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Over 10 years, Xi Jinping has methodically amassed power. Beginning with an unprecedented consolidation of military support, Xi then launched his ‘Tigers and Flies’ campaign, sidelining his political rivals along with officials accused of corruption. Over many years he patiently laid the groundwork to elevate Xi Jinping Thought to match the official stature of Mao Zedong Thought, and edge out Deng Xiaoping Thought, in the CCP’s ideological pantheon. He then overturned international commitments regarding Hong Kong, and brought that free-wheeling and Westernized city to heel with the introduction of a new security law. At the last 19th Party Congress in 2017, Xi tossed aside Deng’s “hide-and-abide” (韜光養晦、有所作為) approach to international relations and gave a triumphalist speech, announcing that China had not only arrived on the world stage but that it deserved central position on that stage. With the outbreak of the Covid-19 epidemic, Xi used sharp-elbow tactics to block scientific investigation into its origins in China and ordered sweeping zero-Covid lockdowns to highlight his government’s ability to take more effective action than was possible for democratic governments in the US and the West.  The Winter Olympics were meant to be Xi’s star-turn to demonstrate — more to the Chinese people than to international audiences (many of whom undertook diplomatic boycotts of the Games because of oppression of Uyghurs in Xinjiang and other issues) — that he was a flawless and unrivalled champion.  He even went so far as to claim that the authoritarian system he presided over represented a superior form of democracy to Western liberal democracy.

Chinese President Xi Jinping during a show commemorating the 100th anniversary of the founding of the Communist Party of China

Along this path to unrivalled power in China, Xi first jettisoned the system of collective rule by the Standing Committee of the Politburo which Deng had put in place to guard against recurrence of unbridled rule by any one individual, epitomized by the last years of Mao’s rule.  Longer term, Xi’s aim in amassing power has been to discard the limit of a president to two five-year terms, another safeguard Deng put in place and which he himself observed.

The announcement of leadership for the next five-year term will happen at the CCP’s 20th Party Congress in Beijing this autumn. At that meeting, Xi is widely expected to be named for a precedent-shattering third term. This will mark a historic high-point for Xi. His systematic consolidation of power has been designed, in part, to create an air of inevitability about this outcome. While his selection is still overwhelmingly likely, a number of significant fissures have appeared in recent weeks which crack this façade of total control.

ZERO-COVID

While undoubtedly successful in limiting the number of infections, hospitalizations, and deaths in the first two years of the pandemic, Xi’s Zero-Covid policy has created a raft of problems for China more recently, most notably during the highly-transmissible omicron phase. While incidences of infection, hospitalization and death have been dropping worldwide, they have been surging in China, with the number of confirmed cases more than quadrupling from mid-February to mid-March of this year. Elderly citizens are especially at risk due to their low rates of vaccination and hospitals have already become overwhelmed, due in part to the low number of hospital beds on a per capita basis in China. While it can be argued that the Zero-Covid policy ‘bought time’ for the development of vaccines, Xi’s championing of the locally developed Sinovac vaccine and his refusal to permit the use of more clinically-effective vaccines developed in the West, has blunted that advantage somewhat since the Sinovac vaccine is notably less effective against the omicron variant. The Zero-Covid policy has also meant that there is practically zero immunity in the Chinese population as a result of exposure to the virus as it becomes endemic worldwide. If SARS-COV-2 can be compared to a flame, China’s population is like a vast field of tinder. Finally, the economic and social costs have become glaringly apparent with the lockdown of an entire province, Jilin, in the northeast and the of Shenzhen and Dongguan – China’s two largest manufacturing hubs for information and communications technology (ICT) — in the south.

While Xi will, with considerable justification, continue to claim credit for his “triumph” over the coronavirus, China is by no means out of the pandemic woods and the setbacks of the last month make his strident claims ring more hollow, both internationally and domestically.

REAL ESTATE

In September last year, Chinese real-estate development firms began to feel the severe discomfort of a massive hang-over following years of real-estate speculation partying.  The problems were most evident in real-estate giant Evergrande but soon spread to a host of other significant players in the field such as Fantasia, Modern Land, China Property Group and Xinyuan Real Estate Group.  At the institutional level, the problems hitting the $5 trillion sector were the result of a unique PRC nexus of aggressive real estate development, lax banking, and local government incentive structures.  More simply, the problems resulted from “unrestrained borrowing, expansion as an end-in-itself, and corruption.”  

While the PRC Government claimed this week that the real-estate free-fall has been “stabilized,” pricing data from real estate developers across the country continue to show sharp deterioration. Also this week, Evergrande announced a further delay in sharing its plan for restructuring and for paying back bonds and other financial obligations.  The government has strong reason to put on a brave face while throwing up a curtain of opacity around the problem.  Property-related industries account for more than 30% of China’s economic output.  Continued problems in the sector could drag China’s growth below the optimistic, post-pandemic official target of 5% growth, a minimum level which must be maintained in the years ahead for China to escape the ‘middle income trap.’ More immediately, it risks alienating an important swath of the urban public, 80% of whose household wealth is tied up in real estate and who see their property values plummeting. (A particularly aggrieved segment of this population are buyers who have paid up front to the developers, as is common in China, for a property not yet built and for which construction has halted indefinitely while values continue to slide).

While Xi has voiced loud promises to not let the bottom fall out of this sector and to support homeowners currently caught in the fallout, there is little evidence on the ground of these promises translating into reality.  Meanwhile, the situation risks alienating the public and sowing dissent among officials.

‘COMMON PROSPERITY’

As measured by the Gini coefficient, China ranked fourth in the world in 2022 for greatest wealth disparity and inequality (after South Africa, Namibia and Sri Lanka). While Deng Xiaoping had announced famously in the late 1980s that “to get rich is glorious” and to “let some get rich first,” the extreme degree of inequality persisting in China four decades later is a source of growing social and political concern. The heady days of 10% growth have long ago disappeared and Chinese who thought they would be boarding on a later rail-car in the national train of prosperity now worry that the train may have departed, stranding them on the platform.

To counter this source of social unease, Xi unveiled with great fanfare in 2021 a policy of ‘Common Prosperity.” Writ large, this policy was meant to cement Xi’s place — side-by-side with Mao and with Deng slightly in the background – in China’s pantheon of modern heroes.  In this telling, Mao was the one who roused China to throw off its ‘Sick Man of Asia’ bondage to foreign imperialists and to stand up. Deng contrived a transitional stage of capitalist-style wealth-creation for enough Chinese that China could attain wealth and power (富权). It was left to Xi to complete this project of national rejuvenation, by reinstituting a Marxist “Common Prosperity’ for all Chinese and returning China to the center of the world stage.

Without getting into either the ideological weeds (such as Xi’s ‘Dual Circulation’ strategy) or deep into the tangle of economic measures (e.g., restrictions on overseas listings by Chinese companies, user-data and other controls put on Chinese Big Tech firms, clampdown on student test-prep and video game commercial sectors, etc) which Xi embraced in 2021 to advance his Common Prosperity agenda, the general effect was felt quickly and keenly in the form of abrupt economic slowdown. In the first quarter of this year, the Common Prosperity program has been ‘walked back’ by numerous party officials who have emphasized that it represents a historic project more than an immediate project. Premier Li Keqiang, in his lengthy speech to 3,000 deputies at the opening of the National People’s Congress earlier in the month, mentioned Common Prosperity only one time. For educated Chinese — who have been skillfully parsing official pronouncements closely ever since the Cultural Revolution for clues about where the country is headed — this lack of visibility and endorsement for Xi Jinping’s signature program represents a remarkable degree of push-back for Xi by top-level leaders.

UKRAINE

Chris Buckley’s report in last Friday’s New York Times traces the contours of what is potentially the most damaging crack to appear in Xi’s carefully-crafted, monolithic façade of power and control.  The article details the war of words that has erupted on the Chinese internet following the warning delivered by a respected scholar and politically-connected insider, Hu Wei, to the effect that China “risked becoming a pariah if it didn’t denounce Russia’s invasion of Ukraine.” As was covered in last week’s post and as continues to play out this week, Chinese officials have contorted themselves by claiming to be neutral and wanting peace while following Putin’s lead in not calling the ‘special military operation’ either a war or an invasion, in not objecting to Russia’s violation of Ukraine’s sovereignty and territorial integrity, and in amplifying Kremlin disinformation about U.S. bio-military labs in Ukraine. 

As argued last week, this has the potential to grow into a strategic blunder for China with significant geopolitical fall-out. It may affect not only Xi’s ambitions to retake Taiwan – the last territorial piece in his China Rejuvenation plan – but to bear long term costs for China as a rising power in the Indo-Pacific region and for its standing in the world at large.

None of this is to suggest that Xi will not get his third term as President this fall. It is only to say that the carefully-cultivated blooms of infallibility and inevitability are now off the XJP rose.

Xi has been in power for less than half of Putin’s tenure (18 years as President and 4 years as the power behind the throne for Medvedev) but there are doubtless people in Zhongnanhai wondering to themselves, post-Putin’s invasion, whether Deng didn’t get it right with his moves to limit the untrammeled exercise of power by an individual leader.

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