Nov 17, 2022

Fortress China

The Chinese Communist Party’s 20th National Congress was an all-out victory for Xi Jinping. China won’t necessarily be more crisis-proof as a result, but it will become more combative.

Chinese President Xi Jinping waves after his speech as the new Politburo Standing Committee members meet the media following the 20th National Congress of the Communist Party of China, at the Great Hall of the People in Beijing, China October 23, 2022.
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Xi Jinping has prevailed. October’s 20th National Congress of the Chinese Communist Party (CCP) will go down in history as a moment of triumph for the general secretary’s policies and as the point at which he consolidated his power. Xi will be in charge for at least another five years. He installed no heir apparent and could well pass over almost an entire generation of older leadership hopefuls when he finally hands over power. Much suggests that Xi will be the dominant figure in the Chinese system for many years to come, be it as general secretary or with some other title.

The core of Xi’s power is the CCP’s Politburo and its seven-member Standing Committee, but he has also placed extremely loyal allies in positions far and wide, in key power centers in Beijing and across the country. Politicians regarded as pragmatic, technocratic, or business friendly—like Vice Premier Hu Chunhua, for example—either did not make it into the inner leadership circle or found a place for themselves in a tableau clearly marked by a “Xi dominance” stronger than ever in systemic terms. Cynical observers already see these figures as pawns that could be sacrificed in the next crisis. Other observers see them as being more independent, but also interpret this as a testament to Xi’s power—he can afford to let them be so.

Xi’s triumph goes well beyond his personnel decisions. His ideological system now permeates key party documents, and new “banner slogans” like “two anchors” and “two safeguards” —which sometimes sound irritatingly cryptic to Western ears—reinforce Xi’s central role in the party and its pantheon of past leaders. Party media have taken the lead in dramatically accentuating his role—variously as “leader of the people,” “core leader,” and increasingly also as “helmsman,” in reference to the “Great Helmsman,” Mao Zedong.

These steps were mapped out and prepared long in advance, but none were inevitable. Ever fewer observers are dismissing their deliberately impressive staging as mere show—no surprise, given that the consequences of Xi’s politics are increasingly felt around the world.

Signals from the party congress suggest continuity in key policy areas that have preoccupied Xi in recent years—his hard line against the United States, assertiveness on Taiwan, support for Russia, and the “dynamic zero-COVID policy” at home. China’s approach to the pandemic has for years now isolated the country and made international exchanges much more difficult. Nonetheless, the policy has been loudly hailed by party media and acquired something like political untouchability. This has obscured the fact that China faces real challenges in healthcare, including a lackluster vaccination campaign.

Xi’s Struggle

But absolutely crucial for the long term is what’s going on behind the scenes—a fierce debate continues to rage over the future of China, the CCP, and a leadership that remains determined to stay in charge of the country. Xi is framing the debate ever more openly in strict Marxist-Leninist terms—as a dialectical and historical-materialist struggle and the working out of central “contradictions,” as necessary, almost affirmative confrontations and battles that have to be waged to secure the position of the party and its leadership, and China’s ascent.

To understand Xi’s politics and power in the wake of the party congress, it’s important to appreciate inner-party perspectives rather than apply external criteria, as is so often done. In the view of party members even beyond the loyal elite, Xi has got many things impressively right in the historic struggle in which the party is engaged. His exertions are widely seen as having succeeded—even as foreign observers point to China’s current weaknesses, international opposition is on the rise, and many executives overseas are joining in the lament about growing insecurity and diminishing reliability when dealing with the country.

Xi’s Battlegrounds

Xi can claim to have achieved long-term development and growth goals—at least on paper—and to enforce ideological discipline and organizational resilience within the party. But they are not enough to explain his standing, his power and the fear he inspires in others. Xi stands for visionary, highly ambitious and risky moves into uncertain territory (and without too much regard for losses). As seen from the party, he has enjoyed success on many political battlegrounds about the most highly sensitive policy areas.

Far-reaching military reforms and a wide-ranging anti-corruption campaign showed Xi tackling crucial party weaknesses, which no previous leader had dared to tackle seriously. He consolidated the party’s hold over China’s information space, extending its reach far beyond its traditional censorship and media control, and pushed it to adapt to new digital environments. Western influence in the country—everything from foreign espionage to critical media, from NGOs to religious movements—has been radically diminished. Protests, opposition movements, and other forms of resistance, notably in Hong Kong, have been successfully quashed. Pluralism and international ties in education and science have not only been reversed by Xi’s team, systematic ideological indoctrination have instead been made a key part of education.

Xi also stopped the “barbaric expansion” of capital, speculation and the uncontrolled activities of “arrogant” private companies that had made a systemic shift in China’s internal balance of power appear a real possibility. Rarely was so much capital destroyed in so short a time by regulatory action, above all in the previously flourishing digital sector. At the same time, Liu He, Xi’s economic czar, quietly initiated a thorough restructuring of China’s system of innovation. Full control over value chains in strategic industries has long been an explicit goal for Xi’s team—and has also led to successes in developing entire industrial ecosystems, from high-speed trains to shipping, from telecommunications to electromobility.

From the CCP’s point of view, Xi has also achieved solid success beyond China’s borders. The “escalation” of Chinese foreign policy from one of an ambitious regional power to that of a major power with aspirations to global leadership clearly bears Xi’s stamp. The Belt and Road Initiative was only the first experiment on the path to this transformation. Having begun with trade and infrastructure connectivity, Xi is using global initiatives on “security,” “data security,” and “development” to help shape a new China-centric world order. China’s initial success in the fight against COVID—very different from the difficulties experienced by many G7 countries—reinforced a notion born in the global financial crisis a decade earlier: a belief in China’s growing systemic superiority, a sense that “the East is rising and the West in decline.”

Most of the party elite is united by a long and profound distrust of the West and by a foreign policy outlook derived from the longstanding systemic and structural conflict with the United States. Not only has Xi long warned internally of the risks of intensifying this dispute —and prepared China for the fight. His position seemed vindicated by recent tensions with Taiwan that followed the August 2022 visit to the island by Nancy Pelosi, the Speaker of the US House of Representatives. Foreign policy may also be the area in which Xi managed a political masterpiece: international negotiations with China these days have to be conducted on an equal footing—and often ultimately on China’s terms. Xi can justifiably claim that his approach successfully guided the country through a period of severe global turmoil. Huge pressure on China—for example, through conflicts with the United States over trade and technology—has not altered the internal view that Beijing so far has had to make few compromises and not change course.

No Alternative to Xi

The backdrop of so many perceived successes at the CCP Congress allowed Xi to conjure the impression that there were effectively no alternatives to his leadership. The many conflicts and setbacks and the opposition he has faced he considers inevitable—and veritably seems to draw strength and legitimacy from them. The general secretary’s Work Report, published every five years, is probably the party’s most authoritative and detailed policy document. The latest version, delivered at this year’s congress, successfully asserts Xi’s policy program, painstakingly pushed through against much resistance over the last few years—a resolutely socialist modernization program, prizing national security above all else, the strategies of “dual circulation” and “self-reliance,” a focus on “common prosperity,” and Xi’s “new theory of development.”

China is meant to become more and more independent across all economic sectors, while the other economies of the world become increasingly dependent on China. A “national team” approach is now being pushed with greater urgency in the area of strategic technology development. It is explicitly meant to use “the socialist system’s unique capacity to concentrate resources” to close sensitive gaps in China’s “indigenous” industrial system. Moreover, if “the rich” are in future meant to “voluntarily” redistribute funds to state-sponsored programs in order to reduce income inequality, a much more state-oriented and techno-nationalist economic orthodoxy will come to the fore.

Impatient Self-Confidence

But this teleology of unstoppable ascent and the triumph and the theater have for some time been accompanied by a quite different tone. Couched in positive terms, the story goes something like this: history is moving towards China’s restoration as an economically, technologically, and systemically successful global center of power, but victory still has to be fought for—in a turbulent period of extreme instability and growing risk.

Not enough foreign observers have taken note of how Xi has sworn the country’s elites to “the great struggle,” for example, through the crucial November 2021 “historic resolution” or a piece in the party magazine Qiushi, published shortly before this year’s party congress. National security was declared to be the top priority, and all party members were reminded to use their fighting spirit and their personal skills to fulfill their responsibility of protecting the country and the party from danger as well as minimizing risk. The time for concessions was declared to be over—the 2021 resolution noted these only led to further disruptions and humiliations. But this impatient, almost aggressive self-confidence on the part of the Chinese leadership will now have to deal with an explosive mixture of crises in extremely difficult global conditions, homegrown problems which are immediately pressing but also have deep structural roots. It is impossible to say how they may combine or how severe they could become.

The party congress signaled confidence in victory at a time when millions of Chinese were back in lockdown. For the first time in decades, China’s economy is growing more slowly than the rest of Asia. The country’s currency is under severe pressure and an eerie sense of uncertainty has come to tinge the economic life in the huge empire. Even if China’s leaders can deal with the brutal slump in the real-estate sector and limit the effects of “contagion” in the construction industry and on municipal finances, they will continue to struggle with a significantly lower, more uncertain growth path.

The stability of the entire system is by no means guaranteed. Unemployment is rising rapidly, budget shortfalls are getting bigger, the pressure on individual companies and the financial system in general is growing. Critical developments seem almost inevitable. It is within the realm of the possible that often-broken promises of prosperity will make urban elites increasingly dissatisfied with Xi in his new term of office. Also, the country’s dynamic private sector remains uncertain about how far Xi’s regulatory frenzy will go. At the same time, the driving forces of China’s new growth model have not yet kicked in—and will not for some time.  

China’s problems at home will only be exacerbated by a difficult international environment. Recession is predicted for one third of the global economy in 2023. If this happens, China will not be able to use exports to power its economy out of crisis—and price turbulence and supply bottlenecks will only add to this problem. The consequences of the intensified technology conflict with the United States remain impossible to predict. New US semiconductor export controls will hamper Chinese efforts to catch up with the United States technologically. Whatever happens, Beijing’s impatience with China’s dependence in critical areas will increase dramatically.

The main question concerning China’s course over the next five years will be how Xi, more secure in power than ever, deals with rising pressure and acute crises. But the future remains wide open. Possible scenarios range from open confrontation with the West or reform and opening-up in reaction to severe economic crisis and systemic uncertainty to expansion of “Fortress China,” party control of the state, and the prioritization of security—or even to a relatively successful China as waves of turbulence engulf the whole world. The country’s course under Xi Jinping and the latest signals from the 20th Congress suggest China is set on becoming “Fortress China,” with ideological hardening, party control of the state, and security prioritized above all else. This does not mean China is on course for total isolation. It will, instead, push for a nimble and if necessary accelerated reorganization of globalization on Chinese terms, wherever opportunity allows.

China’s current lockdowns could be seen as a kind of training camp to ready for international isolation, should it arise. China is more engaged than any other country with building up strategic stores of food and energy. The leadership has commissioned stress tests to assess the impact of possible sanctions on the country’s economy, while the “self-reliance” campaign is now in veritable overdrive. Massive pressure from outside China and growing tensions within the country ultimately only confirm—in an almost circular way—what Xi has declared to be the central necessity all along: China must prepare for a difficult fight.

Mikko Huotari is the Executive Director of the Mercator Institute for China Studies (MERICS) in Berlin.

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