A “drop the pin” event in Chinese politics

There may be headwinds as the CPC prepares for its 20th Congress in the fall, follows the ‘Chinese Dream’

There may be headwinds as the CPC prepares for its 20th Congress in the fall, follows the ‘Chinese Dream’

When the Chinese Communist Party (CCP) held its annual Central Economic Work Conference last December, the watchword was “stability.” This was reiterated with even greater emphasis during the March 2022 sessions of the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC).

Path to a review

Later in the fall of this year, the CCP will convene its 20th National Party Congress which will see significant turnover in leadership positions. There will be an examination of the trajectory towards the realization of the “Chinese dream” – the rejuvenation of China, its emergence as a modern and powerful nation fully developed and occupying the very center of a transformed international order. The target year is 2049, marking the 100th anniversary of the founding of the People’s Republic and, therefore, of considerable symbolic significance.

President Xi Jinping is also expected to retain his party, state and military leadership positions beyond the informally observed 10-year term for party leadership positions, in line with instituted reforms. by Deng Xiaoping. This was in the wake of the immense damage done to the party and the country by Party Chairman Mao Zedong’s Cultural Revolution (1966-1976). China’s constitution has been amended to allow only two five-year terms for the head of state. The aim was to restore the principle of collective leadership and ensure predictable leadership transitions and prevent a personality cult from developing around an ambitious individual leader. The Constitution has now been amended again to allow the President to serve beyond a 10-year term and, in theory, indefinitely for life. The Party does not have a fixed mandate for the Party General Secretary; only an informal standard is in place. By remaining in this position, Xi Jinping will not violate any party statutes.

On Xi Jinping’s tenure

The 20th Party Congress is important because it is expected to approve Mr. Xi’s retention as China’s supreme leader. The question is whether he will get just another five-year term or be assured of his leadership position for life. The latter will mean that his power is unassailable at the moment. A limited extension would indicate that there is opposition within the CCP to his taking office for life. For other leadership positions, the informal age limit of 68 has generally been observed even during Xi’s tenure.

Current Prime Minister Li Keqiang recently announced at a press conference that he would step down later this year after completing his 10-year term. If the informal age limits are adhered to, then up to 11 of the 25 Politburo members and two of the seven Politburo Standing Committee members are expected to retire at the 20th Party Congress. Appointments to these high-level posts, including the appointment of a new prime minister, will give the world an indication of Xi Jinping’s political influence as well as the direction of China’s domestic and foreign policies during the the next phase of China’s journey towards realizing the “Chinese Dream”.

Stability implies a predictable and carefully choreographed outcome for the Party Congress. There should be no “black swans” or “gray rhinos” – both signifying unexpected crises – to upset the apple basket. At present, it is clear that no such smooth transition to a celebratory 20th Congress will be possible. In his work report to the NPC, Premier Li Keqiang acknowledged, “A comprehensive analysis of changing dynamics at home and abroad indicates that this year[,] the risks and challenges to development are increasing dramatically and we must continue to push to overcome them.

A sluggish economy

Domestic risks have multiplied as the economy continues to slow and is rocked by severe shutdowns in major cities, disrupting ordinary life, disrupting production schedules, causing supply chain disruptions and leading to anger and widespread public protests. The case of Shanghai, China’s leading industrial and commercial center and the world’s largest container terminal, is particularly worrying. Images of ordinary citizens battling public health workers, people begging for food and medical aid, and generally venting their anger at a government immune to their suffering do not bode well for social stability.

And yet, Mr. Xi has publicly defended the very strict confinements. There is barely concealed controversy within the party leadership over the need for such harsh measures. Shanghai’s current Party Secretary Li Qiang is reputedly close to Mr Xi, but may be in the niche for failing to stem the spread of infection in the city. He is rumored to be in the running to be made prime minister later this year. This may have become a victim of COVID-19.

China’s economy was on a slower trajectory even before the outbreak of the COVID-19 pandemic and the widespread disruption it caused not just in China but around the world. “Decoupling” the Chinese economy from the United States, at least in high-tech and sensitive sectors, has been a challenge. But Mr. Xi himself has tried to reorient China’s economic direction through several key decisions.

First, it attempted to rein in the hugely successful and profitable (and politically influential) Chinese business multinationals such as Alibaba, WeChat and DiDi Chuxing, all in the tech platform category, by introducing several tough new regulations, particular in the field. data security. Their activities abroad were closely monitored and regulated. As a result, nearly US$1.7 trillion of their market capitalization was wiped out, which would have been treated as an economic catastrophe in any other major economy.

Second, it hit China’s vast and expanding real estate market with similar stringent regulatory measures driving some of the country’s largest real estate companies near bankruptcy, including Evergrande, which has a whopping $300 billion in exposure. The real estate sector accounts for around 30% of China’s GDP. Chinese banks have granted 30% of their loans for housing construction and 60% of all bank loans are backed by real estate as collateral. In urban areas, 60% of jobs are related to construction. Therefore, the cascading effect of a housing bust across the economy can only be imagined.

There is another serious vulnerability related to Local Government Finance Vehicles (LGFVs) which are launched by local governments and municipalities to finance infrastructure and real estate development. Outstandings on this score increased from 2,300 billion US dollars in 2013 to 8,000 billion dollars at the end of 2020. They are probably even higher today. This represents almost 50% of China’s GDP and constitutes an inconspicuous economic vulnerability.

The Ukrainian War

The big uncertainty for China is the fallout from Russia’s war on Ukraine. Regardless of the end result, Russia lost the war even though it goes on to win several other battles. It is hard to see how reducing Ukraine to virtual rubble can constitute a victory in any practical sense. More importantly, whatever the outcome, Russia will continue to be disconnected from the still Western-dominated global trading and financial system. Western sanctions against Russia will continue and may become even stricter than they already are.

China has condemned sanctions in general but is obligated to observe those whose violation will expose its own companies to secondary sanctions. There are limits to China’s “unlimited” cooperation with Russia. Overall, the Russian misadventure in Ukraine has exposed China to greater vulnerability in its foreign relations. The strengthening of the Western alliance led by the United States, the revival of European unity and the renewed narrative of “democracy against autocracy” imply that Chinese expectations of a steady march towards the “Chinese dream” could be denied. Admittedly, the prospect of a return of Taiwan to Chinese rule, an essential component of the “Chinese Dream”, may have been remote for the time being.

Xi Jinping’s position may have weakened, but he is unlikely to face a serious leadership challenge in Congress. In an earlier comment made shortly after the release of the historic Sino-Russian joint statement on February 4, 2022, I said that China had made a Russia over the United States just like in 1972 with the visit of the American president Richard Nixon in China, the United States had made a China out of Russia. This latter-day scheme seems to have failed. To that extent, India has some breathing room to rework its foreign policy calculations.

Shyam Saran is a former foreign minister and senior fellow at the Center for Policy Research (CPR)


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