| China's annual National People's Congress kicks off this Sunday, and the key political meeting promises some significant shakeups at the very top as President Xi Jinping consolidates his power.
While there aren't likely to be any provocative moments of political intrigue on the levels of Hu Jintao's mysterious party congress exit last year, there are still some big moves to look out for — starting with Xi ally Li Qiang's expected ascension to the premiership.
Li is already the Communist Party's No. 2, and replacing Premier Li Keqiang would bring the former Shanghai party chief even closer to Xi. Li Qiang's elevation — he's known as being business friendly — could also be a good thing for the financial hub, which saw its reputation tarnished last year as Covid lockdowns spurred an exodus of expats.  Li Qiang Photographer: Qilai Shen/Bloomberg All the key ministries and institutions will have new leadership, including the nation's central bank. People's Bank of China Governor Yi Gang is widely expected to step down, with veteran banker Zhu Hexin potentially in line to take his place. He Lifeng, who's known Xi for more than four decades, is expected to replace Liu He as vice premier responsible for economic policy and is also being considered for the role of party secretary at the PBOC. Their appointments and potential overhaul of China's financial regulatory regime would put decision-making over key economic policies in fewer hands and centralize it under Xi. This could be an opportunity for the leader to tighten his grip over the $60 trillion financial sector, which has been rocked by the disappearance of one of China's top investment bankers and a sweeping anti-corruption campaign. Watch: Xi Signals 'Intensified' Overhaul of Government Agencies (Video) In a speech ahead of the NPC, Xi said the party would roll out plans for "deepening structural reform" in the financial sector and exercise more control over science and technology work — key strategic areas as the US moves to prevent China from obtaining advanced computer chips.
Bankers in particular had better watch their backs. They have been told to rectify their mindsets, clean up their "hedonistic" lifestyles and stop copying Western ways as part of directives laid out in a 3,500-word commentary last week from the country's top anti-graft watchdog.
As if that wasn't ominous enough, Wu Qing, a 57-year-old who earned the nickname "the broker butcher" for cracking down on traders in the mid-2000s, is slated to become the head of the China Securities Regulatory Commission, the nation's securities regulator. "All of these development speak to one thing: The Communist Party will govern everything, including economic and financial work," said Shen Meng, a director of Beijing-based investment bank Chanson & Co. "Policymakers are placing the finance industry at the heart of the economy as a lubricant for its smooth development, and if the economy goes sour, the sector is mainly to blame." So far, though, the economic data are playing out in their favor. An official gauge of manufacturing activity posted its biggest improvement since 2012, while services activity jumped and home sales climbed for the first time in 20 months. The February data was the first comprehensive look at the economy since the lockdown ended late last year, as January's figures were influenced by the Lunar New Year holiday. Other on-the-ground indicators, such as rising subway usage and clogged roads, have been similarly promising — though I don't need to look at the numbers to know that in Shanghai, at least, people are back to packing the metro like sardines, taxis are impossible to find late at night and some popular restaurants are impossible to dine at without a reservation. Market players are gearing up in anticipation that leaders will likely announce a robust 2023 growth target at the NPC of over 5%, which the government expects to achieve through policies to stimulate domestic consumption and stabilize the property market. Last year the economy grew just 3%, one of the lowest rates in decades, largely due to the impact of Covid Zero. The upshot is that Beijing probably won't offer much in the way of monetary and fiscal stimulus, given the nation's huge budget deficit and the quick economic rebound that's supposedly even surprising the nation's leaders. Having so many Xi acolytes is also stoking concern that there will be fewer voices at the apex of power who are willing or able to question the nation's leader at a time when his credibility is in doubt because of his handling of the pandemic, US-China relations and the economy. Righting the economy, at least, may come down to whether He and Li Qiang can prove they're up to the task.
One of the first items on the agenda — getting foreign companies to stay and attracting new investment — won't be easy. Overall inbound foreign investment dropped sharply in the second half of last year as lockdowns dragged on economic growth.
Now it's a question of whether it's too late to restore confidence. China is not a top three investment priority for a majority of US firms for the first time in about 25 years, according to a report by the American Chamber of Commerce, citing geopolitical tensions and domestic economic issues for driving businesses to increasingly focus elsewhere in the region. That could also impact China's supply-chain dominance. Apple's Chinese suppliers are likely to move capacity out of the country far faster than many observers anticipate to preempt fallout from escalating US-China tensions, according to AirPods maker GoerTek. It is one of the many manufacturers exploring locations beyond its native China. GoerTek is investing an initial $280 million in a new Vietnam plant while considering an India expansion, Deputy Chairman Kazuyoshi Yoshinaga said. Citigroup said its clients are shifting supply chains away from China in a trend that is likely to last for years. A recalibration of global supply chains that's been underway since the pandemic has accelerated following the war in Ukraine, according to David Livingstone, the lender's CEO for Europe, the Middle East and Africa. Getting foreigners to return will also be a tricky task. A recent position paper by the European Chamber of Commerce in Shanghai cited estimates that 25% of German residents in Shanghai left after the 2022 lockdown, while the number of French and Italian citizens who were registered with their governments each fell by 20%. "Before it was a super attractive place and now actually nobody wants to go back because people feel not sure what will happen," said Bettina Schoen-Behanzin, chair of the Shanghai chapter of the EU Chamber of Commerce. Each weekday, The Big Take podcast brings you one story — one big, important story from Bloomberg's global newsroom. Subscribe and listen on iHeart, Apple and Spotify. What We're Reading Finally, a few other stories that caught our attention: | 
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