The National People’s Congress (NPC) formally elected Xi Jinping as President of the People’s Republic of China (PRC) and Chairman of the State Central Military Commission (CMC) on March 14. Xi obtained 2,952 votes with three abstentions and one vote cast against him.  Li Yuanchao was elected Vice President on the same day and Li Keqiang was appointed Premier on March 15, with 2,940 affirmative votes, three objections and six abstentions. The new government was voted in on March 16, concluding the once-in-a-decade transfer of power. Xi Jinping became Secretary General of the Chinese Communist Party at the 18th Party Congress in November last year. “In recent memory there is no comparable figure who has such power in his hand [so quickly],” commented Willy Lam of the Chinese University of Hong Kong. In his first speech as head of state, President Xi Jinping called for “arduous efforts for the continued realization of the great renaissance of the Chinese nation and the Chinese dream”. He also urged delegates to “oppose hedonism, and flamboyant lifestyles, and firmly fight against negative and corrupt phenomena”. Zhang Dejiang, the third-ranked Member of the Standing Committee of the Politburo, received 2,952 of the 2,961 valid ballots cast to succeed Wu Bangguo as Chairman of the National People’s Congress (NPC). A total of 173 NPC deputies contested the 161 NPC Standing Committee seats. Zhou Qiang was elected President of the Supreme People’s Court  with 2,908 votes of the 2,957 effective ballots cast and Cao Jianming was re-elected Procurator General of the Supreme People’s Procuratorate. Cao, 57, received 2,933 of the 2,956 votes cast. NPC deputies gave the lowest endorsement in the past six years to government, budget and court reports on March 17, the closing day of the annual session. A total of 2,071 negative votes were recorded for the six reports, a rise of almost 30% over 1,612 disapprovals recorded last year and 1,611 in 2008. All reports bar the one for the procuratorate received the strongest opposition in at least six years.

Source: website of the South China Morning Post

The new lineup of China’s State Council, nominated by Premier Li Keqiang, was endorsed by lawmakers at the NPC session on March 16. Zhang Gaoli, Liu Yandong, Wang Yang and Ma Kai were endorsed as Vice Premiers, with Yang Jing, Chang Wanquan, Yang Jiechi, Guo Shengkun and Wang Yong as State Councilors. Yang Jing was also appointed Secretary General of the State Council. Lawmakers also endorsed Li’s nominations of Ministers, Chairpersons of commissions, the Governor of the central bank and the Auditor General. The number of cabinet-level ministries was reduced by just two, from 27 to 25.

The following is the list of the newly appointed officials:

• Wang Yi, Minister of Foreign Affairs
• Chang Wanquan, Minister of National Defense
• Xu Shaoshi, Chairman of the National Development and Reform Commission
• Yuan Guiren, Minister of Education
• Wan Gang, Minister of Science and Technology
• Miao Wei, Minister of Industry and Information Technology
• Wang Zhengwei, Chairman of State Ethnic Affairs Commission
• Guo Shengkun, Minister of Public Security
• Geng Huichang, Minister of State Security
• Huang Shuxian, Minister of Supervision
• Li Liguo, Minister of Civil Affairs
• Wu Aiying, Minister of Justice
• Lou Jiwei, Minister of Finance
• Yin Weimin, Minister of Human Resources and Social Security
• Jiang Daming, Minister of Land and Resources
• Zhou Shengxian, Minister of Environmental Protection
• Jiang Weixin, Minister of Housing and Urban-rural Development
• Yang Chuantang, Minister of Transport
• Chen Lei, Minister of Water Resources
• Han Changfu, Minister of Agriculture
• Gao Hucheng, Minister of Commerce
• Cai Wu, Minister of Culture
• Li Bin, Chairperson of the National Health and Family Planning Commission
• Zhou Xiaochuan, Governor of the People’s Bank of China
• Liu Jiayi, Auditor General of the National Audit Office.

Of the 25 ministers who make up the new government, 15 kept the jobs they held previously. Of these, four were born in 1949 and are only a year away from turning 65, the mandatory retirement age for Ministers. Veteran diplomat Wang Yi, 59, who was Ambassador to Japan from 2004 to 2007 and also has extensive experience of North Korean and Taiwan affairs, was named Foreign Minister. Gao Hucheng, 61, an experienced international negotiator and fluent in French, becomes Commerce Minister. Gao has a Ph.D. in sociology from the University of Paris. Lou Jiwei, 62, ex-Chairman of the China Investment Corporation (CIC), is the new Finance Minister. Central bank Governor Zhou Xiaochuan retained his position as expected. He drew 2,753 yes votes, 158 no votes and 41 abstentions. Xu Shaoshi, a former Minister of Land and Resources, has been appointed Chairman of the powerful National Development and Reform Commission (NDRC), the top economic planning agency. Xu succeeds Zhang Ping – who was named one of the Vice Chairmen of the National People’s Congress – at the head an expanded NDRC, the biggest beneficiary of the latest cabinet overhaul, making him one of the most powerful Ministers in China.

Two ministry-level bodies have been abolished. The Ministry of Railways’ functions have been split and transferred to the Ministry of Transport and the China Railway Corp. The Ministry of Health and the National Population and Family Planning Commission have been combined into the National Health and Family Planning Commission.

Yu Zhengsheng, 67, Member of the Standing Committee of the Chinese Communist Party’s Political Bureau, was elected Chairman of the Chinese People’s Political Consultative Conference (CPPCC), replacing Jia Qinglin. Yu was previously Party Secretary of Shanghai.  A missile engineer by training, he held the post of Construction Minister in the 1990s. Zhou Xiaochuan, Governor of the People’s Bank of China (PBOC) since 2002, is one of the most prominent figures among the 23 newly-elected Vice Chairpersons. His election gives him “state leader” rank that exempts him from compulsory retirement at 65 for officials in cabinet minister-ranked jobs, enabling him to keep his job as Governor. Du Qinglin, who is ranked first among the Vice Chairpersons, is a Member of the Secretariat of the Party’s Central Committee. He was previously Minister of Agriculture and Director of the United Front Work Department of the CPC Central Committee. Five provincial Party Secretaries were promoted to the CPPCC Vice Chairmenship, compared with only one in the previous lineup. There are two female Vice Chairpersons: Lin Wenyi, Chairperson of the Central Committee of the Taiwan Democratic Self-Government League, one of eight non-Communist political parties, and Li Haifeng, Director of the Overseas Chinese Affairs Office of the State Council. The two former Chief Executives of Hong Kong and Macao, Tung Chee-hwa and Ho Hau Wah, have also been elected Vice Chairmen. The CPPCC session concluded on March 12. The Standing Committee of the CPPCC National Committee has 23 Vice Chairpersons and 299 Members.

Li Keqiang held his first press conference as Premier for the Chinese and foreign press immediately after the closing of the NPC session on March 17. At 107 minutes, it was shorter than those hosted by his predecessor Wen Jiabao. Li outlined three priorities for his cabinet: transformation of the economic model; improving people’s livelihoods; and enhancing social justice. He said the government would cut the number of officials and drive down costs. Currently there are 1,700 items which require administrative approval and at least one-third would be abolished. Funds flowing into central government coffers increased by just 1.6% over January and February, and Li foresees only modest increases in the future. As spending on social programs will increase, the government would be forced to cut back expenses in other areas. No new central government offices, halls or guest houses will be built, staff numbers will decrease, and spending on government hospitality, overseas trips and new vehicles will be curtailed. Answering a question on Sino-U.S. relations, Premier Li said that bilateral trade had increased from only USD1 billion three decades ago to more than USD500 billion last year. He said the two countries had more and more common interests. He dismissed U.S. accusations of cyber attacks originating in China, saying that cyber-hacking is a worldwide problem and China itself is a main target of the attacks. He said that “reform pays the biggest dividend for China”, and the government would make sure benefits from reform reach the entire population. The people’s well-being must be improved and in order to do this, we must confront China’s income gap, Li Keqiang said. Vested interests would have to be confronted. He added that urbanization is the logical product of modernization, but is not the same as building big sprawling cities. Urbanization should go hand in hand with agricultural modernization. The acreage of farmland should be kept above 20 million hectares and food security as well as the farmers’ interests should be safeguarded. “Food safety is of utmost importance as it pertains to people’s quality of life and health. This government will take measures to punish heartless producers of sub-standard and fake food,” the Premier continued. Premier Li Keqiang concluded the press conference by saying that “We require an international environment of lasting peace. Even if China becomes stronger, we will not seek hegemony. We are willing to work with countries around the world for global prosperity and peace”.

The Ministry of Railways (MOR) has been abolished. Its regulatory and administrative functions have been transferred to the Ministry of Transport and commercial operations will be carried out by the China Railway Corp. The revamp is part of government efforts to reduce bureaucracy and improve efficiency in the hugely-indebted and corruption-plagued Ministry, which serves as both an industry watchdog and a service provider, and is also China’s biggest issuer of corporate notes. “The reform could help broaden the sources of funding for railway construction and be positive to rail equipment makers in terms of demand and earnings,” Guotai Junan Securities said in a note. The China Railway Group and the China Railway Construction Corp will remain the key railway construction companies in the country. Fitch said it believes the proposed restructuring will not change the strategic importance of rail transport in China. The former Ministry of Railways accounted for the bulk of China Railway Group’s revenue. The reorganization won’t hit investment in railway building, said Railways Minister Sheng Guangzu, who took over in 2011 after his predecessor Liu Zhijun was ousted for corruption. The break-up of the Ministry of Railways will encourage greater private investment in the railways, foster more initial public offerings (IPOs) of rail companies and alleviate its massive debt, industry insiders say.

The new corporation will run the commercial operations of the Railways Ministry, with registered capital of nearly CNY1.04 trillion, and will also inherit its assets and about CNY2.66 trillion worth of outstanding liabilities. The last Railways Minister, Sheng Guangzu, was named General Manager of the new state-owned corporation. Existing loan policies to support the Ministry, along with the credit status of bonds it has issued, would remain unchanged under the new organization. Transport Minister Yang Chuantang said “a new page has turned” for China’s transport networks, and he promised a “seamless transition” as his Ministry takes over the administrative duties of the Railways Ministry. Some National People’s Congress delegates were worried that commercialization of the railways sector would lead to a significant increase in ticket prices and freight rates, and less building of railways in areas were it would not be profitable. “Before the historical debt of the Railways Ministry is resolved, the state will temporarily not tax the company’s profit,” the government said.

“The biggest impact of this reform is the greater diversification of rail investment,” said Luo Ping, Transport Planning Director at the National Development and Reform Commission (NDRC). “Many companies have money and wanted to invest in railways but couldn’t. In the past, the Railways Ministry grabbed all the good rail projects. Now, it has become a regulatory body, allowing any company to invest in and build its own rail projects.” The Ministry currently accounts for more than 90% of the multi-trillion-yuan investment in the country’s rail projects. Freight rates and passenger ticket prices will be made more market-driven. China Railway Corporation will probably not bear all the Railways Ministry’s debt, only part or none of it, said JP Morgan Analyst Karen Li. “If the company takes over the debt, its capacity to raise more debt will be limited,” she said. Resolving the debt issue would be left to the next step, Wang Feng, Deputy Director of the State Commission for Public Sector Reform, told a news conference in Beijing.