BEIJING -- Chinese President Xi Jinping plans to bring his growing power to bear on reining in financial risk as his second five-year term as Communist Party leader begins in earnest. But his efforts could create instability in an economy already facing the threat of trade friction with the U.S.
Last month's meeting of the Central Economic Work Conference barely touched on the issue of China's mounting debt, leading some to hope that the government might ease its recent clampdown on the financial system. But it looks likely to escalate instead as Beijing ramps up its war on financial risk.
"The idea that we've given up on reducing debt is a misunderstanding," said Yang Weimin, deputy head of the Office of the Central Leading Group on Financial and Economic Affairs.
Yang was among the officials who drafted a statement on China's economic priorities issued after the meeting. Financial risk was named alongside poverty and pollution as the top problems for the government to tackle through 2020. "Naturally, reducing debt is included in curbing financial risk," a Communist Party insider said.
Another party source boasted that China has managed to keep its economy growing even amid deleveraging efforts. The economy apparently expanded about 6.8% in 2017, faster than 2016's 6.7% rise. This would mark the first yearly uptick since 2010.
In a system where Xi holds unchallenged authority, it can be difficult to hit the brakes on a policy once the president has set it in motion. A recent push to switch from coal to natural gas in an effort to combat air pollution has caused widespread problems, including leaving elementary schools in northern China without heat in December. Similarly, rushing headlong into a financial crackdown could have unintended consequences for the economy.
Xi is set to make appointments to key government posts at a session of the National People's Congress convening in March. Where former anti-graft czar Wang Qishan -- a Xi ally who stepped down at last year's Communist Party congress after reaching the unofficial retirement age -- ends up will provide a clue as to how successful the president has been in consolidating power.
Xi has stepped up efforts to squelch free speech, particularly online. The government shut down some 10 million social media accounts and roughly 13,000 websites between 2015 and 2017. Some regional universities banned Christmas celebrations, urging students to promote traditional Chinese culture instead.
Xi's decision not to choose a successor at the party congress has fueled speculation that the president plans to stay on for another decade. This has provided more fodder for Xi's growing cult of personality and created a stifling atmosphere for Beijing intellectuals.
The U.S. looms as another source of economic risk, despite a November meeting here between Xi and U.S. President Donald Trump that produced $250 billion in trade deals. Washington has turned up the economic heat on Beijing, including slapping anti-dumping duties on Chinese imports.
The pressure seems partly intended to force China to do more to rein in North Korea. But Trump clearly remains troubled by the U.S. trade deficit with China, which likely hit a record high last year.
The Chinese side has taken pains to fend off criticism on trade issues, including cutting import duties and announcing an international import expo to be held in November 2018. A worried former Chinese finance official likened the situation to the trade conflict between the U.S. and Japan in the 1990s.