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China up close

Xi loyalists grab the reins of pivotal projects

Belt and Road, Beijing redevelopment spark dangerous turf wars

KATSUJI NAKAZAWA, Nikkei senior staff writer

TOKYO -- Chinese President Xi Jinping is giving close allies full control over two signature projects that promise to help him achieve total political supremacy: the Belt and Road Initiative and the remodeling of Beijing.

The former -- also known as One Belt, One Road -- is an effort to create a vast economic zone linking China to Europe and Africa by land and sea. This drive to build a new Silk Road and expand Beijing's sphere of influence will entail astronomical investments over many years. Key positions related to the initiative have been changing hands one after another. 

"It's astonishing how quickly big national projects, including the core One Belt, One Road program, have been taken over by close aides to President Xi," said a Chinese source familiar with economic policy.

"They are mostly from the two provinces of Zhejiang and Fujian," the source said. "The momentum of the 'Zhejiang faction' and the 'Fujian faction' is tremendous."

The factions comprise Xi's former subordinates in the provinces, where he worked for a total of 22 years.

Consider the new leader of the National Development and Reform Commission, which handles general planning and international cooperation for the Belt and Road Initiative. He Lifeng, a 62-year-old Fujian faction member and close Xi aide, was promoted to the top post in February.

His predecessor as chairman of the commission -- once the control tower for the socialist planned economy -- was close to former Premier Wen Jiabao.

Bonding over basketball

The ties between Xi and He date back decades.

Thirty-two years ago, Xi moved to the Fujian city of Xiamen to assume the post of deputy mayor. Still in his early 30s, he was exceptionally young for the job. 

Xi is a member of the so-called second red generation -- the children of revolutionary-era Communist Party leaders. His late father, Xi Zhongxun, once served as vice premier. So in Xiamen, Xi was perceived as an outsider who was merely following a career path reserved for the political elite. He struggled to find his feet in the city government, where he had many older subordinates. 

Xi enjoyed playing basketball to blow off steam. He Lifeng, a local government secretary, was also a basketball buff. The two hit it off, partly because they are close in age; Xi is two years older than He.

Xi spent nearly 17 years in Fujian, rising through the ranks and building a strong attachment to the province that is both personal and political. In 1987, two years after he became deputy mayor, Xi married his second and current wife, popular military singer Peng Liyuan. 

In a move that surely reflects the president's affinity for the place, Xiamen has been selected to host a summit of the leaders of the BRICS countries -- Brazil, Russia, India, China and South Africa -- in September.

Gulangyu Island, Xiamen's leading tourist attraction, was listed as a UNESCO World Heritage site this year. The rumor among local residents is that Xi's strong backing helped make it happen.

Meanwhile, an important figure representing the Zhejiang faction is Zhong Shan. The 61-year-old became commerce minister in February, taking on the job of managing trade friction with the U.S. -- a critical task if Xi is to achieve his economic aims. 

Zhong was the vice governor of Zhejiang when Xi held the top provincial post of party chief.

Chen Min'er, 56, also belongs to the Zhejiang faction. He became the top official in the key city of Chongqing in mid-July, replacing onetime rising political star Sun Zhengcai after his fall from grace.

Ones to watch

As newly appointed cabinet members with economic portfolios, He Lifeng and Zhong found themselves in the thick of things when Xi visited U.S. President Donald Trump's Mar-a-Lago estate in Florida in early April. At the summit, both sat at the table alongside Xi.

In Florida, Xi promised to put pressure on North Korea to abandon its nuclear and missile development programs, and in exchange Trump pulled his punches on trade. But the U.S. president is losing patience, now that Xi's promise to rein in Pyongyang has proved empty.

Trump may well revert to a hard-line stance regarding trade. This means Zhong, in particular, faces a moment of truth. He has warned that a U.S.-China trade war would bring nothing but harm. 

In any case, both He Lifeng and Zhong will be taking cues from an even closer Xi confidant: Liu He.

The 65-year-old is known as China's most influential macroeconomic policymaker. He currently serves as director of the Office of the Central Leading Group on Financial and Economic Affairs, the Communist Party's top panel on the economy.

Liu and Xi have been friends since they were teenagers. Like many children of senior party and military officials, they both graduated from the prestigious Beijing 101 Middle School. 

Xi makes no secret of his faith in Liu. In 2013, when Xi introduced Liu to Thomas Donilon, then the U.S. national security adviser, he said: "This is Liu He. He is very important to me." 

When it comes to promoting the Belt and Road Initiative, He Lifeng and Zhong will work in accordance with the basic strategy drawn up by Liu.

"Millennium strategy"

While the Belt and Road program has a broad international scope, Xi's other big investment project is focused on the home front.

The capital is struggling with serious air pollution and rapid population growth. The government is seeking to develop Beijing, neighboring Tianjin and Hebei Province in an integrated manner, to achieve a balanced distribution of people and industries.

Beijing's core government functions have already been moved from the heart of the city to the eastern suburb of Tongzhou. And as part of the coordinated development project, China announced in April that it will establish a massive city called the Xiongan New Area in Hebei.

The metropolis is to rise in a farming area about 150km from Beijing. The Xi administration describes it as "a strategy crucial for the millennium to come."

One rumor is that the farming district was chosen because Xi's mother, Qi Xin, was born nearby.

Property transactions have been banned in the area, in response to signs of a price spike. But in May, the place was still home to vast cornfields, marshland and small towns. The region is known for its fur-processing industry, and dyed pink pelts could be seen hanging under the eaves.

Will this pastoral landscape really become a cluster of skyscrapers in 10 or 20 years?

To be sure, China has a track record of this sort of thing. It transformed Shanghai's Pudong district from an open field into a commercial hub, complete with a distinctive skyline, a new airport and even Shanghai Disneyland.

But China's superfast growth phase is in the past. Pouring money into a new city is risky -- as shown by the Caofeidian development project in Hebei, which is now a ghost town.

At the same time, a project to build a new international airport is underway about 50km south of central Beijing. The airport is scheduled to open at the end of 2019, and there is little question the city of 23 million needs it.

The current gateway -- Beijing Capital International Airport -- has been expanded and currently has three terminals. But it is operating at full capacity and delays have become a serious issue.

Steering the Beijing redevelopment drive is Cai Qi, 61, who became the party chief in the capital in May.

Cai was born in Fujian. In fact, he straddles both the Fujian and Zhejiang factions; he was transferred from the former province to the latter in the late 1990s.

Later, Xi also moved from Fujian to Zhejiang, where he became the province's top official. 

At this point, Cai is not even one of the nearly 200 candidates for full membership on the Communist Party's Central Committee. But he is virtually certain to leapfrog rivals and join the Politburo at the party's National Congress this autumn.

Cai is doing his part to promote Xi's interests. On Aug. 3 -- the same day China's leaders and retired party elders reportedly converged at the Hebei seaside resort of Beidaihe for their annual summer gathering -- Cai attended a meeting in the capital and repeatedly referred to Xi's "important thought."

This was part of a push to enshrine the president's political thinking in the party's rules at the upcoming congress. 

Like Cai, the No. 2 man in Beijing is also in Xi's corner. That would be Chen Jining, the 53-year-old acting mayor. 

Forces within the party are broadly divided into three groups: Xi's camp, including both the Fujian and Zhejiang factions; the Communist Youth League faction, made up of former officials of the party's youth organization, including former President Hu Jintao and current Premier Li Keqiang; and former President Jiang Zemin's faction.

Chen assumed his post after serving as environmental protection minister. Previously, he was the president of Tsinghua University in Beijing -- Xi's alma mater. 

Concentration of power

The appointments of close Xi aides to the top two posts in Beijing have raised eyebrows among party insiders.

"It is natural that Xi's group wants to manage the huge amount of money to be invested in Beijing, Tianjin and Hebei," said one former bureaucrat.

Party elders and allied bureaucrats wield strong influence in Beijing -- namely former President Jiang, who is now 90, and former Premier Wen Jiabao, now 74. Furthermore, Tianjin is a stronghold of Wen, who was born there, and Zhang Gaoli, one of the current seven Politburo Standing Committee members.

But Xi's group looks poised to obtain total authority in the Beijing-Tianjin-Hebei economic triangle by redeveloping the areas and installing officials in key posts. The recent personnel changes are part of Xi's wider effort to fend off political foes and consolidate his power.

For Team Xi, the remodeling of Beijing and the construction of the Xiongan New Area also mark significant steps toward dominating vested interests.

Xi, it should be noted, has not been a force in Chinese politics for very long. It was only 10 years ago that he emerged as a likely candidate to take the helm. To the surprise of many, he was promoted to the Politburo Standing Committee at the party's 2007 congress, jumping to sixth place in the hierarchy -- one rank ahead of Li Keqiang.

The Politburo Standing Committee is the party's top decision-making body. Xi's promotion made him a shoo-in to succeed Hu Jintao. Sure enough, he became the party's general secretary in autumn 2012 and president in spring 2013.

His limited time on the top echelon partly explains why he fills his inner circle with old associates. 

Before joining the Politburo Standing Committee, Xi served as Shanghai's top official, but only for half a year. This was after his 17 years in Fujian and five years in Zhejiang.

Despite Xi's second red generation status, he lacks the support of powerful organizations like the Communist Youth League. Seen from this angle, he has little choice but to rely on the Zhejiang and Fujian factions.

Now, huge responsibilities rest on the shoulders of relatively inexperienced loyalists from the two groups. Xi cannot afford to see his pet projects fail. But to succeed, his allies will have to win risky turf wars and uproot powerful vested interests.

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