If the citizens of the People’s Republic of China (PRC) were asked, “Are you more hopeful for the future now than you were before Chairman Xi came to power?” the answer for most, if they were able to answer freely, would likely be a resounding “no.”
China’s economy is facing its gravest challenges since the Maoist era amid a collapse in public confidence. Growth has slowed, the unemployment rate is high, and the housing market is tumbling. But at the recent Third Plenum, a meeting of top Chinese Communist Party (CCP) officials held roughly every five years and centered on economic policy, President Xi Jinping made clear that he has decided to stay the course and is doubling down on state control of the economy. At the same time, Xi has been baselessly claiming that the economic reform goals set at 2013’s Third Plenum were met.
If the citizens of the People’s Republic of China (PRC) were asked, “Are you more hopeful for the future now than you were before Chairman Xi came to power?” the answer for most, if they were able to answer freely, would likely be a resounding “no.”
China’s economy is facing its gravest challenges since the Maoist era amid a collapse in public confidence. Growth has slowed, the unemployment rate is high, and the housing market is tumbling. But at the recent Third Plenum, a meeting of top Chinese Communist Party (CCP) officials held roughly every five years and centered on economic policy, President Xi Jinping made clear that he has decided to stay the course and is doubling down on state control of the economy. At the same time, Xi has been baselessly claiming that the economic reform goals set at 2013’s Third Plenum were met.
Xi believes in the central role of the CCP in everything—including the economy. The CCP has taken an increasingly direct hand even in private businesses, and using this leverage, his government has pursued a policy of prioritizing the expansion of manufacturing capacity through massive subsidies, embracing an export-driven economy rather than one linked to expanding domestic consumption in China. With this excess capacity, Xi hopes to gain market share by driving foreign competitors out of business through dumping the subsidized goods below cost.
Xi’s plan has alarmed foreign political and business leaders while leaving the Chinese public and even local officials resigned to the fact that they have no ability to impact central policymaking. By doubling down on this policy, the Third Plenum crushed any lingering hope that the PRC would be able to break out of sputtering growth or address long-standing economic imbalances that leave it increasingly at odds with the rest of the world.
Since the Tiananmen Square massacre in 1989, the CCP has maintained its power not only through force, but also through an implicit compact with its citizens that the party would deliver economic growth as long as its primacy remained unquestioned. With the current slowdown, the CCP is failing to uphold its end of that political bargain. Protests in China over labor issues and housing have become more frequent as the unemployment rate ticks up; meanwhile, the PRC has seen the largest exodus of high-net-worth individuals from the country in its history.
The path to strengthening the PRC’s economy and restoring confidence in increasingly skeptical Chinese consumers is clear: loosen the CCP’s political stranglehold over the economy, acknowledge the severe problems that China is facing, and offer a realistic plan for addressing the needs of the Chinese people. Instead, Xi has chosen to tighten his grip, consolidating powerful state-owned enterprises, elevating CCP ideology, ignoring the drivers of demand and consumption, and prioritizing his political control over China’s prosperity.
The Third Plenum painfully confirmed what we already know: The PRC under Xi lacks the ability to self-correct because Xi does not allow it. Xi’s centralization of power has minimized opportunities for expert dissent and public discourse, sharply curtailing considerations of alternative economic policies. The results of the Third Plenum made clear that Xi believes China’s economic policies are already on the right track and that better results will come when officials better implement his directives.
According to one recent analysis, party cadres and economists were demonstrably less willing to speak up and provide comments during this Third Plenum drafting process for the conference’s central “decision” policy document than they were at the Third Plenum held in 2013. Xi was also less willing to listen. According to the Asia Society Policy Institute, there were 25 percent fewer written suggestions submitted for the text by cadres during this year’s session than in 2013, and of those suggestions, only a meager 12 percent were accepted in the final document as 88 percent were rejected.
One of China’s most loyal “wolf warriors” and CCP propaganda insiders, former Global Times editor Hu Xijin, was recently banned from Chinese social media for incorrectly interpreting the Third Plenum decision as signaling more support for the private sector. In this environment, why would any official stick their neck out to propose significant reform, no matter how necessary they believed it to be?
Xi believes that China must dominate the advanced technologies of the future, and he remains committed to that priority, even as it comes at the expense of the public good. In Xi’s economic vision, social welfare programs, which would decrease the current trend of Chinese people saving more than a third of their income, would divert resources away from the PRC’s pursuit of technological dominance that would support its military capacity.
In Xi’s worldview, national security is based on political security, which means the security of the party. As an unfortunate result, we should expect the CCP’s grip to tighten. Xi will continue to view the economy through the lens of national security even at the expense of the PRC’s sagging economy and the wealth of its people. It also means that Xi will double down on nationalism, censorship of discontent, and international bellicosity to distract from domestic challenges.
China’s economic struggles have continued through Xi’s crackdowns at home and increasingly aggressive stance toward Taiwan and the Philippines. Xi will continue to face trade-offs between his nation’s prosperity and his total control. Based on the recent signals, we should not expect changes in the PRC’s government, economic priorities, or foreign policy any time soon.
The post Xi Jinping Is Prioritizing Political Survival Over Economic Prosperity appeared first on Foreign Policy.
