In October 2019, the Chinese Communist Party (CCP) celebrated the 70th anniversary of its founding. During this lavish celebration, three Chinese leaders were extolled: Mao Zedong, the first leader of Communist China, for providing the nation “unity;” Deng Xiaoping for delivering the country economic “prosperity”; and Xi Jinping for giving China “strength.” This set the stage for the 20th National Congress of the CCP of the People’s Republic of China (PRC) that began on October 16, and laid out Xi’s goal of securing his place in this pantheon of Chinese leaders.
The CCP holds a congress every 5 years, and they are typically borings affairs. The meeting is largely a communication and management event, promoting the achievements of China and the Communist Party. The Central Committee is the body that makes actual decisions, a very opaque process, but this CCP meeting was special. The roughly 3,000 delegates that arrived in Beijing had a single primary goal: confirm Xi Jinping for a third term as leader of the party and president for life.
This was in breach of previous retirement norms that were established by the Party to avoid a reoccurrence of the so-called “cult of personality” during Mao’s rule. But Xi had this term limit abolished by the party in 2018 as well as the de facto retirement age. It is likely that he will be named the “Leader of the People” early next year which is a title once held by Mao. The Congress did not result in major additional announcements, but it was important for leadership appointments and what Xi’s remarks and report to the Congress suggest for the nation’s future.
In determining China’s future direction, it is important to examine Xi Jinping’s past and the worldview it created. He was born a “prince” as his father (Xi Zhongxun) was a senior party official and member of the Central Committee during the rule of Mao. He fell into disfavor during the “Cultural Revolution” and was imprisoned for several years. Xi’s family was both disgraced and punished for his father’s alleged crimes. His sister committed suicide. At 16 years of age, Xi was sent to work on a farm in rural China for seven years. His father as well as the family were eventually “rehabilitated,” and Xi Zhongxun was elected the deputy chair of the Standing Committee of the National People's Congress.
Xi’s early life taught him that the party was the crucial mechanism to ensure that the nation did not experience such social chaos in the future. Consequently, Xi is first and foremost a communist and plans to move the nation to closer adherence to Marxist doctrine. This may be surprising to many in the West who thought that Communism as an ideology was effectively dead. Kevin Rudd, former Prime Minister of Australia and a well-known expert on the PRC, observed that this was true in China, too.
That’s because in the late 1970s CCP leader Deng Xiaoping set aside the Marxist-Leninist orthodoxy of his predecessor, Mao Zedong, in favor of something more akin to state capitalism. The economic results were extraordinary. In 1988, 88 percent of the Chinese population lived in poverty, but by 2017 that had been reduced to less than one percent. Still, it has been clear for several years that Xi has brought the era of pragmatic, nonideological governance to a crashing halt. He has and will continue to bring more and more of the private economy under government control.
As a result, he has been ruthless in the acquisition of power. Early in his tenure as General Secretary of the Party, Xi announced that elder leaders of the party would no longer have the power and influence they had had under his predecessors and even prosecuted some on charges of corruption. The threat of similar probes into other elders — or their family members — remains a powerful deterrent to challenge him.
This was reconfirmed during October’s Party Congress with appointments of new senior and lower-level officials who are clearly loyal to Xi. These were not only changes to the Central Committee but also the Politburo and in particular the Standing Committee, the highest decision-making body in China. All its members are now acolytes of Xi, and for the first time in 25 years, there will be no women in the Politburo.
Xi provided some idea of his policy focus from the speech he delivered on the opening day of the Congress and the final report. His priorities appear to be in three main areas: party politics, foreign/military policy, and economics. In terms of party politics, the report urged both the nation and new leadership to stay “in lockstep with him in thought, politics, and actions” and further underscored that “the party is the supreme political force in the nation.”
The Chinese economy is clearly slowing, and significant challenges lie ahead. Unemployment for Chinese under 25 is over 20 percent, and it was not a coincidence that the government delayed the release of economic data prior to the onset of the Congress. It was released a few days later and showed that the economy had grown 3.9 percent — missing its 5.5 percent target rate. Furthermore, economic growth in China from April through June was slower than in the U.S.
This reflects a larger dilemma. A developing economy growing at a rate of 2 or 3 percent must operate under different policies from one growing at a rate of 6 to 8 percent. Because of the weight of loyalty now demanded by Xi and greater overall control of the economy by the party, changing policies without direct approval from the top will be more difficult.
Xi must also reckon with the world’s worst housing-related financial crisis: vast speculative excess, mortgage strikes, and people who have pre-paid for apartments that were not built. In many cases, real estate developers have collapsed financially prior to completing the construction of homes and apartments. This has resulted in large protests at banks since countless depositors have lost their entire savings. Consequently, it is a distinct possibility the Chinese housing market could collapse with massive economic consequences.
Last year, Xi also announced a slew of new regulations on the Chinese technology sector, with the goal of reigning in the power of this growing part of the economy. This reduced investor confidence significantly and resulted in losses of over $1 trillion in the past year.
China’s “zero Covid” policy of lockdowns continues to have a serious impact on the economy as well. Economic activity flatlined as the latest variant hit and lockdowns followed, producing essentially zero growth in the second quarter of 2022. The measures have been a catastrophic success, protecting millions of lives but wrecking the country’s economic engine in the process.
Xi’s comments on military power and foreign policy clearly suggest that China will play an increasingly aggressive role in international affairs, but he did not mention the United States specifically. It was not a coincidence, however, that the Chinese military sought to demonstrate its expanded capabilities only a few days prior to the opening of the Congress. Xi’s report cited the need to “win regional wars,” though his speech at the Great Hall of the People oddly made no mention of it. He further argued that the Chinese military must move faster to become a world-class fighting force.
Xi reiterated his longstanding hope that Taiwan can be annexed peacefully but made clear he reserved the right to use force. This may well be a “legacy issue” for him and the other members of the Politburo. Still, Moscow’s disastrous invasion of Ukraine may cause Xi to be sober about a possible assault on Taiwan. Chinese military power is growing, but he knows his forces have not fought a real war since their defeat in a brief conflict with Vietnam in 1979.
Furthermore, as he expands Chinese military power there is growing strategic cooperation between the U.S., Australia, Japan, and India (the so-called “Quad”). There are also closer ties between Japan and Australia, and the new AUKUS (Australia, United Kingdom and U.S.) alliance is focused on the development of nuclear-powered submarines for Australia. Finally, the recent appearance for the first time of Japanese and South Korean representatives at a NATO Summit portends increasing global concerns about growing Chinese military power.
Xi’s remarks and the final report were also important for what they did not say. Phrases such as “peace and development” and that China enjoyed a “period of strategic opportunity” to focus on internal development that had been part of such reports since Deng were missing. It further warned of “dangerous storms” in the future, and one senior PRC official summarized it as demonstrating that the PRC was now “daring to struggle” on the international scene. In sum, Xi’s initial speech, final remarks, and report to the Congress clearly show that he is moving the nation into a “new era of maximum Xi.”
The Party Congress occurred just a few days after the Biden Administration released its long-awaited National Security Strategy (NSS) that identified China as the U.S.’s “pacing challenge.” The strategy portrays Russia as a belligerent but declining imperialist power and China as the greatest long-term threat to the United States. As Secretary of Defense Lloyd Austin put it: “Unlike China, Russia cannot systemically challenge the United States over the long term.”
This was followed by an announcement by the Biden Administration of new policies that place major restrictions on the sale of microchips and the machinery that makes them to China. This heralds the onset of a “technology war” between the U.S. and the PRC. Today the Chinese spend more on the importation of microchips than they do oil. History may be instructive here, as it was an oil embargo that convinced the Japanese leadership that they were functionally at war with the U.S. prior to Pearl Harbor.
Such actions coupled with Xi’s desire to reassert maximum control over the Chinese economy and challenge the global leadership of the United States will have profound effects on the future of international security and the global economy. This will result in increased risks for foreign investors in China, dramatic changes in supply chains, as well as the growing possibility of a military confrontation.
In sum, the West must be clear-eyed about what Xi intends. He has pushed politics in China to the “Leninist left, economics to the Marxist left, and foreign policy to the nationalist right.” He has reasserted the influence and control the CCP exerts over all domains of public policy and private life, reinvigorated state-owned enterprises, and placed new restrictions on the private sector. Meanwhile, he has stoked nationalism by pursuing an increasingly assertive foreign policy, turbocharged by a Marxist-inspired belief that history is irreversibly on China’s side and that a world anchored in Chinese power would produce a more just international order.
