published Oct 17, 2017 8:25:26 PM, by Ting Shi
(Bloomberg) —
Chinese President Xi Jinping warned of “severe” challenges Wednesday, as he kicked off a twice-a-decade party meeting that may signal if he will appoint a successor to rule after 2022.

Xi started the week-long event this morning with what’s known as the work report, seen as the ruling Communist Party’s most significant policy document. It covers achievements since 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,” 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 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’s seeking to boost China’s global clout with infrastructure spending while seeking to avoid a conflict with U.S. 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.

Yao Wei, chief China economist at Societe Generale SA, said before the speech Wednesday that 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,” Yao told Bloomberg Television in Hong Kong. “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 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.

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’ll be looking to secure a majority of allies on the new Standing Committee, which may potentially include possible successors who could rule until 2032.

‘Extraordinary Period’

The speech on Wednesday included sections on politics, the economy, national defense, foreign policy and Hong Kong and Taiwan.

Last week, Xi 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’s likely to reaffirm the goal of attaining “moderately prosperous society” by 2020.

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

‘Becoming Strong’

Another document that helped lay the groundwork for his 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 Deng and is now “becoming strong” under Xi.

Xi was 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. 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 summarize other major domestic and international programs 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 Gu Su, professor of Philosophy and Law at Nanjing University. “The country has gradually jettisoned the ‘lay-low’ stance it’s been practicing 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.”

–With assistance from Keith Zhai, Peter Martin, Jeff Kearns and David Tweed.To contact the reporter on this story: Ting Shi in Hong Kong at tshi31@bloomberg.net To contact the editors responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net Brendan Scott