In a historic move, China has ratified a constitutional amendment that will abolish the country’s presidential term limit.

Other constitutional changes have affirmed the supremacy of the Communist Party of China (‘CPC’) and strengthened its governing apparatus. While these changes don’t necessarily come as a surprise, they appear to be reversing measures introduced by previous governments to rein in the excesses of one-man rule. China’s government says that these measures are necessary to ensure political and economic stability, while others fear that they will do the opposite.

It’s all about the Party

Only two out of 2,964 delegates at this year’s National People’s Congress (‘NPC’) voted against abolishing the country’s presidential term limit. The NPC is widely regarded as a rubber stamp for pre-approved legislation, but this vote was more unanimous than for any other major constitutional amendment since the 1980s (see below). It not only paves the way for President Xi Jinping to remain in power beyond 2023, but other revisions to the constitution have affirmed the supremacy of the Chinese Communist Party (‘CPC’) and strengthened its governing apparatus, of which Xi is now placed firmly at the centre. The lines between party and state are increasingly blurred.

Presidential term limits were introduced in 1982 by Deng Xiaoping, to avoid a repeat of the destabilising and destructive personality-cult that emerged under Mao Zedong. To some, the move to abolish term limits has come as no surprise. Since taking office in 2012, Xi has repeatedly reversed measures that were designed to rein in the excesses of strong-man rule. Xi was designated as the “core” CPC leader in 2016– a title that was never granted to his predecessor Hu Jintao– and he is also seen to have sidestepped the State Cabinet, the Chinese government’s highest authority, through an increasing reliance on small working groups to coordinate policy. Crucially, during the 19th National Party Congress last year, Xi did not appoint a clear successor in accordance with party convention.


The world reacts, China stays quiet

The state media was quick to argue that the removal of term limits does not automatically imply life-long presidency, and that it is of paramount importance to have a strong and unified leadership to tackle China’s economic and social challenges. Western media generally perceive it as a major regression from the progress that China has achieved in terms of the rule of law and market liberalisation. It appears that some overseas Chinese are equally as disheartened. Posters showing Xi’s portrait and the slogan “Not My President” have been seen at university campuses in the US, the UK, Canada and Australia; allegedly put up by Chinese students. (Source: BBC)

However, the reaction within China has been harder to judge. The subject has attracted little coverage in Chinese-language news; the initial policy proposal was first published by the CPC in English, presumably in the hope that it would draw less attention domestically. Netizens who express dissent or concern are impeded by increasingly efficient and far-reaching online censorship. Internet memes and WeChat content that mocks Xi Jinping, or even references the constitutional amendment, are quickly taken down.

Business as usual?

Pessimistic observers argue that the weakening of China’s collective governance system heightens the risk of arbitrary decision-making, which may adversely impact the business environment. For example, under the banner of Xi’s anti-corruption campaign, it is not only state-owned companies that have become the target of campaign-style investigations that are unpredictable and often lacking in transparency. In February 2018, the head of private energy conglomerate CEFC China Energy was arrested for undisclosed reasons, reportedly under the personal order of Xi. At times these investigations have even reached beyond China’s borders; in 2017 billionaire Xiao Jianhua was seized in Hong Kong, and his whereabouts remain unknown.

However, others believe that extending Xi’s shelf-life will buy him the time he needs to push through the difficult but essential market reforms that are needed to sustain China’s long-term growth, and realise the country’s goal of overtaking the US as the world’s largest economy. These reforms, such as wrenching control of resources from the bureaucratic elite to the markets, will not be easy, and a strengthened leadership will increase the likelihood of success and ensure political stability. China has stunned the world before, and there is no reason why it can’t do so again.

The NPC in 2018

What to watch: Our top 5

1. Financial regulation becomes more centralised:

China’s central bank will be granted lawmaking powers, while the old banking and insurance regulators will merge.

2. The Belt & Road Initiative (‘BRI’) gets its own administrative organ:

A new body will be created to oversee China’s international development efforts, with a focus on the countries along the BRI.
Read our latest update on China’s Belt and Road initiative here.

3. An anti-corruption body is established with sweeping new powers:

The National Supervisory Commission will rank higher than the judiciary and will be in charge of disciplining all public institutions.

4. China goes green:

The environmental ministry is expanded and there will be a 19 percent increase in spending on anti-pollution initiatives.

5. Party supremacy is enshrined in the constitution:

The CPC leadership is now referred to as the “most fundamental feature of socialism with Chinese characteristics”.

If you have any questions about how recent policy and regulatory reforms may affect your operations in China, contact S-RM’s Asia Pacific team.