Xi Jinping’s re-anointment as the ‘King’ of China has brought about consequences that were not expected by either China or the wider world. China has ended up losing more than what the world lost in the initial days of the Pandemic.
PUBLISHED IN THE FINANCIAL EXPRESS. READ THERE
November 14, 2022
Much analysis has been done on the Chinese 20th Party Congress and the appointments of various Xi-men to the top jobs. The actual impact on China post the Congress is now seeping out in front of the world stage and needs to be pieced together to understand what has actually happened and what the world could expect going forward.
The first impact would be the onset of an ideological change in thought. The return of the old Marxist thought with Chinese characteristics of course. This would include decoupling with western culture and reenergising culture anchored within CCP and China. The frequent mention of “national security” and “state power” showcases the bent towards transforming into a more Nationalistic society. The symbolic visit to the party’s Mecca, Yanan and the mention of “a great struggle” by Xi Jinping can be seen as a start towards the return to Maoist lines of thought. Xi, who today is looked at as a “core” leader, going against the decades of efforts by the previous party leaders to reduce the chances of a cult or a dictatorship revolving under one man.
Many Chinese people fear a repeat of the disasters of the “great” revolutions during Mao’s era. The way Xi Jinping was able to manoeuvre himself into being all powerful is by creation and the sustenance of fear. The purges of 1.4 million party members since he took power is a statistic that the CCP publishes itself. This fear was clearly visible during the 20th Party Congress proceedings amongst even the seniors within the CCP. This fear and ideology is also being instilled within the youth of the country by changes in the education system and controls over lifestyle.
The second impact would be seen on the PLA, whose new front face shows the Xi-men along with the intent behind the changes made. Commanders with experience in the domain of Taiwan and India have been brought up disregarding the age clause, followed religiously till now. Post retaking his position, Xi visited the CMC and stated the PLA must be ready to fight and win wars. This is not something new and has been said since the times of Hu Jintao. He also said, ”We will strengthen the normal and diversified use of military forces, carry out military struggles with determination and flexibility, shape the security posture, contain crises and conflicts, and win local wars”.
China People’s Daily reported Xi had earlier warned of “dangerous storms” on the horizon in the Communist party’s congress as well as instructed the armed forces to thoroughly study, publicise and implement the guiding principles of the 20th CPC National Congress. Further he commented on ’Informationised’ conditions which he said are not only important, but today is the dominant condition of warfare. The PLA White paper paper of 2019 mentions a sphere of influence of China in the regions of east and south east Asia where China aspires to keep the US out. It is for this Xi has set the goal of fully modernising the PLA by 2027.
Additionally the “Action Guidelines on Military Operations Other than War” issued this year in June have brought to light an eased up process being set up for the faster deployment of troops as required internally or externally. These guidelines have been issued because of lessons learnt during the Covid pandemic and the unrealised requirements of evacuation of citizens during the start of the Ukraine war. The guidelines also entail operations to stabilise situations internally in Tibet or Xinjiang or even Taiwan when required.
When the going gets tougher for China economically, the biggest impact would be on its people, examples of force deployment during the recent protests against the banking sector have not gone unnoticed. The constant focus of Xi himself on “increasing instability and uncertainty” and “colour revolutions” specifically points towards ground work for the interference of the PLA internally, when required. Finally he also said “We will strengthen party building across the board in the people’s armed forces to ensure that they always obey the Party’s command,” which points towards an existing opposition within the ranks, who most likely have been sidelined.
The increasing scope and frequency of these self-critiques during the tenure of Xi Jinping as chairman of the Central Military Commission casts doubt over the senior party and military leadership’s confidence in the PLA’s ability to prevail in battle against a modern enemy. Further the news about western pilots training Chinese pilots in concepts of modern air combat show a glaring lack of understanding of modern battle concepts within the leadership and ranks. Xi is bent upon pushing his forces to ensure the modernization goals are met at any cost.
China positions itself as the manufacturing hub of the world. China’s economic growth has been attributed towards lower cost of labour, lesser bureaucratic hassles etc. The Covid crisis can be seen as a mark on an upward graph of China from where the story starts to go south. Decoupling, as it’s called, may not be fully realised but the beginning of the process has led to a drain on the Chinese economy. This phenomenon combined with the Zero Covid policy and common prosperity has left a fractured capability as well as the will of the people to be able to drive Chinese growth.
The recent news about a reduction in Chinese exports, although marginally, throws some light into how the future may open out for the Chinese economy. Apple, whose plant has been locked in with its workers, has announced delays on his latest iPhone 14, placing a previously unknown hurdle in the smooth Chinese manufacturing system. Recent reports show that the Chinese deficit has increased to $1 trillion due to the economic slowdown. American sanctions on the potentially large chip industry within China has resulted in a slowdown in the high-end electronics industry as well as military components. The Hong Kong markets as well as the Chinese Yuan have seen sharp declines since October 24, the date when Xi Jinping was re-annointed.
Hong Kong’s Hang Seng Index fell 6.4 per cent – its largest drop since the 2008 financial crisis – the Chinese yuan hit a 14-year low against the US dollar and a Goldman Sachs index of US-listed Chinese stocks fell 15 per cent. Just as a comparison, the world markets suffered a loss of $6 trillion in the end of February 2020, as the world was experiencing the deadly second wave. Post taking back his position, the Chinese markets lost the same amount of money in one week. A recent study by Goldman Sachs talks about the Chinese being months away from even starting a reopening plan for their country.
In the economic realm, many of those earning promotions are more versed in Communist Party ideology and politics than technical know-how, even as a large number with economic experience and technocratic skill head for the exit.The man slated to be China’s next vice-premier overseeing the economy, He Lifeng, 67, who is now head of the National Development and Reform Commission, has an economics PhD from Xiamen University.But many analysts see in his résumé an inordinate focus on state-led projects, including the Belt and Road Initiative, rather than watching over high-quality private sector growth that some believe is required to revive the Chinese economy. Many analysts believe that Xi does not have the Chinese economy and its problems in his focus at all.
Last week the markets in China showed a significant spike based upon a rumour that the Chinese were planning to relax the zero Covid policy. This was of-course quickly quashed by the party officials re-establishing their commitment towards Zero Covid. Chinese efforts in holding up their economy and to stick by their Zero Covid strategy will actually provide for a great excuse for the world to decouple faster as the growing number of sporadic outbreaks and its consequent reaction don’t seem to be going away anytime soon.
It is now bad to be rich in China. Xi Jinping’s common prosperity has brought an old idiom from the days of Mao back to life. While state companies have become bigger and more powerful, private companies in China have come under heavy regulation and lost some autonomy. In 2019, China began buying up stakes in private companies, and it also took over private businesses it considered undisciplined. A predominant fear within the CCP of the private sector becoming more powerful and able to influence national politics has brought the proverbial hammer down on such entities.
Xi said “We will keep income distribution and the means of accumulating wealth well-regulated.” The common prosperity plan has been defined as a Robin Hood style wealth redistribution in the form of taxation and other regulations. The sheer factor that entrepreneurs have been personally called out by Xi, will result in lowering of confidence amongst potential investors both domestic and foreign.
The well-known fabric and social agreement between the Chinese people and Communist Party is based on a promise by the latter to ensure wealth, high standard of living as well as prestige for the citizens. The Chinese people have been exposed to harsh health policies and technology designed to restrict movement as well as accessibility to social benefits as and when deemed fit by the Chinese authorities. The declining population as well as socio-economic movements like “lying flat” or “let it rot,” has resulted in the new generation not having the drive to work.
Interference in personal lives of people, reportedly to check family plans of newlyweds is amongst some of the bizarre steps being taken in China. The exodus of the super rich, reportedly about 10,000 in numbers with a combined value of about $48 billion, are looking at getting their golden tickets out of China. The Chinese government has tightened capital controls in order to prevent this outflow from China as a preventive measure. The Chinese people looked the other way and tolerated various diktats from the CCP as long as their standard of living was maintained. What happens when that basic fabric is damaged not just by harsh lockdowns but also by a crashing real estate market, growing unemployment, tighter social controls just to mention a few.
The youth unemployment in China has risen to 20 percent with no mention of this by Xi during his speech. In a rare moment of a public protest that spread through China just before the session and showcased a sublime opposition to what is happening in the country. The Chinese people have found innovative ways to not just communicate amongst each other but also send a message to the world at a critically important juncture for the CCP. The bridge man as he is called, is not impactful on the ground but in the minds of the Chinese people as the two things that fail a leader in China are the lack of food and loss by a foreign army.
This fact is not lost on the CCP, which is seen clearly by the cover up operation launched to remove this display from the Chinese internet. Xi’s promise to the Chinese people in the 18th session of a “Beautiful Life” is a far cry from the life of Chinese citizens today. The Chinese Failure to create an internal consumption market as stated by the IMF along with a very high domestic saving rate is a telling sign of the confidence amongst the Chinese themselves in the system. The high saving rate which also resulted in a higher GDP, is kept for real estate purchase, a sector whose bubble has burst and pensions or old age expenses. The growing demographic problem in China would put greater pressure on this saving, coupled with the losses in the housing market and the two year plus lockdown.
The return of Xi Jinping and his Xi-men are in full avatar to ensure the “River Flows” in the right direction. The impact of the return of Xi would be multifold in China and its international relations. The Chinese leadership talks about opening up to the world while in practice they are closing China and its potential and regressing back to the likes and times of Mao. There is a thought process that states, the decoupling from China is today being helped by Chinese policies making it easier for the world to find alternatives as the Chinese one seems to be ‘locked in’.
Author is a Geopolitical Analyst at DEF Talks. You can listen to him or read more on www.thedeftalks.com