From courting Tesla to becoming Xi’s right-hand man: Li Qiang’s journey to becoming Chinese premier

As Communist Party leader in Shanghai, Li Qiang’s signature business coup persuaded Tesla founder Elon Musk to build the US electric carmaker’s first overseas factory in the Chinese megacity.

At the signing with Musk in 2018, the man who would one day become President Xi Jinping’s No. 2 spoke enthusiastically about creating “favorable” conditions for trade, while a rainbow overshadows a halo in a huge painting behind them the up-and-coming party star.

But Li’s business-friendly profile is soon put to the test. China’s parliament on Saturday confirmed him as prime minister and head of the State Council or cabinet by 2,936 votes in favour, three against and eight abstentions. After signing his letter of appointment, Li stood up to fervently shake hands with Xi. Rarely has a prospective prime minister seen such a daunting entrance.

Li and his economic team must devise a new growth strategy to replace China’s flagging debt-driven model while overseeing a sweeping state restructuring, including financial regulators, that was announced this week.

Maybe even more difficult, he will have to manage his boss. Xi’s sudden policy changes in recent years on issues ranging from crackdowns on internet companies to Covid-19 controls have unsettled investors, analysts said.

“He’s inheriting a job that has faced so many headwinds, starting with the housing crisis, the debt burden, US sanctions, China’s aging and sentiment lows,” said Joerg Wuttke, head of the EU Chamber of Commerce in China. “The guy clipped his work for him and the low-hanging fruit was plucked by his predecessors.”

Like many in Xi’s inner circle, Li owes his rapid rise to fame through a close connection with the Chinese leader when they both served in provincial jobs. An agricultural engineer, Li worked as Xi’s secretary when he was governor of Li’s native city of Zhejiang, one of China’s wealthy eastern coastal provinces, in the mid-2000s.

After Xi became president in 2012, Li himself became governor of Zhejiang, then communist chief of nearby Jiangsu province, and party secretary of Shanghai in 2017.

During those years, he was regularly paired with top businessmen, most notably Jack Ma, founder of Zhejiang-based internet group Alibaba, who has largely disappeared from public view since Xi’s internet busting.

He even wrote the prologue to a book by Wang Jian, chairman of Alibaba Group’s technology committee. “Jack Ma and Wang Jian are both my favorite conversationalists,” Li wrote when he was governor of Zhejiang.

Li is “uniquely positioned to lead the new government” given his experience in running “the most developed regional economies in China, with key contributions from private, foreign-invested and state-owned companies,” said Eric Zheng, head of the American Chamber of trade in Shanghai.

In addition to the Tesla deal, Li is also credited with opening a new Nasdaq-style exchange in Shanghai.

But Li’s record was tarnished last year after he implemented one of the strictest, and in the eyes of many people, poorly managed Covid lockdowns in China. Residents of the country’s wealthiest city struggled to get enough to eat.

However, he has declined to address criticism of the handling of the outbreak, later saying: “We . . . won the battle to defend Shanghai”.

The Shanghai lockdown was widely interpreted as a sign of loyalty to Xi, who had repeatedly stressed the importance of the zero-Covid strategy before the policy was abandoned in December.

“The lockdown in Shanghai has shown that Li Qiang will do whatever Xi Jinping wants when it counts,” said Neil Thomas, a China analyst who joined the Asia Society Policy Institute’s Center for China Analysis in Washington this month will join.

On the other hand, while Li Qiang paralyzed China’s financial hub, his predecessor, outgoing Premier Li Keqiang, sounded the alarm about the economic impact of the pandemic in a video call with tens of thousands of officials. Li Keqiang, an economist by trade, did not specifically refer to Xi’s zero-Covid policy, but his comments hinted at internal difficulties in aligning the approach with economic growth.

Despite occasional attempts to be more assertive, Li Keqiang was seen as largely handicapped by Xi, who viewed him as a former rival who hailed from a different political faction.

As a trusted longtime adviser, Li Qiang could have better access to the president’s ear, analysts said. Some suggested that based on his recent speeches, Li Qiang wants to pursue policies similar to those of his predecessor, including debt control and rebalancing the economy towards consumption.

“Politically, he will credit Xi Jinping for the achievements of the past five years, but in terms of political alignment, he aligns with Li Keqiang,” said Bo Zhiyue, founder of the Bo Zhiyue China Institute, a consulting firm.

While more details of Li Qiang’s economic program are expected to be announced on Monday when he makes his first remarks as premier, many observers expect Chinese politicians to remain cautious in the coming year as growth recovers from last year’s Covid controls .

“It looks like policymakers are hoping and expecting that this year’s growth will come from organic sources. . . and they don’t really plan to drive that growth with very expansionary policies,” said Louis Kuijs, chief Asia economist at S&P Global Ratings.

But in the long term, few expect Li to be able to revive the strong reformist premierships of the past, such as that of Wen Jiabao under Xi’s predecessor Hu Jintao or Zhu Rongji under late President Jiang Zemin.

As a newcomer to the national stage, Li Qiang must build alliances in Beijing. But Xi, who has always been wary of his position at the helm of the party, is expected to keep Li firmly in control, analysts said.

“The potential for unpredictability will remain a chronic risk when Xi is in charge, and especially with a leadership team composed entirely of his allies,” Thomas said. “Xi’s policies will be implemented under Li Qiang, for better or for worse.”

Additional reporting by Nian Liu, Xinning Liu and Ryan McMorrow in Beijing