China’s Xi fights fires at home and abroad

- ADVERTISEMENT -

On a host of fronts, China’s domineering leader seems to be fighting fires. Abroad, President Xi Jinping is confronted by a hardening consensus against Beijing in the West, as well as ever-present friction with regional powers and neighbors. At home, Xi presides over a hinge moment for the Chinese economy. Its meteoric growth has slowed, a brief post-pandemic surge petered out, and analysts point to profound structural issues undermining China’s future prospects.

Xi and the ruling clique are struggling to address the new challenges posed by China’s maturing economy. The country’s population is both shrinking and aging, and questions loom over the potential productivity of a graying workforce. At the same time, youth unemployment has reached such striking levels that the government suspended publishing the relevant data this summer. China’s economy once seemed the new engine of the world – and the country remains a juggernaut in global trade – but a sense of stagnation is creeping in, one that can be seen in the macroeconomic data as well as the waning optimism of a younger generation that knew only the boom times.

China’s one-party state can’t repeat the mammoth stimulus for infrastructure projects and property construction that powered China out of the 2008 global financial crisis and allowed Xi and his allies to crow about the superiority of the Chinese model compared with the West’s crisis-hit democracies. A decade and a half later, cash is tighter, the wounds of the pandemic’s draconian lockdowns are still raw, and China’s overheated real estate sector is extra laden with debt, with some major developers teetering on the brink of collapse.

Xi’s ever-tightening authoritarian grip over virtually all facets of life in China is arguably making the situation worse. “The government’s pursuit of total control has set the country on a path of slower growth and created multiplying pockets of dissatisfaction,” wrote Ian Johnson, a senior fellow at the Council on Foreign Relations and a longtime China watcher.

There are ripple effects on the world stage, too. “The current slowdown underscores a shift in China’s global image,” explained my colleague David Lynch. “For years, China’s vast domestic market beckoned multinational corporations with the promise of enormous profits. And it seemed certain to surpass the United States as the world’s largest economy.”

But now, “the outlook is less rosy,” with China posting a considerably sluggish performance in the second quarter given the pace-setting dynamism of its economy over the past three decades.

This may not be a blip, as Beijing weathers considerable geopolitical head winds. On a trip to China last week, U.S. Commerce Secretary Gina Raimondo warned that the prevailing uncertainty, stoked also by the tough actions taken by the Chinese government against foreign businesses, is making China “uninvestable” in the eyes of U.S. investors.

“China needs to recognize that they can no longer rely on the sheer mass of their market to attract that type of foreign investment,” Naomi Wilson, vice president of policy, Asia and global trade at the Information Technology Industry Council, told my colleague Meaghan Tobin. “Even among Chinese companies, there have been efforts to relocate outside of China.”

Recent surveys of global public opinion find largely negative views of China’s influence in international affairs, including in some middle-income countries outside the West. In Asia, the United States has steadily bolstered a web of alliances and partnerships with China’s neighbors, bonds being strengthened directly out of concern for China’s increasingly aggressive behavior.

Chinese officials resent the implication that their state – rather than what they see as the overweening U.S. hegemon – represents a threat to stability and order. But Beijing can’t seem to help itself. The recent state publication of a map that claims chunks of territory in neighboring nations, including India, triggered a diplomatic spat with New Delhi that preceded news that Xi will not attend this week’s meeting of the Group of 20 major economies, hosted in the Indian capital.

Xi’s apparent approach to the moment has been to double down on his hard-line nationalist instincts. Long gone are visions from a decade ago, when some experts imagined that China’s leaders would steer the country’s economy to a more liberalized, market-oriented future. Instead, Xi, an aloof supremo with the license to rule for life, has embarked upon rounds of radical purges and crackdowns that have affected the ranks of China’s political elites and its private sector.

Chinese tech companies hemorrhaged hundreds of billions of dollars in value in recent years. Capable technocrats in prominent posts were replaced with Xi loyalists. Managers and business executives in state-run companies are compelled to study and expound upon the virtues of “Xi Thought,” in a nod to the more doctrinaire, Maoist past. For Xi, centralized authority and control is paramount.

That reflects Xi’s weakness. “Whereas Mao Zedong and Deng Xiaoping enjoyed prestige from their revolutionary pedigree and exploits in establishing the ‘New China,’ Xi has no personal legitimacy independent of the Communist Party,” Chun Han Wong, author “Party of One: The Rise of Xi Jinping and China’s Superpower Future,” said in a recent interview. “His right to rule is inextricably linked with the party’s legitimacy, and his power cannot be separated from the party’s political machinery.”

But what may be good for the party may not be good for the country. “These economic problems are part of a broader process of political ossification and ideological hardening,” Johnson wrote in an essay in Foreign Affairs. “For anyone who has observed the country closely over the past few decades, it is difficult to miss the signs of a new national stasis, or what Chinese people call neijuan. Often translated as ‘involution,’ it refers to life twisting inward without real progress.”

That malaise may have profound implications in the years to come. “So far nobody can challenge [Xi] politically,” Ling Chen, an assistant professor at the School of Advanced International Studies at Johns Hopkins University, told my colleague Christian Shepherd. “But economic performance is always the very core of the regime’s legitimacy and that affects how well he can govern the country.”

“Things always fail slowly until they suddenly break,” William Hurst, a professor of Chinese development at the University of Cambridge, told Reuters, warning of potential financial crises to come that may have steep social and political costs. “Eventually there’s going to have to be a reckoning.”