministries,” seem to have stalled. In particular, rumored plans for substantial changes to the National Development and Reform Commission, the behemoth of the state planning machinery within the Chinese bureaucracy, apparently have foundered, suggesting that the regime’s entrenched interests have blocked serious restructuring for the time being. Although not completely tying the leadership’s hands in terms of advancing reform, the shape of the government machinery certainly sets the framework for whatever reform proposals the CCP may seek to unveil at its next Central Committee plenum in the fall.

Christopher K. Johnson is a senior adviser and holds the Freeman Chair in China Studies at the Center for Strategic and International Studies in Washington, D.C.

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