The major new direction taken by Xi Jinping, China’s President for life, is facing some serious obstacles.
Just when it is preparing to celebrate the 70th anniversary of the People’s Republic, Xi Jinping’s China is facing the end of its “forty glorious years” and a radical change in its status and environment. As in 1978, when Deng Xiaoping launched the revival of the country with his Four Modernizations, China is having to rethink its strategy and development model. But the return to a life presidency, the cult of personality and state control of the economy could block the reforms that the absolute power conferred on Xi Jinping was supposed to benefit.
After the death of Mao, Deng Xiaoping based China’s development on four principles: maintenance of the Communist Party’s monopoly, reaffirmed by the bloodshed in Tiananmen Square in 1989, but counterbalanced by collegial power and the ten-year limit placed on each mandate so as to prevent any new Cultural Revolution; the progressive opening of the economy to market forces and to the outside world; the relaxation of ideological control over the economy and society; and a peaceful return to the international stage. Xi Jinping has systematically gone against these guidelines. He has had the 19th Party Congress establish an imperial presidency. He has consolidated the position of state-owned businesses and put the brake on Chinese capital outflow to foreign countries. He has strengthened the hold of Marxist dogma on businesses and universities, and, lastly, has openly declared that China will have taken over world leadership by 2049.
This major change of direction is facing some serious obstacles. Firstly, growth is slowing down considerably – officially around 6%, it is actually about 2%. The number of company bankruptcies has increased by 20%. Last year, the Shanghai stock exchange fell by 25% and the outflow of capital keeps increasing. Above all, the Chinese development model based on industry, exports and debt has come to a dead end. Hyper-growth in the manufacturing sector has devastated the environment. The trade and technology war declared by Donald Trump is putting a stop to China’s commercial expansion; it is a red flag that has already meant Huawei being banned from a large number of countries. The rise in public and private indebtedness – the equivalent of over 260% of GDP – is generating dangerous speculative bubbles. There are problems financing projects within the framework of the “New Silk Road” because there are so many of them. Lastly, China’s stated aim to attain world leadership raises many fears, and more and more resistance is appearing – including in Asia – against the spread of China’s model of authoritarian government and of its state-run predatory economy that includes close supervision of the nations it helps and control over their vital assets.
Faced by a dilemma of proportions that have not been seen since Tiananmen, the Chinese leadership has begun an internal debate, on three issues. Firstly, the revival of economic reforms – with, at the top of the list, the restructuring of 20,000 zombie state-owned companies. Secondly, the chance of a finding a compromise solution with the USA in order to preserve growth levels. Thirdly, the choice of a less aggressive stand when it comes to asserting world leadership. In fact, more and more people believe it was a mistake to have defied the USA so soon, when Donald Trump was in fact putting an end to US domination and leaving the world stage, to the benefit of Chinese power.
Xi Jinping is caught in the crossfire of an economic slowdown, an escalating trade and technology war, and criticism of his aggressive stand on the international front. He is therefore preparing to make some tactical concessions. The main one consists of an armistice with the USA over trade, but which will not stop technological confrontation from continuing.
But China’s new emperor intends to save face by means of four modernizations, each of which give control priority over openness. Control of power and of the population by the Communist Party, notably through the program for continuous digital surveillance of the population. Control of businesses by the State, with the enshrinement of the public sector, more and more leaders of private businesses put in prison, and a brake put on opening Chinese capitalism to the international market. Control of ideology, with the reintroduction of Marxist dogma into the media, universities and businesses. Control of strategy by intensifying the arms race, taking back control of Hong Kong, increasing pressure on Taiwan, annexing the South China Sea, and using North Korea as an instrument to weaken the American presence in Asia.
The economic and political influence of Xi Jinping’s China will get stronger. Its most valuable asset is none other than Donald Trump, who is boosting Beijing’s ascension by pulling back US interests, by discrediting America’s international commitments, and by dividing the West. However, Xi’s four counter-modernizations could jeopardize China’s rise to world leadership. Restrictions on freedom are hardly compatible with an economy based on knowledge and innovation. The priority given to control rather than to reform is a hindrance to the economic and social transformation that was the main reason why the “forty glorious years” were such a success, and such reform will be decisive if China is to meet the challenges of the 21st century.
In celebrating its new era instead of speeding up its changes, Xi’s China is making the same mistake today as the USA did when the Soviet Union collapsed: it is giving way to excess. The hyper-power of the USA turned out to be a myth, linked to illusions about the victory of market democracy. In Xi’s mind, China’s “forty glorious years” were proof of the infallibility of the Communist Party, whereas they were primarily the fruit of the Chinese ability to mobilize themselves and adapt. In China too, absolute power works against reform, and therefore against the country’s development and power.
(Column published in Le Figaro, 14th January 2019)