19th Party Congress

The Party and the People
This week, the Communist Party of China (“CPC”) will convene its 19th Party Congress. It is the assembly of Party representatives held every five years to choose its leaders.

In March next year, the representatives of the people of the various ethnic nationalities of China will gather for the 13th National People’s Congress (China’s highest parliamentary body or “NPC”) to approve a new government and its program, that the CPC will recommend for the next five years.

Managing China Inc.?
Think of China as a corporation, with 1.4 billion shareholders, that has granted an exclusive management contract to the CPC to run its business.

What is the CPC like? Think of McKinsey & Co., the premium global management consulting firm, and multiply that by 1000 times. Then tag on a dozen Goldman Sachs and Bell Labs, attach several Googles and Facebooks, add a constellation of top-notch think-tanks and a group of proprietary learning institutes that would surpass Harvard, MIT, Princeton and Caltech combined. Even all that would not come close to matching the resources of the CPC. It may help you begin to comprehend the organization that runs China Inc. (more in another paper, “The Powerhouse In Practice”).

The CPC has 89.5 million active members. Its addendum, the Communist Youth League, has another 90 million members aged between 14 and 28. The Party runs approximately 45,000 organizations, including central and local governmental units, enterprises, social and public functional organizations, and others. Every five years, general elections are held within each of them and pooled into 40 groups of representation (by geographical regions and functional constituencies), to form the 2,300-member Party Congress.

If the Party Congress can be likened to a General Meeting of Partners (Representatives) at a professional firm, the NPC would be like a General Meeting of Shareholders of its giant client corporation. These are held every five years to elect an approximately 200-member Central Committee (in the case of the Party) and a similar-sized Standing Committee (in the case of the NPC). The Central Committee of the CPC and the Standing Committee of the NPC are the highest bodies, in managing the country, and legislating its laws and government appointments, respectively. They would meet at least once a year, called Plenary Sessions, to approve major decisions recommended by the executive staffs of the Party and the NPC, as required by the nation’s Constitution.

At each Party Congress, the new Central Committee will also appoint a 25 to 30-member Politburo (similar to a Management Committee in a partnership firm) that is ultimately responsible for the running of the country. Within the Politburo, a Standing Committee comprising of 5 to 9 members will be selected to constitute its top leadership (tantamount to an Executive Committee of a partnership firm). The members of the Standing Committee of the Politburo will make the day-to-day decisions. On important matters, or at critical junctures (especially when there is a split in the deliberation of the Standing Committee), the full Politburo will be called into session to resolve the issues or approve major decisions, for example, the Five-Year Plan or the sacking of a senior official.

Party Governance
The CPC owns trillions of dollars of assets, and manages over a hundred trillions more on behalf of the nation. If we liken the CPC to a professional business management consulting firm, its past performance would have to be considered stellar. China Inc. grew from an annual GDP turnover of USD 1.2 trillion in 2000 to over USD 12 trillion this year, and the value of accumulated assets increased at an even higher multiple.

During that, it was inevitable that Party members and their families and social networks would come across economic and other opportunities that are hard to imagine in any country in any period in history. Corruption, misappropriation, graft, and myriad forms of irregularities and conflicts of interests ran rampant. Despite that, the country got the job done and society markedly progressed, and much was considered “normal”. In the process, it was hard to differentiate what is legal and illegal, legitimate and illegitimate, appropriate and inappropriate.

After Xi Jingping became leader five years ago, all that began to change. He launched the anti-corruption campaign known colloquially as “whacking tigers, swatting mosquitoes” meaning improprieties big and small will all be swept clean. Making a long story short, as of now, more than 1.45 million Party members have already been expelled, with many including their relatives and cohorts-in-graft presented to the judiciary system for criminal prosecution. Many are already in jail. We believe more will follow after the 19th Party Congress, as the disciplinary and supervisory arms of the Party will be strengthened, and standards and methods institutionalised. Xi calls that the “New Normal”.

That is the expected central focus of attention on the upcoming Party Congress.

Absorbing The Qi
Those close to Xi Jingping are fond of making reference to the process of “xi di qi 吸地气”, or “absorbing the essence from the ground”. It means sweeping up the facts, conducting detailed surveys and gathering intelligence meticulously, from the grass-root level to the top, so as to master the pulse of the people and identify the critical factors and/or inherent contradictions on major issues and concerns. That is the first step in Xi’s style and methodology in governing.

He is a fighter and, above all, a strategist. We describe his approach as “separating the object and letting it cool down, then gripping it in one hand with multiple fingers and move it; meanwhile, having the other hand ready to form a solid fist, to strike if necessary.”

That is politics. Without which, the man’s vision for reform and charting the future course of history will be academic. Xi is not about rhetorics. He is very well-read and commands a superlative intellect. He is succinct with words, expository with notions, and he makes complicated matters simple and crystalline. Above all, he is a man of practice, ready to show the Way (“Dao or Tao 道”), build the Road (“Lu 路”), and lead the nation in the right Direction (“Fang Xiang 方向”).

That is what you will hear from the 19th Party Congress.

-doublewood

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