The 19th Party Congress

On October 18th, the Communist Party of China (CPC) will meet for the 19th Party Congress. China’s leadership for the next five years will be determined at this meeting.

In this report, we will offer a background on China’s government, focusing on the difference between de jure (what is the official structure of China’s governance) and de facto (how it really works). From this discussion, we will examine the likely developments from this meeting and what they will mean for China and the world over the next five years. As always, we will conclude with potential market ramifications.

China’s Government (Official Version)

China’s government has a parallel structure. The CPC operates alongside the government of China. Since the CPC is the only political body in China, the governance of China is dominated by the CPC, but there are elements of power that are separate from the party. For example, Xi Jinping is both the President of China (head of government) and General Secretary of the Central Committee (head of the CPC). He is also the Commander in Chief of the People’s Liberation Army. There exists a National Party Congress (as noted below, the most powerful body in China, at least in theory) and a National People’s Congress, which is the primary legislative arm of the government. The President has a strict legal limit of two five-year terms, while the General Secretary’s term limit is based on tradition. In theory, a General Secretary could remain in that role after relinquishing the presidency. This extended control of the CPC hasn’t happened since Mao Zedong,[1] who remained in control of the party from 1943 until his death in 1976. Deng Xiaoping brought order to the transition of power, and since then General Secretaries have held office for 10 years, consisting of two five-year terms.

China’s most powerful body is the National Party Congress. It meets every five years; in 2012, it had 2,268 members.[2] Its primary job is to elect the Central Committee. The Central Committee, which had 376 members in 2012, elects the General Secretary, the Politburo and the Standing Committee of the Politburo. The Politburo consists of 25 members and is the executive body of the CPC. The Standing Committee of the Politburo has seven members, all of which are also members of the Politburo. The Central Committee meets annually, while the Politburo meets monthly and the Standing Committee of the Politburo meets weekly.

Thus, in theory, the most powerful body in China is the National Party Congress. The second most powerful is the Central Committee, followed by the Politburo and the Standing Committee of the Politburo.

China’s Government (Actual Version)

The Standing Committee of the Politburo is the most powerful body in China. The Standing Committee and the Politburo select the members of the National Party Congress. The Central Committee essentially ratifies the selections made by the Standing Committee of the Politburo. The National Party Congress and the Central Committee provide two roles for the CPC. First, they give the veneer of democracy. Although the CPC doesn’t represent a large number of Chinese, maintaining the myth that a fairly large number of party members select the highest officers of the CPC does suggest modest local input. Second, these two bodies are something of a “minor league” for future leadership. Senior leaders within the CPC put their favorites into the National Party Congress and the Central Committee not only to enhance their own power base but to also raise the profile of their protégés for potential future elevation.

It should be noted that the official structure has mostly been in place since the early beginnings of the CPC in 1921. However, in practice, the CPC wasn’t part of government until the Communist Revolution in China successfully ousted the Nationalists in 1949. Mao controlled the CPC after the revolution until his demise in 1976. Although a governmental structure was in place, in reality it didn’t do much more than execute the whims of Mao. After his death, there was a period of uncertainty on how to actually govern China. Deng Xiaoping ousted the leadership that Mao had put in place at the time of his death and began to create the structures that remain in use today.

Deng’s primary goal was to avoid another cult of personality that Mao fostered. For this to work he had to create a structure that would allow for the peaceful transfer of power. A consistent transfer of power would require mechanisms that prevent a general secretary from holding onto power. In a single-party system, the selection process of new leaders occurs within the party. By consistently cycling new leaders into power, China can avoid the ossification that often occurs in single-party states.