Will the Xi Jinping Leadership Take Up Reformist Policies After the 20th Party Congress?

That President Xi Jinping and his faction will dominate the 20th Party Congress is apparent from the Politburo announcement that the week-long, five-yearly conclave will take place on October 16. The Politburo meeting, which was held on August 30, said that the guiding principle of the party and country would remain “Xi Jinping Thought on Socialism with Chinese characteristics for a new era” (Gov.cn, October 16). The Politburo reasserted that the Chinese Communist Party (CCP) would follow principles laid down by Mao Zedong, Deng Xiaoping, Jiang Zemin, Hu Jintao, and above all, Xi Jinping. However, the dictums on reform and the open door – as well as the “lie low” foreign policy – promulgated by “Chief Architect of Reform” Deng in the 1980s and 1990s were conspicuously absent from the Party Congress announcement. Instead,  the communique emphasized the so-called “three continuances” (三个继续, san ge jixu). This is a reference to Xi’s efforts to uphold Mao Zedong-style “common prosperity” (共同富裕, gongtongfuyu); to sustain “party construction” (党的建设 (dang de jianshe) in order to ensure the loyalty of cadres; and to work toward the formation of a “community with a shared future for mankind” (人类命运共同体,renlei mingyun gongtongti) (Xinhua, August 30; Ming Pao, August 30).

The CCP’s commitment to promote the “party core’s” (党的核心, dangdehexin) as the locus of statecraft is an unmistakable indication that Xi will be granted an unprecedented one – or even two – more five-year terms as supreme leader. This has been followed by a resurgence of a Cultural Revolution-style personality cult around Xi in CCP media. One officially sponsored video proclaimed “Chairman Xi, I love you, I think of you every day… You are the savior of the people” (Youtube.com, August 31). Another article by the President of Xinhua News Agency, Fu Hua promulgated the so-called “three one-minutes theory,” which stipulates that “we must not even for one minute stray outside the party’s ranks; not even for one minute stray from the directions laid down by General Secretary Xi Jinping, not for a single minute be outside the scrutiny of General Secretary Xi Jinping and the central party leadership” (HK01, September 5).

Reform Versus Retrogression?

Xi undoubtedly remains in favor of a semi-Maoist, statist economy, which is under the comprehensive control of party-state authorities. Xi’s preference for tight state control over the economy was fully revealed during his visit to Liaoning Province immediately after the informal Beidaihe leadership conference concluded on August 16. In his speeches in Jinzhou and Shenyang in the northeast province, he played down market-oriented reforms and stressed the importance of “never changing the colors of the red heaven and earth” (不允许江山变色, buyunxu jiangshanbianse). The underlying logic is familiar: to give market forces and foreign investors a big play in the economy will amount to “changing the colors” of the People’s Republic of China (PRC), which is a product of the protracted struggles waged during the successful Communist revolution (Gov.cn, August 18; Qstheory.cn, August 18).

The big question for China after the 20th Party Congress is: will Xi shift to a more pro-reform posture in order to save the faltering economy? The PRC is experiencing the most severe financial headwinds since the Era of Reform was launched by Deng Xiaoping in the late 1970s (China Brief, July 18). Even though Xi will almost certainly be endorsed by the Party Congress, many Congress deputies and Central Committee members, particularly those from the provinces and cities, will be asking Beijing for a financial bail-out (BBC Chinese, August 31; Deutsche Welle Chinese, April 25). Despite his well-known aversion to market economics and his preference for reviving Maoist norms in economic policy-making, Xi may be compelled to abide by at least the majority of the relatively pro-reformist policies rolled out by out-going premier Li Keqiang (who will remain in office until March 2023) over the past two to three months. These pragmatic measures have been integral to sustaining growth, providing help to the struggling real-estate and technology sectors, preventing unemployment from worsening, and persuading foreign investors not to withdraw from the China market (Aljazeera.com, August 17; Yazhou Zhoukan, June 12).

At a State Council meeting one day before the August 30 Politburo session, Premier Li called for “unremitting efforts to create a market-oriented, law-based and internationalized business environment.” Li added that market-oriented reforms had “contributed to eliminating impediments to development and stimulating market vitality as well as public creativity” (Xinhua, August 29). Much of Li’s efforts to relax the money supply and boost government investment, including the 19 measures unveiled by the State Council in late August to buttress output, are expected to be implemented for at least a year or two after the 20^th Party Congress. (Lianhe Zaobao, August 25; Bloomberg, August 24). Recent measures to bail out heavily indebted real-estate firms and to maintain employment, which were announced by Premier Li when he met provincial leaders in Fuzhou in July and in Shenzhen in mid-August, will also likely continue into next year (News.cn, July 10; People’s Daily, August 17; Gov.cn, August 16). Such efforts have assumed added urgency as most Western (and independent Chinese) researchers have lowered their projections for China’s yearly GDP growth to just around 3 percent. China’s growth rate for 2023 is likely to be even lower, and could amount to a statistically insignificant increase (SCMP, August 18; CNBC.com, August 18).

Some analysts have interpreted the different areas of emphasis between Premier Li and supreme leader Xi as “a struggle between two lines.” However, it is the supreme leader who is likely to have the last laugh on the eve of his “coronation” as the official “party core for life.” According to this line of argument, Xi does not necessarily think highly of policies favored by pro-reform cadres such as Premier Li.  For example, a key clause in Li’s Shenzhen speech that “the waters of the Yellow River and Yangtze River will not flow backwards” (黄河长江水不会倒流, huanghe changjiang shui bu hui daoliu) has been banned in the official press and social media (Radio French International, August 21; Radio Free Asia, August 18). This censorship has occurred despite suggestions by the party media that Li’s emphasis on economic development and Xi’s sticking to strict socialist edicts can somehow be reconciled – albeit with priority given to ideological discipline over free-market liberalization. After this year’s Beidaihe leadership conclave, state media ran articles avowing that the harsh zero-COVID policy – which has become a kind of political campaign to test cadres’ compliance with Xi’s orders – will coexist with market reforms (VOAChinese, July 4; Radio Free Asia, April 13). For example, a commentary in the August 24 edition of People’s Daily was entitled: “We must grasp both hands and both hands must be [equally] tough – economic development as well as prevention and control of the pandemic” (People’s Daily, August 24). The article claimed that promoting people’s health was a prerequisite for economic advancement.

In the past fortnight, COVID-19 epidemic prevention lockdowns, which are similar to those that were imposed in Shanghai and Wuhan in the past year, have reappeared, partly as a demonstration of local cadres’ fealty to Xi. On September 1, public health authorities in Chengdu, the capital of Sichuan Province, which has over 20 million residents, announced the imposition of a Shanghai-style lockdown. This resulted in residents dropping everything to flock to supermarkets, where chaotic scenes of desperate people fighting to grab foodstuffs from live chickens to vegetables unfolded. As of August 20, some 74 cities with a total population of 313 million have been placed in at least partial lockdowns (CNN, September 5; VOAChinese, September 4; BBC Chinese, September 2).

The American Problem

Another issue of ideology versus practicality that the Xi leadership must grapple with is reduced access to the international economy, which is an impediment that China never faced during the Reform Era. Over the past half-decade, the partial “decoupling” of the Chinese and American economies has gained momentum. Increasing geopolitical competition has also prompted the U.S. and its allies to impose a de facto boycott in the key area of the supply of micro-chips and other advanced components necessary for China’s advanced technology sector. Last year, China spent $350 billion importing high-end chips, mainly from Taiwan, South Korea, Japan and the U.S. In 2015, the State Council set aside $1.4 trillion to support research and development of the technology sector through 2025. Since the mid-2010s, Beijing has poured in $50 billion to subsidize China’s chip-making industry, but the results have been disappointing (RICS.org, July 8; Radio Free Asia, January 28). The country’s most advanced chipmaker, the Semiconductor Manufacturing International Corp (SMIC), lags behind the Taiwan Semiconductor Manufacturing Co. by at least one generation of technological attainment. Several huge microchip firms, including Tsinghua Unigroup – as well as 50-odd companies in the same sector set up by IT giant Huawei Corp – have either amassed huge debts or declared bankruptcy. This prompted Beijing’s anti-corruption agencies to arrest several top managers of chip factories, including the former president of Tsinghua Unigroup Zhao Weiguo on graft-related charges beginning early this year (Technologyreview.com, August 5; SCMP, August 2).

Other measures adopted by the Biden presidency to “choke off” China include prohibiting more Chinese firms, including superficially “private” companies that are allegedly linked to the PLA from doing business with American entities. Limits have also been placed on American funds investing in Chinese markets (Guangming Daily, August 18; Netease, August 17). After studying the sanctions that the U.S., European countries and others imposed on Russia in the wake of the February 24 invasion of Ukraine, the Xi leadership has prepared his country and the PRC economy to guard against the “conspiracies” of the U.S.-led “anti-China coalition.” In late 2020, Beijing initiated a policy of “dual circulation ” (双循环, Shuang xunhuan) (Gov.cn, November 25, 2020). The game plan calls for facilitating “internal circulation” (国内循环, guoneixunyuan) — a reference to the fact that while the country is still eager to absorb Western investment and engage in the context of “international circulation” (国际循环, guojixunyuan) — the economy is also ready to rely primarily on internal resources, especially its 1.4 billion person market in order to sustain itself (Xinhua, April 25; People’s Daily, November 29, 2021). Last month, various official media outlets, including Historical Research, which is published by the Chinese Academy of Social Sciences, ran articles defending the “close-door policy” (闭关锁国, biguansuogu) of the Ming Dynasty (1368-1644) and the Qing Dynasty (1644-1911). These articles asserted that the imperial courts did the right thing to prevent foreign countries from subjugating China through “unequal” trade arrangements (Chinadigitaltimes.com, September 1; VOAChinese.com, September 1).

Conclusion

Despite the PRC’s current emphasis on self-sufficiency, after the 20th Party Congress, it is possible that Xi may seek some kind of compromise with the Biden administration in order to ameliorate the unprecedented difficulties facing China’s domestic economy. For example, the two countries reached an agreement in late August to establish an auditing protocol for Chinese firms seeking to list on the New York Stock Exchange and Nasdaq (NYTimes Chinese, August 29). Further temporary arrangements to improve China-U.S. economic and geopolitical ties could be made during the expected face-to-face talks between Xi and President Biden on the sidelines of the November 2022 G20 summit in Jakarta. In the longer term, however, due to the likely exacerbation of the intensifying geopolitical contest between the PRC-Russia authoritarian axis on the one hand, and the U.S.-led coalition on the other, there are definite limits on the resumption of meaningful cooperation between the world’s two largest economies. Despite reservations expressed by senior cadres from anti-Xi CCP factions, Xi is unlikely to abandon either his strong support for Vladimir Putin’s Russia, or his determination to “liberate” Taiwan, perhaps during his third term  (2022-2027). While a military adventure such as a “hot war” against Taiwan might bring forth devastating anti-China sanctions from the U.S. and its allies, such muscle-flexing might also allow the party leadership to impose martial law in China and to silence all opposition to massive socio-economic injustices. In the final analysis, much depends on whether the “Mao Zedong of the 21st century” is genuinely convinced that “the East is rising and the West is declining” (Radio French International, August 27; SCMP, October 22, 2021). A key element influencing Xi’s calculus will be whether the Washington-led coalition can disabuse him of his apparently unrealistic assessments of both China’s strengths and the perceived weaknesses of the West.

Dr. Willy Wo-Lap Lam is a Senior Fellow at The Jamestown Foundation and a regular contributor to China Brief. He is an Adjunct Professor in the History Department and Master’s Program in Global Political Economy at the Chinese University of Hong Kong. He is the author of six books on China, including Chinese Politics in the Era of Xi Jinping (2015). His latest book, The Fight for China’s Future, was released by Routledge Publishing in 2020.