China concluded its 17th Communist Party Congress on Oct 22 by naming a new Politburo Standing Committee, one that appeared to be a setback for Hu Jintao, the head of the party, the state and the military. But judged against other indicators, that may have been deceptive.

Indeed, Hu’s preferred successor, Li Keqiang, the party chief of the northeast Liaoning province, failed to get the slot reserved for the heir. That went to Xi Jinping, the party chief of Shanghai, who is regarded as a representative of Hu’s meddling predecessor, Jiang Zemin. Li only took the spot below, usually meant for the future prime minister.

Observers began worrying about a weakened Hu weeks ago when the list was leaked. But before the Congress opened, many of these observers had also expected that Hu would use tough words on Taiwan in his keynote speech as a way of garnering support in the party.

Instead, Hu soft-pedalled the issue, deleted harsh words from the corresponding section in the keynote speech of the 16th Party Congress in 2002, and extended an olive branch by offering to negotiate a “peace treaty” across the Taiwan Strait. That conciliatory tone on a potentially explosive issue within the Chinese power elites was a sign of confidence. Several other factors also indicated Hu’s consolidation of power.

First, Hu succeeded in inserting his signature political theory, “the scientific outlook on development,” into the party constitution five years before he retires. Jiang managed only to write his equivalent “three represents” into the party constitution when he was leaving the helm in 2002.Second, Hu has achieved a firm grip on the army. He began promoting generals only in 2006, two years after he acquired the military command as chairman of the party’s central military commission. But he has gradually quickened the pace.

His appointments of younger generals, often two ranks above their previous assignments, have proliferated from military regions to the headquarters in Beijing. Just days before the Congress opened, Hu completed a thorough overhaul of the People’s Liberation Army.

Third, Hu has extended his reach in the provinces and the ministries. He has placed his preferred provincial leaders and ministers in a low-key and piecemeal fashion since 2004. Today, one third of provincial party secretaries and governors are from the Communist Youth League, Hu’s primary power base since he served as its secretary general in the early 1980s.

Fourth, Hu demonstrated his populist and pro-simplicity style during the Congress, a manifestation that he could now overrule the conservative reservations within the party hierarchy. He allowed Liu Xiang, an athletic star, to spice up the conventionally stifling press conferences of the Congress. He opened up provincial panel discussions to the media.

In late 2002, after the party power transfer, Hu presided over a Politburo Standing Committee stacked with Jiang’s men. He could count on at most three of the nine members. Now he has four solid votes, plus three neutral ones. Hu’s approach is reminiscent of Mao Zedong's strategy during China’s civil war in the late 1940s – “taking the countryside before besieging the cities.” Hu has worked his way from outside in, and from bottom up. The remaining stronghold is the Politburo.

Hu has been consistently underestimated. Observers were surprised by his emergence as the party chief in 2002, and as the military chief in 2004. Before September 2006, when he suddenly sacked the “Shanghai Warlord” – then party chief Chen Liangyu – on charges of corruption, many viewed Hu as powerless toward Chen’s open criticism of Hu’s prime minister, Wen Jiabao.

As Hu gains power in substance rather than form, we may expect Beijing's continued emphasis on cooperation with Washington, deepening China-Japan entente, and more carrot than stick on Taiwan. We should not rule out a thaw on China’s relations with Vatican and the Dalai Lama for the Olympics, as Hu’s people have found in religion a useful tool to reduce resistance against China’s rise.