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ASHLYNNE:

From Schwartz Media, I’m Ashlynne McGhee. This is 7am.

Australia is about to be visited by the most senior Chinese leader we've had on our shores in almost a decade.

The visit, by Chinese Premier Li Qiang, comes at a really interesting time for China, with economic stumbles, and looming sanctions, making President Xi Jinping’s vision for the future more precarious than ever.

So what is going on inside Xi's inner circle? And what message will Xi’s close political ally bring when he lands in Australia?

Today, contributor to The Saturday Paper Richard McGregor, on the rumours swirling, and what they reveal about Xi’s grip on power.

It’s Tuesday, June 11.

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ASHLYNNE:

Richard, you're in Washington recently, and there was this question that China watchers kept asking you. Tell me about that.

RICHARD:

Yeah, I was attending various conferences, some closed doors, some in public about various aspects of China. And people kept asking me whether, XI Jinping's wife, Peng Liyuan, was going to be appointed to the Politburo.

Audio Excerpt – Unknown:

“…Now I would like to introduce to you the other six members of the bureau, who have also been elected to the standing committee of the political bureau.”

RICHARD:

And the Politburo is the sort of top political body in China.

Audio Excerpt – Unknown:

“At the top of the pile pyramid. It's the Politburo Standing Committee composed of nine men, ranked by number.”

RICHARD:

It has no women on it, incidentally.

Audio Excerpt – Unknown:

“The entire system is designed to promote collective leadership, but in the process, it's resulted in fierce jockeying among politicians at every level.”

RICHARD:

But for her to be appointed to the top level body, kind of sounded ridiculous, but people only took it seriously because she is so powerful these days, and his power is so personal that they thought they had to sort of ask around about it.

ASHLYNNE:

So tell me a little bit more about Peng Liyuan, what do we know about her?

RICHARD:

Well, she's a very glamorous first lady and that has not always been the case in China. And she's famous in her own right.

Audio Excerpt – [music]

RICHARD:

She was a famous singer in the people's Liberation armies, military musical troupes.

Audio Excerpt – [Peng Liyuan singing]

RICHARD:

She's also famous, much more famous than him for many years because he used to appear on the Lunar New Year or Chinese New Year concerts, which is sort of the biggest thing on TV, every year and sing a song.

Audio Excerpt – [music]

RICHARD:

And when she first married, Xi. That was his second marriage. He was the party secretary of a sort of middle ranking, city in a coastal province. But she was highly recognisable.

And I don't think it was really until about 2007 when he started climbing the ranks through the party, that he really outshone her or was more recognisable, as a public figure.

Audio Excerpt – Unknown:

“I now have the great honour to present to you our keynote speaker, Professor Peng Liyuan.”

RICHARD:

Now She's a sort of ambassador for all sorts of causes in China.

Audio Excerpt – Unknown:

“First Lady of China and UNESCO's Special Envoy for the Advancement of Girls and Women's Education.”

RICHARD:

She’s associated with herself, with causes, people with disabilities, Aids and the like. Which people I don't think, had really done in China before.

And on top of all those appointments Madame Peng was also appointed to this sort of opaque, military body. I think it's called the Cadre Assessment Body or something like that. And that's one of these Chinese bodies that runs right through the Communist Party at different levels. And that's the sort of top level of people who have to be cleared by the system every time they're promoted. And I guess she's part of the military wing of that.

But it would really have been astounding for her to have been appointed to the Politburo. And I guess rumours are sometimes floated deliberately. Sometimes they're kind of circular. I suspect this was a kind of circular one because it hasn't happened. But I just think the point is that people took it seriously. Because you take anything with Xi seriously.

ASHLYNNE:

Richard the fact this was even a live discussion in Washington about whether she’d be appointed to the Politburo, what does that tell you about how Xi Jinping is perceived in China?

RICHARD:

Yes, he's kind of I would say he's well and truly, consolidated his power I guess. In his first 100 days, he rapidly took, tried to take over the system. He had a big anti-corruption campaign. Ten, 12 years later, it's still going, you know, for example, last year, the foreign minister and the defence minister were both disappeared, detained. We don't know exactly what for. So over time, Xi has put his own people, so they dominate the top level of Chinese politics. That's the Politburo Standing Committee. Every single person on that body now is a Xi loyalist. And that's most unusual in Chinese politics, because you know, you always have internal balancing, left wing, right wing. They had the same thing in China that's gone now under him. He gradually consolidated the control of the military, which is very important and all that, also the security services and economic policymaking. So he really, that's why people jokingly call Xi the chairman of everything, because he's put himself in charge of everything.

Audio Excerpt – [Xi Jinping speech]

RICHARD:

I just think these days in China, you know, the personal is political, Xi's in charge. People hang off every word of his.

Audio Excerpt – [Xi Jinping speech]

RICHARD:

They read his speeches, they sort of try to calibrate his public appearances and the like. I just think it's a function of the fact that he's really on top of the whole system and has all the levers of power in his hands.

Audio Excerpt – [Xi Jinping speech]

RICHARD:

And since, China opened its door after Covid, China's economic policy has actually been very volatile, to put it nicely and unstable to put it, less so. You know, one day, China loves foreign investment. One day they love foreigners. Win win cooperation. We're off to Davos and all that. The next day they're locking up foreigners. They're issuing proclamations about foreign spies, they're raiding foreign companies and the like. So it's been really, for China pretty all over the place.

ASHLYNNE:

After the break – A top Chinese leader coming to Australia, and the message he’ll bring on behalf of Xi Jinping.

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ASHLYNNE:

Richard in the middle of these rumours and Xi’s very real efforts to consolidate power… we’re going to get a visit soon from Premier Li Qiang. He’s heading to Australia in June. That’s pretty big right, tell us a bit about him and what we can expect from this visit?

RICHARD:

Yes, he's a Xi loyalist. He wouldn't be at the top otherwise. He's officially ranked as number two in the party.

Audio Excerpt – Unknown:

“In China Li Qiang has been appointed as premier, the nation's second highest post. It follows his nomination by President Xi Jinping.”

RICHARD:

He was the party secretary of Shanghai. And, you know, by the way, if you're the party secretary of Shanghai, you're number one in the city. You rank above the mayor. And he was also in charge of a number of other prosperous cities, near Shanghai. So he has a pretty good record as an official. He has one big black mark against his name was that he had to do the Shanghai lockdown during Covid, which was a really painful period, but he was kind of just following orders there. But to give you another example of something that Li Qiang pulled off, you know, why is the world's biggest Tesla factory, in Shanghai? And the reason is because he negotiated with Elon Musk to put it there, you know, Elon Musk in the way that he does, said, I want you to build it in two years. And in fact, they built it in a year. And so that's why that's helped China build the country into the basically the electric vehicle powerhouse that it is these days. And by the way, all the Teslas you see on the roads in Australia are built in Shanghai. So Li Qiang is head of the government in theory, also head of the economy, a very competent official, but he's very much under Xi's thumb.

ASHLYNNE:

And so it's been about seven years since someone of his ranking travelled here…what will you be listening for when he speaks in Australia?

RICHARD:

Yes, well, it's going to be very interesting to listen because as you say, we haven't had anybody from China of this stature for some time.

And of course, in the interim, China put Australia, you know, deep into the freezer, ministerial contacts were cut off for years.

Audio Excerpt – Reporter:

“The latest in a tit for tat diplomatic stoush. This retaliation for the federal government's shredding of China's Belt and Road deal with Victoria, Today accusing Australia of acting out of a Cold War mindset and ideological discrimination.”

RICHARD:

We had all manner of, punitive trade measures, levelled against us.

Audio Excerpt – Reporter 2:

“China has fired a new and damaging shot in its trade war with Australia. It slapped massive tariffs on our wine exports.”

RICHARD:

China was very unhappy with us on a, you know, a ton of issues Taiwan, South China Sea, Huawei, foreign interference, COVID inquiries, the list goes on and on and on.

Audio Excerpt – Reporter 3:

“Australia says it is inching closer to stabilising its fraught relationship with its largest trading partner.”

RICHARD:

So under the Labor government, the relationship is not stable but stabilising, if that's not a contradiction.

Audio Excerpt – Penny Wong:

“The stabilisation and the resolution of trade issues will take time, but we are pleased that constructive dialogue has resumed.”

RICHARD:

So, you know, we're not kind of kissing and making up. We're sort of just agreeing to sort of go for a walk in the park again. So to speak. What will he say? He'll say what a lot of Chinese say about Australia. They'll say, we've got no territorial disputes to divide us. We've got no fundamental areas of difference between us. Our economies are complementary. We should get along. That's the public face, of course. But behind that, China hates AUKUS. They don't like the tightening US Australia alliance. They don't like the fact that we still sail our naval naval ships, as we have for decades in the South China Sea. They don't like our tightening links with Japan, but I think China is taking a longer term view and trying to see how they might be able to get along with Australia. And I guess the same is true of us.

ASHLYNNE:

Richard so that’s the Chinese government’s external relationships but how are things going internally, with the economy faltering is there a bit more of a challenge that Xi is facing inside the country?

RICHARD:

Yeah. I think the economy is Xi's Achilles heel, if you like. You know, China's economy is not going to collapse. You know, we're not on the verge of a sort of deep recession, but, growth is much lower than it has been for a long time. And more to the point, Chinese have got a pretty crappy stock market and they can't really invest offshore.

You know, it's a closed capital market. So household wealth is tied up in the real estate sector, in your home and in any investment homes that you own.

So this is a total revolution in China since the mid 90s, really successful in many ways, but grew into this massive bubble. Big developers have gone bust. And of course, Demographics is another big one. You know, we're on the cusp in theory of the Asian century, but every big country in Asia, South Korea, Taiwan, Japan, and most of all China, their populations are falling. There's no more demographic dividend. You can't do what we're doing, frankly, in Australia, throw more people into the economy and get growth like that. So they’re struggling in that respect.

And I think that one of Xi Jinping's key goals is to make China into a high tech powerhouse. You know, the US is levelling all manner of sanctions against China at the moment related to technology to try and sort of slow down China's development. Well, China would like to do that to America. So they're investing literally tens, hundreds of billions of dollars, to catch up.

So it’s a really hydra-headed competition and we are dragged into that because we are a close US security ally.

People who watch China and follow China have been wondering for many months when something called the third plenum of the current party Congress would be held. And all that means is it's a full meeting of the sort of broader, larger board of China Inc, of the Central Committee. And they would issue some proclamation on economic policy. The fact that it's delayed tells you that there's probably a lot of debate, discussion, infighting about the direction of the Chinese economy.

And so Xi is an all powerful leader, but he might be the first leader since about 1980 to preside over a relative contraction of the economy. And that affects a politician standing in an autocracy as much as it does in a democracy.

ASHLYNNE:

Richard, thanks so much for your time today.

RICHARD:

Thanks, great to be here.

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ASHLYNNE:

Also in the news today,

The French parliament has been dissolved, by president Emmanuel Macron, with an election to be held within 30 days.

Macron made the decision after Marine Le Pen’s far right opposition won an overwhelming number of seats in elections to represent France in the European Parliament – with Macron telling the nation during a late-night televised address that he intended to confront the right at the ballot box, in a high-stakes snap election.

And…

Coles is limiting how many eggs that customers around Australia can buy – two cartons per person – after an outbreak of bird-flu in Victoria.

More than half a million chickens in Victoria have been euthanised in an effort to stop the spread of the disease, but the outbreak is likely to continue to limit supply, with some reports warning the cost of eggs could double in the next few weeks.

That’s all from the 7am team for today, my name is Ashlynne McGhee. Thanks for your company and I’ll see you again tomorrow.

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