Le Keqiang to Step Down (Not Required)

On paper, China is ruled by the communist party (the CPC). But the reality is that there are factions within the part which are where all the action is.

Xi has broken with tradition going back about 75 years. He is supposed to serve two 5 year terms and step down. He made it clear early on that he had no such intention, and accumulated power to make it so.

At the top, China is run by a bunch of ... managers. In this, China is like France: identify the young people who are both smart and well-connected, and then groom them for decades to lead the country. Political buffoons (so common in the U.S.) are rare in China. There's a top level of a few vice-premiers, then a central committee that adds a handful more, and then a Politburo that adds another dozen or so on the bottom.

So, just because Xi is not resigning like he's supposed, does not mean that the others who came up alongside him are not retiring when they're supposed to. They will be replaced by younger members of those groups. And they will all come Xi's offshoot branch of the Shanghai faction: rich, well-educated, children of generals who fought in the Chinese Civil War that ended in 1949. Xi prefers a subgroup of those, who started working together in Fujian province in the 1980's. These guys aren't really communists. They still use that name, but they're a lot closer to an old boys network at a country club. Some called them "princelings" before they rose to power in 2012.

Le Keqiang was the first to announce his retirement. He's been the (weak) # 2 in China for 10 years. He is well-known to macroeconomists for admitting publicly that China's GDP numbers are a fiction, and that they are simply not believed at the top levels of government. Le was not a member of the Fujian faction.

Liu He is retiring too. It seems like he will be replaced by He Lifeng. He is part of the Fujian faction.

Yes, this is kind of an odd thing to pay attention to as a macroeconomist. But ... do some of you wish you'd pay more attention to who was making the decisions in Russia the past few years?

***

Not to put too fine a point on this one too, but China used to have a mandatory retirement age of 65 (or the end of your current term) for the people in charge. Xi was pushed to the top 10 years ago from the # 6 position because he was young enough to serve 2 terms before retiring. But now he's hanging on to power (the plan is, for life), pushing out Li at the retirement age, but elevating He at the same age rather than someone younger. So again, this is another case of a system that has come to be dominated by old guys who like to tell other people what to do.