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It has been a long journey to reach this moment …

  • In 1972, Nixon traveled to China
  • In 1973, the Philadelphia Orchestra became the first international orchestra to perform in China
  • In 1974, I began to study Mandarin at college
  • In 1976, Mao died (and the Cultural Revolution with him)
  • In 1978, Deng and the CCP began experimenting with economic reforms
  • In 1979, Carter normalized relations
  • In 1980, I traveled to the mainland for the first time
  • 1n 1982, at its 12th National Party Congress, China adopted economic reforms as its priority policy

Just this past week — forty years later at its 20th Party Congress — China under Xi has formally abandoned economic growth as its top priority for national development (along with the international partnerships on which that growth depended for trade, investment, access to capital markets and innovation) and prioritized instead “security” (with all the ideological baggage which that entails in Xi’s worldview).

Put simply, Xi has just crossed the Rubicon …

I wrote on Monday in Ideologues Meet Markets that I would share my considered view on the implications of the just concluded 20th National Party Congress after a few days of rumination and reflection. I am doing so now. Xi has just crossed the Rubicon. His move not only upends a forty-year trajectory of the most dynamic economic growth ever witnessed in the world, it threatens — more ominously — the foundations of the post-WWII international order and the unprecedented seventy-year run of (relative) peace the world has enjoyed at the global level.

An extremely well observed account of what this moment means is contained in the political economist Yuen Yuen Ang’s opinion piece in today’s New York Times. I reproduce below that piece in its entirety:

China’s Era of Reform Has Officially Ended

By Yuen Yuen Ang

Forty-four years ago, Deng Xiaoping kicked off the period of “reform and opening up” that transformed China from a poor, autarkic nation into an emerging global power.

President Xi Jinping officially ended that era last week. He emerged from the Chinese Communist Party’s congress in Beijing with unchallenged authority and plans for China that revolve around his obsession with control and security — even if that means harming the economy.

It’s a momentous change in outlook.

Deng Xiaoping’s strategy for China’s spectacular economic achievements had two main components. The first was a collective leadership arrangement within the Communist Party. Deng rejected Western-style democracy, but China’s tumultuous decades under Mao Zedong had taught him that one-man rule is dangerous. He and the party introduced partial checks and balances into politics at the highest level, including term limits. The second component was a single-minded pursuit of economic growth that, Deng famously declared, would be China’s “hard principle.” Officials throughout China dove headlong into promoting growth at all costs — bringing prosperity but also corruption, inequality and heavy industrial pollution.

Last week in Beijing, Mr. Xi dismantled those foundations. He ensured that he would remain paramount leader of China for a third term — if not for life — and packed the party’s leadership with loyalists while heavily prioritizing national security over the pursuit of economic growth.

In his speech to the party congress at the Great Hall of the People on Oct. 16, he mentioned “security” significantly more often than “economy,” a major break with precedent. He went further, declaring unambiguously, “National security is the bedrock of national rejuvenation, and social stability is a prerequisite for building a strong and prosperous China.”

In Chinese politics, small changes in wording can herald big shifts in ideology and policy. If there were any remaining doubts about Mr. Xi’s intentions, he dispelled them by vowing that China would stick to its zero-Covid policy, “without wavering.” His government’s approach to the pandemic, a public health policy in name, is in reality the most powerful security tool devised by the Communist Party, restricting access to the country and controlling who can go where, underpinned by tracking apps that citizens and visitors must have on their smartphones.

For observers long accustomed to Deng’s growth-first ethos, Mr. Xi’s policy choice is mind-boggling. The Covid controls are angering citizens, crippling China’s economy, decimating domestic consumption, disrupting manufacturing and logistics, and repelling foreign and local investors alike.

Why is the most powerful Chinese leader in decades so obsessed with security and domestic control that he would sacrifice the economy? The answer lies in an array of domestic and foreign challenges, some worsened by Mr. Xi’s own policy choices.

Politically, he probably fears the proverbial knife in the back after making enemies through a decade-long anti-corruption campaign in which thousands of officials — possibly including potential political rivals — were punished and is doubling down on repression out of his instinct for self-preservation.

On the economic front, he faces smoldering crises, including an economy that is slowing sharply, a property sector meltdown and record-breaking youth unemployment. These problems have been exacerbated by the Covid controls and by Mr. Xi’s “common prosperity” campaign — a strategy for narrowing inequality and addressing monopolistic behavior by big tech firms and other private companies, which was punctuated by an abrupt and sweeping regulatory crackdown last year that has alarmed investors. The market backlash was intense: Within months, more than a trillion dollars in value at many of China’s most innovative companies evaporated.

On foreign policy, Mr. Xi has projected an ambition to challenge American primacy. The Trump administration’s chaotic handling of the pandemic prompted Mr. Xi to boast that “the East is rising and the West is declining.” But his triumphalism was premature. China is far from an even match with the United States in economic, military or technological power. And while American democracy is in crisis, the United States remains strong, a true superpower and a free country able to criticize and renew itself. Mr. Xi criticizes the West for seeking to contain China, but his hubris and aggressive approach helped bring about this threat.

To be sure, Mr. Xi does not intend to completely abandon the capitalist success that rejuvenated China and brought global respect and influence. And to his credit, he has confronted serious problems that his predecessors swept under the rug, particularly corruption and economic inequality. His vision of a powerful China, respected on the global stage, is warranted given his country’s size and economic clout.

But addressing China’s myriad problems will require measured steps that Mr. Xi seems disinclined to take. Putting out fires in China’s economy must begin with relaxing Covid restrictions and importing more effective vaccines, something that his government has prevented. These won’t be miracle cures, but they are necessary first steps that will go a long way toward alleviating stress on China’s people and reassuring investors that his leadership team has not lost all sense.

Mr. Xi has plunged China into a vicious cycle: A hubristic and authoritarian leader, unaccountable to society and unchallenged even by his own advisers, makes poor policy choices, which add to his problems, exacerbating his fears of a revolt and leading to more repression.

The consequences of his decision to emphasize security over economic vibrancy will be global. China is the world’s second-largest economy and the biggest trading partner of dozens of countries. A prolonged economic slowdown in China will increase the risk of a global recession, with many countries sharing the pain. In the long run, there may be winners as China’s waning competitiveness hastens a shift in global supply chains to other emerging economies. But if China turns inward, it will lose. Chinese tech companies are already expanding overseas to compensate for a restrictive home environment.

China’s great capitalist revolution under Deng and his successors is now history. So is Mr. Xi’s first 10 years in office, when there was at least a minimal layer of checks on his power from moderate, non-loyalist officials. China under Mao and the former Soviet Union proved that absolute dictatorships fail miserably at making nations prosperous and strong. They bring only impoverishment and false security. Mr. Xi is likely to relearn those lessons in the coming years.

Yuen Yuen Ang (@yuenyuenang) is a political economist and the author of “Chinaʼs Gilded Age” and “How China Escaped the Poverty Trap.”

I’ll give my wrap on the conclusion of the 20th Party Congress in Beijing later in the week after some further digestion and rumination.

Meanwhile, here’s a graphic putting today’s market reaction to Xi’s consolidation of power into some context. Entirely different timelines and denouements but same implacable forces at work …

As we await Sunday’s introduction of the official lineup for the 25-person Politburo, the 7-person Standing Committee, the Premier and the President over the next five years, what has already become clear is that the Chinese Communist Party (CCP) has gone all in on Xi Jinping. While the field might possibly look somewhat different at the next Party Congress, the broad contours for the global picture for the coming five years are becoming clear. The bold brushstrokes were drawn by Xi during his nearly two-hour speech delivered last Sunday. Since then, there have been ample signs of what’s to come. The team being assembled around Xi will be made up of apprentices filling in with finer brush strokes for Xi, not near-peers willing to argue for painting a different landscape.

“Dystopia with Chinese Characteristics” (my title). Original print artwork by Yang Yongliang

So what are the big takeaways from the Congress so far for the global community to consider?

  • The great rejuvenation of the Chinese nation” is the goal for the CCP and Xi alike. There’s no daylight between Xi Jinping and the Party on this point. China wants back at the center of the world.
  • Zero-COVID policy can only change marginally. It bears the weight of Xi’s claim that “Chinese-style democracy” is superior to traditional Western-style democracy. Look, fewer people died, right?
  • Whatever the economic headwinds, the ship of state will stay “secure” and on-course as long as Xi is at the helm. (Translation: state security and ideology to be prioritized over Deng’s economic reforms)
  • Taiwan’s incorporation into China — which, post-Hong Kong, is now only feasible by outright coercion or military force — is the sine qua non of the full achievement of China’s great rejuvenation

And what are some key things that we’ll be watching in this this space in the weeks and months ahead to gauge Xi’s and the CCP’s success in making progress toward this vision:

  • Fall-out from Russia’s invasion of Ukraine (neither of which were mentioned once in Xi’s speech)
  • Performance of China’s economy in light of Covid lockdowns, real estate sector implosion, regulatory crackdown on tech firms, and the drag of Belt & Road Initiative debt burdens
  • Push-back from the U.S. and Europe, from non-aligned nations and the developing world, and from China’s own citizens as Xi pushes dictatorship with Chinese characteristics as his “new choice for humanity.”
  • And, most crucially from my individual perspective, the “tech-tonic” shocks upending global economies as competition over microchip innovation, production and supply continues to ramp up

The Fat Lady won’t be singing in Beijing until Sunday but we know who’s in the lead after three innings. In the deciding game of this once-every-five year series, the Emperor For Life team currently holds a three-to-nothing lead over the Court of Rivals team.

Chinese President Xi Jinping attends the opening ceremony of the 20th National Congress of the Communist Party of China, at the Great Hall of the People in Beijing, China October 16, 2022. REUTERS/Thomas Peter

Who scored? As reported by Josh Chin in today’s Wall Street Journal (see below), Ding Xuexiang, Xi’s Chief of Staff, and Li Qiang, party boss in Shanghai, are both being widely mooted in Beijing as favorites to land Standing Committee appointments. Both are “Xi’s men.” Given the nature of the National Congress process, a candidate whose name is being touted loudly at this stage of the process is almost guaranteed to be formally anointed come Sunday. Additionally, the fact that Li Qiang’s name is being advanced as the likely Premier to replace Li Keqiang means another run based on the scoring system set up in my Chutes and Ladders post last Friday. So, after three innings, score three for the Emperor For LIfe team.

The third name being picked in today’s reporting by Josh Chin is Li Xi, the top party official in Guangdong Province. This player is harder to score in the sense that Guangdong is the province most committed to international trade and investment and Xi has been actively narrowing that space. For instance, during his nearly two hour speech during the opening of the Congress on Sunday, Xi mentioned “security” (read, “surveillance”, “lack of consumer data protection” and “insecurity for private investors”) more than sixty time while giving lip-service to market forces only three ties. Of course, Xi may be bringing Li Xi on board precisely to keep Guangdong on a tight leash but there’s at least some possibility that Li Xi could represent a balancing perspective representing power blocs more committed to maintenance of international trade linkages, if not economic liberalization. We’ll score Li Xi as a Court of Rivals batter who was stranded on second without scoring. After three innings, no runs in for Court of Rivals team.

Final comment: The score may only be 3-0, but the game is shaping up as a total rout by Team Emperor For Life.

Stay tuned for further updates as we get to the later innings. For now, take a look at Josh Chin’s fine reporting below from today’s Wall Street Journal.

China’s Xi Jinping Likely to Pack Party Leadership With Allies in Show of Strength

Shanghai party chief is a front-runner for premier, people close to party leaders say, despite outrage over Covid-19 lockdown

Chinese leader Xi Jinping is preparing to name loyalists to top positions in the Communist Party hierarchy, according to people close to party leaders, in a move that would strengthen his hand as he confronts mounting challenges at home and abroad—from a sluggish domestic economy to Western resistance to Beijing’s ambitions on the world stage.

One of the allies Mr. Xi aims to promote is Li Qiang, currently the top party official in Shanghai, the people said. Earlier this year, Mr. Li shouldered blame for a weekslong Covid-19 lockdown during which tens of millions of residents in the country’s financial center struggled to access food and medical care.

Mr. Li is likely to be elevated to the Politburo Standing Committee, the party’s top decision-making body, according to the people, who say the 63-year-old is also considered a leading contender to be named premier at China’s annual legislative gathering next spring.

China’s premier has traditionally assumed responsibility for the country’s economy, which has been battered in recent months by Mr. Xi’s zero-tolerance approach to Covid-19, a dramatic downturn in the property market and a regulatory crackdown that has created uncertainty for business.

China’s National Bureau of Statistics postponed the release of third-quarter gross-domestic-product data on Monday, a day before it was set to be published. An official at the statistics bureau cited unspecified work arrangements as the reason for the delay.

Others likely to join the Standing Committee include Mr. Xi’s chief of staff, Ding Xuexiang, and the top party official in Guangdong province, Li Xi, who once worked as a secretary to a veteran of the Communist revolution with close ties to Mr. Xi’s family.

The people close to party leaders cautioned that final deliberations on the makeup of the Standing Committee won’t be revealed until Sunday when the party elite is due to complete the membership of its top decision-making bodies for the next term.

China’s State Council Information Office didn’t respond to requests for comment.

The makeup of the next Standing Committee and the identity of the next premier have been the subject of intense speculation among Chinese politics watchers ahead of this week’s twice-a-decade party congress in Beijing, where Mr. Xi is poised to break with recent precedent and claim a third term as party leader.

While Mr. Xi seems assured of securing another five years in power, growing public frustration over his management of Covid-19 and the economy has provided ammunition to potential rivals trying to check his power by ensuring his allies don’t monopolize senior appointments.

If Mr. Xi gets his way, despite the pushback, he would surround himself with like-minded officials and upend succession norms that the party had honed over recent decades to prevent a return to Mao-style dictatorship. This might make it easier for Mr. Xi to pursue his priorities, but it also raises the stakes should that agenda fail, political analysts said.

“The risk of things going wrong and him getting the blame is much greater,” said Ryan Manuel, managing director of Bilby, a Hong Kong-based artificial intelligence firm that analyzes Chinese government documents.

With more allies holding key positions, Mr. Xi, who turns 70 next year, may start to delegate some of his authority to his trusted lieutenants as he gets more advanced in age, some of the people said. He has fewer political opponents to worry about, having neutralized many of them with anticorruption purges and cut off retired party elders from meddling in politics, they said.

A promotion for Li Qiang would mark a surprising political comeback. He appeared to be given extra leeway in handling a local Covid-19 outbreak in Shanghai in February, but infections spread out of control. A wave of online anger over the ensuing lockdown spilled over into physical clashes with officials, prompting several analysts to predict Mr. Li had lost his chance at making the Standing Committee.

China’s current premier, Li Keqiang, is due to step down next spring after completing two five-year terms—the maximum allowed under China’s constitution. He has occasionally contradicted Mr. Xi and pressured the Chinese leader to dial back policies seen as hurting growth. Political analysts nevertheless consider him one of China’s least influential premiers, whose sway over the economy dissipated as Mr. Xi centralized decision-making in his own hands.

Li Qiang, Li Xi and Li Keqiang aren’t related.

Analysts say other candidates to succeed Li Keqiang include Wang Yang, the head of China’s top government advisory body, the Chinese People’s Political Consultative Conference, and Hu Chunhua, currently the youngest among the country’s four vice premiers. In recent decades, Chinese premiers had prior experience as vice premier, a criterion that both Messrs. Wang and Hu satisfy.

Some foreign officials and academics have regarded Messrs. Wang and Hu as standard bearers for liberal-minded overhauls that favor market principles. Both are seen as being outside Mr. Xi’s orbit, having been brought along by other political patrons, though both have publicly backed the Chinese leader’s policies. The people close to party leaders said Mr. Hu may fall short of making the Standing Committee.

Among likely new members of the Standing Committee, Li Xi, Guangdong’s party chief since 2017, could step up as the next chief of the party’s top anticorruption watchdog, the Central Commission for Discipline Inspection, the people said.

Mr. Ding, the 60-year-old aide to Mr. Xi, is positioned to be named executive vice premier early next year, according to the people.

Top party theorist Wang Huning and anticorruption czar Zhao Leji are likely to join Mr. Xi as the only members of the current Standing Committee to get another term, though both are likely to be given new responsibilities, the people said.

He Lifeng, the top official at China’s state economic-planning agency and a friend of Mr. Xi since the 1980s, is likely to assume control over economic and financial policy, The Wall Street Journal previously reported. In this role, Mr. He would succeed Vice Premier Liu He, who has been Mr. Xi’s top economic adviser and his point man in trade talks with Washington.

The people close to party leaders and political analysts say Mr. Xi isn’t expected to elevate any potential successors to the Standing Committee, as doing so would undermine his own authority as paramount leader.

Both Li Qiang and Li Xi are too close to Mr. Xi in age to be considered viable successors. While Mr. Ding is younger, he has never served as a regional party boss—an experience long considered an unwritten prerequisite for candidates seeking China’s top political office.

Many in the business community see Li Qiang as a relatively liberal party leader who prefers discussing commercial deals to politics. In the early 2000s, he served as the top commerce official in the coastal province of Zhejiang, home to what would become major private companies including Alibaba Group Holding Ltd. He was later promoted to party secretary of Wenzhou, a city in Zhejiang that became a thriving entrepreneurial hub after China opened up its economy in the late 1970s.

After Mr. Xi became party leader in 2012, Mr. Li took top jobs in the relatively affluent regions of Zhejiang and Jiangsu, before he was elevated to Shanghai party boss in 2017.

If Mr. Xi can make Li Qiang premier, he would be able to consolidate control over the formulation of economic and social policy, said Chen Gang, a senior research fellow at the National University of Singapore’s East Asian Institute. “China’s reform and opening will continue, but the pace will slow down. Zero-Covid policy will continue, and Li may rely on stimulus policies to boost the economy,” he predicted.

Write to Josh Chin at Josh.Chin@wsj.com

Kevin Rudd, global president of the Asia Society and former Prime Minister of Australia, knows China well. He wrote in yesterday’s Wall Street Journal that:”The 20th Congress, which gets under way Oct. 16th will be different (from other Congresses since the opening of the 1982 reform era). There’s only one appointment that matters now: Xi Jinping, China’s Chairman of Everything. The delegates will reappoint Mr. Xi to a third five-year term as general secretary by a vote of 2,296 to 0.”

I don’t disagree with the main point that Kevin Rudd is making here but there is also a more nuanced view that is important to bring to bear. Wednesday’s post set the table for this more nuanced view. That perspective involves understanding the seven appointments which will be announced on Sunday to the Standing Committee under Xi. The crux of the issue is whether those seven appointments represents a line-up of Xi loyalists — in which case Rudd’s take is spot on — or whether there are appointments enfranchising power-bases at odds with Xi’s direction and indicating that the Party wants some checks on Xi’s untrammeled authority.

Here’s my cheat-sheet to reading next week’s Standing Committee appointments in light of this question:

Chutes & Ladders: 20th CPP National Congress Edition

So what to watch for?

(Scenario 1) Signs that the CCP is totally bought into Xi being Chairman of Everything

Premier Li Keqiang (aged 67 and therefore normatively eligible for another term) is gone

— No one in their early 50s joins the Standing Committee (showing Xi doesn’t want heir apparent)

Chen Min’er, a Xi loyalist and champion of Xi’s war on poverty, is appointed

Ding Xuexiang, a Xi loyalist and Xi policy enforcer, is appointed

(Scenario 2) Signs that the CCP wants some checks on Xi’s untrammeled exercise of power

He Lifeng, an internationally-friendly protégé of retiring economic czar Liu He, is appointed

Hu Chunhua, who like Xi had a stellar early career but hasn’t been close with him since, is appointed

Li Hongzhong, party boss of Tianjin and not “a dyed-in-the-wool” Xi man, is appointed

Li Xi, party boss of independently minded Guangdong province, is appointed

Finally, keep an eye on Chen Quanguo, party boss of Xinjiang in charge of Uyghur “reeducation,” and Liu Jieyi, head of the Taiwan Affairs Office and the political dimension of the Taiwan reunification project. Whether their stars shine brightly or dim will also give an indication of the degree of CCP support for Xi’s hardline policies on these two fronts.

So that’s the scorecard I recommend you follow. We’ll circle back next week and tally up the score after the Standing Committee line-up has been brought out, in rank order, onto the main stage of the 20th National Party Congress.

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