(Bloomberg) — President Xi Jinping has put himself in position to rule China for at least another decade, and possibly for life. The question now is what he’ll do with all that power.
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On one level, Xi has made it clear where he wants to take China. At the opening of the Communist Party congress last week, he repeated a goal to make China a modern socialist power by 2035, boosting per capita income to middle-income levels and modernizing the armed forces. Then by 2049, the 100th anniversary of the People’s Republic of China, he wants to ensure the nation “leads the world in terms of composite national strength and international influence.”
It’s how Xi plans to get there that’s unsettling markets. Chinese assets plummeted earlier this week after the president surrounded himself with allies during the twice-a-decade leadership reshuffle, notably positioning Shanghai party chief Li Qiang as premier despite a lack of central government experience. He also signaled a shift of priorities from economic development toward security, heightening investor anxiety over how an unrestrained Xi will steer the country.
“He’d want his legacy in history to be that he achieved the 2049 goal,” said Charles Parton, a former British diplomat and fellow at the Council on Geostrategy and the Royal United Services Institute. “Which if you translate it from party speak, is to become top dog, knock America off its perch, and order the world so that its governance better suits China’s interests and values.”
But Xi’s road map is laden with contradictions: Boosting economic growth while locking down cities under Covid Zero; ensuring technological self-sufficiency while wiping $1.5 trillion off the tech sector; opening more to the world while restricting speech and capital flows. And perhaps the biggest of all, achieving this grand vision while also risking a catastrophic war over Taiwan to complete a “historic mission” and “a natural requirement for realizing the rejuvenation of the Chinese nation.”
“He’s eyeing having an important position in the history books,” said Liu Dongshu, assistant professor at City University of Hong Kong. “A lot of things, including the Taiwan issue, are part of the narrative he can use to justify his extraordinary efforts to take a third and even a fourth term. If you want to break the rule, you need a reason.”
“In the past, if anything was in contradiction with economic development, many people know that China will not do it,” Liu added. “But now it seems that China is willing to sacrifice economic development and market confidence to a much bigger extent.”
When Xi rose to power in 2012, there were early hopes that he would follow his reformist father Xi Zhongxun in seeking to liberalize China at home and open further to the rest of the world.
Former Secretary of State Hillary Clinton told a US banking conference that China’s new leader was “worldly,” “sophisticated” and “more effective” than his predecessor, Hu Jintao, according to documents included in her hacked campaign emails released by WikiLeaks. Shortly after taking office, Xi trekked to Shenzhen on a trip that seemed echo the 1992 southern tour by former leader Deng Xiaoping, whose “reform and opening up” policy kickstarted China’s economic miracle.
Instead, Xi ended up increasing the party’s role in running the economy and centralizing control to make himself China’s most powerful leader since Mao Zedong. He ended China’s era of hiding and biding on the world stage, crushed dissent from Xinjiang to Hong Kong, and eroded four decades of power-sharing at the top levels of the Communist Party.
Xi struck a defiant tone in his speech to open the party congress this month, saying China wouldn’t change course even as it faces “dangerous storms” in a more hostile world. Instead, he forcefully offered China’s model up as an alternative to the US and its allies, in essence vowing to overcome the Biden administration’s efforts to hobble the nation’s development by depriving it of chips and other advanced technology.
“Chinese modernization offers humanity a new choice for achieving modernization,” Xi said.
So far, investors aren’t confident he can pull it off. After Xi unveiled the new elite Politburo Standing Committee, stocks in Hong Kong capped their worst day since the 2008 global financial crisis on Monday and the yuan weakened to a 14-year low. The historic sell-off has since rebounded slightly as Chinese officials have sought to reassure investors.
The party congress has dashed hopes among investors that Xi was turning China into “a hybrid model of restrained capitalism and a reform-minded communist philosophy,” said Gary Dugan, chief executive officer of the Global CIO Office.
“The past week’s events only reinforce the fear that Xi is taking the Chinese policy back to communism,” Dugan said. “His vision of openness does not quite align with that of the West.”
Optimists see Xi’s consolidation of power helping to smooth out policy implementation. On his team, Li as incoming premier is known for having supported companies including Alibaba Group Holding and Tesla Inc. when leading Zhejiang and Shanghai.
At the same time, however, Li also oversaw the punishing two-month pandemic lockdown for Shanghai’s 25 million residents earlier this year. And China still has no clear path out of Covid Zero, which has further hurt an economy weighed down by a property crisis and tech clash with the West.
“National security will likely be China’s top priority given the unstable international environment,” said Vivian Zhan, associate professor of Chinese politics at the Chinese University of Hong Kong. “China has to step up indigenous innovation.”
The one thing Xi doesn’t need to worry about is political stability, with nobody still around in China’s top leadership ranks who could stand in his way. But that doesn’t mean his job will be easier: The bigger issues around Covid, property, chips, Taiwan and an ideological battle with the US have no easy solutions.
“There’s a contradiction between how self-confident the leadership seems to be on the one hand, and how anxious they seem to be about security concerns on the other,” said Jean-Pierre Cabestan, an emeritus professor of political science at Hong Kong Baptist University. “The next five years are going to be harder for Xi Jinping than the past five years.”
–With assistance from Abhishek Vishnoi and Philip Glamann.
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