Gunners Shot

I found three interesting articles on Xi Jinping. These articles tell us that Xi Jinping has turned China into a path far different from the one whose hallmarks were reform and growth. As he is on the verge of a third term, it is instructive to understand the trajectory on which he is guiding China. The extracts from these articles give you a glimpse of the future of China under Xi. 

Headline : How China sacrificed economic growth on the altar of Xi Jinping Thought@https://www.scmp.com/comment/opinion/article/3189971/how-china-sacrificed-economic-growth-altar-xi-jinping-thought

 

Extracts

 

Since the days of Deng Xiaoping, economic growth has mattered more than anything for China’s leaders. The 10 per cent annualised growth from 1980 to 2010 was seen as the antidote to the relative stasis of the Mao Zedong era, when the economy grew by only about 6 per cent. But under President Xi Jinping, the pendulum has swung back, with 6.6 per cent average growth from 2013 to 2021, closer to the trajectory under Mao than Deng.

 

China’s slowdown is far more than an arithmetic event. Three powerful forces are also at work – a structural transformation of the economy, payback for past excesses and a profound shift in the ideological underpinnings of Chinese governance.

 

By staying the course of hyper growth for too long, China became increasingly afflicted with the “four uns” of former premier Wen Jiabao – an economy that was unstable, unbalanced, uncoordinated and ultimately unsustainable.

 

Rebalancing was the only way out, especially if it led to greener, consumer-led and services-intensive growth that addressed the twin goals of balance and sustainability. If slower growth was the price, it was well worth paying.

 

As the revolutionary founder of a new Chinese state, Mao emphasised ideology over development. For Deng and his successors, it was the opposite. De-emphasis of ideology was necessary to boost economic growth through market-based “reform and opening up”.

 

The new ideological campaigns carried out under the general rubric of Xi Jinping Thought, including a regulatory clampdown on once-dynamic internet platform companies and associated restrictions on online gaming, musicand private tutoring, as well as a zero-Covid policy that has led to economically damaging lockdowns, have all but dashed those hopes.

 

Xi’s fixation on national rejuvenation, an outgrowth of his “Chinese dream” that has led to a more muscular Chinese foreign policy, in contrast to Deng’s “hide and bide” approach. Not by coincidence, this has fuelled the trade and tech wars with the United States, given rise to China’s “unlimited” partnership with Russia and stoked tensions over Taiwan. All of these point to the unwinding of globalisation, which has benefited China more than any other country.

 

Xi’s focus on ideology speaks more to the resurrection of Mao’s legacy than continuity with the Deng era. Under Xi, China’s new era is more about the supremacy of the Communist Party, with an associated emphasis on power, control and ideological constraints on the economy.

 

With the upcoming 20th Party Congress likely to usher in an unprecedented third five-year term for Xi, there is good reason to believe China’s growth sacrifice has only just begun.

 

Headline : Xi Jinping looks to take China beyond Deng Xiaoping’s ‘get rich’ era with historic third term@https://www.scmp.com/economy/china-economy/article/3190055/xi-jinping-looks-take-china-beyond-deng-xiaopings-get-rich

 

Extracts 

 

Since taking office in 2013, Xi has expanded China’s economic influence abroad through the Belt and Road Initiative and introduced an inward-looking economic strategy at home. He has shaken up key industries and stared down US threats of decoupling. As president, he has left his mark on the economy like few before him.

China is at a critical stage of development. Over the past decade, the economy has grown steadily and the country is now on the cusp of joining the high-income club.

On the other hand, it faces numerous headwinds: a demographic crisis, slowing growth, debt, deglobalisation, geopolitical tensions with the West and the coronavirus pandemic.

How well China navigates these challenges will largely be down to Xi, who has reshaped the country’s major economic decision-making institutions, most notably the Central Economic and Financial Affairs Commission.

“We must firmly grasp the problems concerning unbalanced and insufficient development, focusing on improving weak links, consolidating foundations and making full use of our advantages,” Xi told senior cadres in the Central Party School in late July. “New ideas and measures are needed to solve them.”

 

Xi’s first term between 2013-18 was devoted to addressing domestic problems….These included high debt, a dwindling demographic dividend, industrial overcapacity and inequality, with structural adjustments and de-risking campaigns high on the agenda.

His second term was dominated by the trade war with the United States – which plunged relations to their worst point in four decades – and the coronavirus pandemic.

Faced with uncertainty abroad, Xi pivoted inward with the “dual circulation” strategy in 2020, putting emphasis on China’s huge domestic market and home-grown technology to power future growth. Some analysts said it marked a shift from China’s decades-old, export-oriented development model and participation in the US-led international system.

At home, Xi also sought to reduce inequality through the government’s “common prosperity” strategy and vowed to make state-owned enterprises (SOEs) “bigger, better and stronger”. His backing of SOEs, which deviated from long-standing calls for market-oriented reform, fuelled concerns about the place of private businesses in the economy. Those worries were amplified by the government’s regulatory crackdown on Big Tech and private tutoring.

Now, with Xi’s third term in sight, a number of important questions have to be asked about the future of China’s economy. How important will ideology be in development? What will become of Deng’s mantra of reform and opening? And how will Chinese entrepreneurs and foreign investors fare in the years to come?

The country is moving out of the Deng era of “Getting Rich” into the Xi era “Being Strong”, and his approach looks like a mix of wealth redistribution, a focus on self-reliance and supply chain resilience, decarbonisation, stability and quality growth over quantity…“The state is the driving force behind realising all of the above,” he said. “China’s economic policies will become more inward looking.”

Market reform in China has stalled under Xi. According to China Dashboard, a joint project between Asia Society Policy Institute and Rhodium Group that monitors Beijing’s reform, there has been either zero progress or actual policy regression in most of the 10 major baskets of reform outlined in November 2013.

 

The assets of state-owned industrial enterprises have grown by 2.6 times to 259 trillion yuan (US$38.3 trillion) compared to a decade ago…There was no “serious discussion” of economic reform, but rather a continuation of ineffective SOE policies of the past, such as corporatization, debt-equity swaps and mega mergers.

The core of Xi’s approach is [that] economics is subservient to politics, that economic gains must be sacrificed if they bring political risks

 

China is still deeply embedded in the global supply chain and a major draw for foreign investment. But refusing to open up the economy further could come with consequences. 

 

Headline : 7 ‘Xiconomic’ policies that have guided growth over the past decade @ https://www.scmp.com/economy/china-economy/article/3190157/china-economy-7-xiconomic-policies-have-guided-growth-over

 

Extracts

 

“Xiconomics” encapsulates the long-term guiding principles of the world’s second-largest economy, and is central to “Xi Jinping Thought”….Here are seven events that have changed China’s economic landscape over the past 10 years.

 

Belt and Road Initiative (September 2013)

 

The Belt and Road Initiative was first used to revive connections along ancient trade routes and tap non-Western markets before turning into an ambitious strategy to expand China’s influence in more than 60 countries in Asia, Europe, Africa and South America…The initiative was predicated on infrastructure connectivity but expanded to include trade and investment, with the establishment of the Asian Infrastructure Investment Bank, Silk Road Fund and the New Development Bank.

 

Reform Document (November 2013)

 

The Reform Document, released during the third plenum closed-door summit in November 2013, mentioned for the first time market principles would play a “decisive” role in the economy…the Reform Document blueprint detailed 336 specific tasks to be achieved by 2020….These included establishing negative list for foreign investment, fiscal reform, an initial public offering registration mechanism and financial opening, all of which fuelled enthusiasm that pro-market reforms would continue…Some of the most easily achievable tasks were completed, but many key tasks were eventually shelved.

 

‘New normal’, supply-side structural reform (2015)

 

The “new normal” placed an emphasis on quality, rather than the pace of economic expansion, with Beijing focusing on a medium-growth stage…It downplayed GDP and concentrated on addressing problems like rising debt, rampant shadow banking and demographic challenges…the government took steps to reshape the property sector – a pillar of growth in previous decades – by introducing the principle that homes are for living in, not speculation…It introduced macro-control measures ranging from blanket purchase and pricing restrictions, to tightening mortgage requirements and clamping down on illegal financing…Financial regulators set three restrictions – the so-called three red lines – including capping major developers’ debt ratio to 70 per cent in late 2020.

 

‘Stronger, better and larger’ SOEs (2016)

 

State-owned enterprises (SOEs) have long been the backbone to China’s socialist market economy. But Xi pledged to make them bigger and stronger. Since 2016, their role has been solidified after Beijing launched a new whole-nation mechanism to counter US trade sanctions and fight the pandemic. “They form the economic and political foundation of China’s socialist system and are a key pillar for the [Communist] Party’s rule. They must be built stronger, better and larger,” Xi said in 2021, adding the state sector’s role “cannot be negated nor weakened”.

 

Dual Circulation’ (May 2020)

 

The economic strategy highlighted both internal and external circulation, but marked a shift from China’s decades-old, export-oriented development model, setting a series of new goals for the next 15 years…The plan places greater focus on the domestic market, or internal circulation, and is China’s strategic adaptation to an increasingly unstable and hostile outside world.

 

‘Common Prosperity’ (2021)

 

China is pursuing common prosperity, which calls for fairer distribution of wealth, as the main objective in its next stage of development, while stressing the need to maintain an airtight economy to support the goal…Common prosperity marks a further shift from the decades-old pursuit of rapid economic growth, which lifted hundreds of millions of Chinese out of poverty but also expanded inequality…The goal is to reform income distribution so that the middle class accounts for most of China’s wealth.

 

Zero-Covid strategy (2022)

 

China was the first major economy to recover from the initial shock of the coronavirus, but the introduction of a zero-Covid strategy early in 2022 to fight the Omicron variant has taken a substantial toll on growth…Strict quarantine and isolation have hit the contact-intensive service sector, putting many small firms out of business, and having flow on effects for household revenue, the job market, mortgage repayments and consumption…The two-month lockdown of Shanghai, China’s commercial hub, and partial lockdown of other major cities, increased pressure on the economy in the second quarter, resulting in growth of just 0.8 per cent year on year…The at-all-cost endeavour to curb the less-deadly Omicron variant, with which many Western countries have chosen to live with, has raised eyebrows at home and abroad…Some argue the move has deviated from the decades-old focus on economic development.

 

Overall Comment 

 

After having read these articles in detail it emerges that Xi Jinping is a dyed in the wool communist of the Mao-Marx lineage . He has three ambitions – Be recognised as the greatest of all Chinese leaders – Make China an unquestioned superpower – Perpetuate communist rule in China. His vision is to achieve  the Chinese Dream through complete state control, development of hard military power backed by strong economic power. He will attempt to dominate great power relations so that he can establish  a Sino-centric global order. Excessive economic liberalization, unbalanced material culture and wide inequity will be jettisoned eventually. In this paradigm, Xi Jinping will yank further left to make China a command economy. Large powerful state enterprises will retain precedence over the once vibrant private sector. We will continue to hear the cornerstones of Xiconomics –  “anti-corruption campaign”, “common prosperity” “victory over covid” “a new model of win – win cooperation” “greatest military on earth” ”strong military in a new era” “dual circulation” “revenge on the century of humiliation” . As Xi heads into his third term it appears that xi Jinping is recreating the Frankenstein called Mao!