After several months of careful preparation, the 20th Congress of the Communist Party of China finally came to an end.
From President Xi’s initial report, to the embarrassing departure of former President Hu Jintao, to the announcement of the list of members of the Politburo Standing Committee, everything we experienced last week was astonishing, for one simple reason. The difficult balance that has characterized the leadership of the People’s Republic of China since Mao Zedong, the difficult balance between a market economy and the important role of the state in economic and other affairs, has been lacking. This imbalance may stem from the fact that President Xi came to this congress to stay and not to beg for a third term. This has always been the case.
Since Xi’s decision to abolish the two-term limit that Deng Xiaoping put in place to ensure that party cadres change from office to office has provided fertile ground for Xi to further amass power, but few expected him to become so centralized. The question one can ask is why: the external environment is much more difficult than it was five years ago, because the US, and more recently the EU and Japan, openly view China as a systemic competitor. Moreover, the initial boom that accompanied President Xi’s administration is now behind us, and a structural slowdown in the Chinese economy is inevitable. As if that wasn’t enough, the restrictions related to the COVID-zero policy that the Chinese government decided to maintain, along with the bursting of the real estate bubble, have put China in such serious trouble that the country is closing in on less than 3% GDP growth, with the The levels at the onset of the pandemic in 2020 are very similar. In addition to the harsh external environment and deteriorating economic situation, we cannot forget about ideology. Xi Jinping reminds us in every speech that China is a communist country with «Chinese characteristics» and the facts have proven it. In fact, communism is becoming more and more totalitarian, and it is difficult for me to judge whether it has Chinese characteristics, because China has experienced many different totalitarian models.
In any case, looking at the economic sphere, it seems important to assess the main courses of action announced by Xi. The first is that the «dynamic» policy of COVID-zero is still in place, successfully saving lives from the chaos in the West. Logically, the word «dynamic» should play some role, but it’s worrying that the president hasn’t revealed anything that would make opening possible, such as accelerating vaccinations that have been stalled for months or importing or producing vaccine mRNA in China. Shanghai just announced the construction of a quarantine center with more than 3,000 beds, which does not bode well for those who expect China to start living with the virus.
Aside from the zero-coronavirus policy, the most important concept highlighted by Xi Jinping in the report is China’s modernization. Modernizing China is not a new idea. In fact, this was the goal expressed by Mao Zedong and Deng Xiaoping in similar reports, but always at difficult moments in Chinese history. For President Xi, the concept of modernization makes economic sense: moving up the technological ladder until self-sufficiency is achieved. This means that China will continue to use industrial policy to support key industries, although by the way, this was not mentioned in Xi Jinping’s speech. The aforementioned industrial policies will not be content with subsidizing local companies, but will continue to rely on the acquisition of foreign technology. This should be an important warning to boaters in Europe, as it remains the easiest place to acquire technology, and countries such as the US, Japan, and South Korea have huge barriers to technology transfer. Washington’s recent move to tighten export controls on semiconductors from China is an additional impetus for the country to accelerate technological transformation and remove bottlenecks, most notably advanced semiconductors. In other words, the increasingly real threat of U.S. containment is being interpreted as justification for Xi Jinping’s introspective tone on the Chinese economy and his ambitions for technological hegemony.
Third, economic growth is not the core of Xi Jinping’s speech at all. When economic growth is mentioned, it is always accompanied by the word «balance». In particular, Xi has maintained China’s ambition to double its income by 2035 in a modernization plan known as the «China Dream.» The key is how to get there. Balanced growth is important, but the interpretation should not be the old «rebalancing», consumption as the most important growth engine, but thanks to technological development. Even the pursuit of «common prosperity,» a concept Xi has been promoting for the past year, received little attention in the president’s speech, as China fretted over unequal access to resources and made it clear that it would not intend to build a European The kind of welfare state that must achieve shared prosperity. Their goal is to strengthen the state/party’s role in “regulating” wealth accumulation, in Xi Jinping’s words. That should be a warning sign for China’s wealthy and private sector. In this sense, the balance between market economy and state-driven is more and more inclined to the latter, because the expression of «market economy» is less and less, and the role of innovation state-driven is more prominent.
In general, President Xi’s report to launch the 19th National Congress of the Communist Party of China is not only a continuation of the economic policies already in place in the country, but also a redoubled effort to achieve a technological hegemony that allows self-sufficiency and guarantees national security. . The same message could not have been more clear in the closing statement and the election of Politburo Standing Committee members.
An important corollary of this discussion is whether these very ambitious goals are feasible with the tools China has. With Congress looming, the rapid depreciation of the yuan and the cautious market reaction to President Xi’s speech suggest that China’s more introspection may come at a price. Markets are also hoping for signs that the COVID-zero policy will be rolled back, albeit gradually, which has not been the case, adding momentum to the introspective shift the country has already taken.
In this context, the big question we Europeans have to ask ourselves is what would be the consequences of a more authoritarian China with global hegemonic ambitions and at the same time more closed to the West. The answer seems clear: nothing good, at least not yet. To end on a positive note, we must not forget that China’s history is full of ups and downs, with ideological shifts when economic realities demand it. This is what happened to a charismatic leader like Mao Zedong. For Xi, it will hardly be another one.