Gleanings from the 19th CCP Congress

Xi Jin Ping addresses the 19th China National Congress

China gives Xi Jin Ping Five More Years

General Secretary Xi Jin Ping has virtually cemented his permanent position. Informed speculations is that he will continue in power long after 2022 when he is due to step down. By selecting Chen Min Er as his successor in 2022, he ensures that he will continue to be of consequence when he steps down. What does that mean for China, Asia and the world?

A Brief History of China’s Modern Leadership

After the Tian An Men demonstration and massacre in 1989, the Standing Committee of the Politburo came to an informal agreement. They would ensure both stability and an orderly transfer of power going forth through consensus agreements worked out well in advance. That worked for a while, but then in 2007 they tapped Xi Jin Ping to succeed Hu Jin Tao in 2012. Xi went to work to ensure not only the success of his forthcoming administration, but also its permanence.
Jiang Zi Min’s performance after vacating the General Secretary’s position had provided clues as to how it should be done. Jiang had retained enough power after he stepped down to hamstring Hu Jin Tao and render him relatively weak. Xi saw what was going on and would have none of that when he assumed power.

Enter Xi Jin Ping

His entry point was the rampant corruption under Jiang and Hu. Lip service had been paid to reforms but little concrete had been accomplished. Given the muck that adhered to Jiang and Hu, it was no wonder they did so little. Sure, 10,000 people were convicted of corruption each year, but that number was a thimble of water in a Yangtze-scale flood. Here was an opportunity to rid the country of corruption and himself of competitors.
During this time, China was becomingly increasingly open as a consequence of the relative freedom of social media. Corruption was on everyone’s mind because it was everywhere on-line. Then came the Arab Spring. The insanity of the Cultural Revolution and the danger of the Tian An Men square protests leapt to mind. The Party, the Politburo and the Standing Committee were worried. Internal calls for a “Jasmin Revolution”, the uncovering of a massive CIA network within the country and Edward Snowden’s revelations of U.S. capabilities turned worry to panic. Xi needed to prove that he was up to the task. If he did not, Bo Xi Lai, might sit in the chair of General Secretary.

Bo Xi Lai’s Challenge

Bo had made himself a popular anti-corruption leader from his position as mayor of far-off Chongqing. His many popular reforms had made him a national figure and a likely challenger to Xi. But Bo had his own popularity problem; his police chief, Wang Li Jun, was rapidly becoming as popular as Bo at home. Bo’s answer was to demote him. Four days later Wang was at the U.S. Embassy asking for asylum and exposing Bo’s dirty underwear. The Americans didn’t take him in, but Bo’s fate was sealed. On March 15, 2012 he was stripped of his Party Chief. By April 10 he and his wife were under investigation. Finally, in 2013 he and his wife were put on trial. Xi’s purge of his rivals and potential rivals was underway using the Central Commission for Discipline Inspection (CCDI) as his tool.

The Purge Begins

Because government salaries had fallen far behind the cost of living, virtually everyone in the government was corrupt. If you weren’t corrupt, you led a pretty miserable life. So Xi had a wide open field – all he had to do is to name the individuals to be purged. Corruption would be found because it was there.

Social Media Tamed

As soon as he took office, Xi began to clamp down on the social media that were at the heart of dissent. Then human rights lawyers were shackled. Then NGOs were starved for funding. Foreign textbooks were removed from universities. And finally, in a move worthy of Donald Trump, territorial jingoism diverted attention from what was happening.
Merit no longer had as much a place in the Party as sycophantism. This most recent Congress is a testament to that. Who, other than a cadre of sycophants, would be willing to a droning three and one-half hour speech/lecture by their leader? But a
Xi has a tiger by the tail and he can ill-afford to let go in 2022. Chen Min Er is his response to that problem.

Chen Min Er

Few members of the Party know Xi as well as Chen. Chen was Xi’s head of propaganda in Zhejiang when they served there together for four years. During that time Chen worked closely with Xi to get his message out, helping Xi to write his weekly column in the Zhejiang party newspaper for four years until Xi was moved to Shanghai. After a couple of promotions, in 2012 when Xi was named as General Secretary, Chen was promoted to the Central Committee and made governor of Guizhou. Xi had already done the math and knew that if he appointed Chen as his successor, he’d be able to serve two full terms without having a problem with his age. (China has both a term limit and an age limit for the General Secretary.) In 2015 Xi promoted Chen to the position of Party Secretary in Guizhou. Chen delivered on Xi’s confidence with resounding economic growth. Now he’s in line for the top spot in five years.

Moving Forward

So where does that leave us today? The news coming out of the 19th Party Congress told us a lot. Knowing that can shape your decisions for the next several years.
For starts, the General Secretary set expectations in line with reality instead of opting for Trumpian layers of superlatives. Xi instead established the goal of a moderately prosperous society. That is sweet music to ears deafened with bombastic Trumpian braggadocio.

Growth is out. Quality is in.

Moderate prosperity has replaced a doubling of the GDP of China as the economic goal. Doubling by 2020 from 2012 may happen at the current rate of growth, but it is no longer the focus of economic policy. We’re unlikely to see steel production grow simply to support the production of more steel production facilities. The same is true in many other areas. What we are likely to see is an emphasis on decreasing income and wealth inequality and a consequent growth in the already vibrant consumer sector.

The Environment Is In.

During Xi’s marathon speech he mentioned the economy seventy times but eclipsed that with eighty-nine mentions of the environment. Coal-belching smokestacks and deadly foodstuffs will be a thing of the past by 2020 if Xi has his way.

Housing is a concern.

And rightly so, given their contribution to economic bubbles. Xi emphasised that houses are for living in, not for speculation. Whether he is willing to risk the unpopularity and possible unrest of instituting permanent controls remains to be seen. Popularity is a key element necessary to keep him in power after the end of this, his final term. For now Xi has the internal politics of the party under control. Losing his popularity with the people could quickly unravel that control.

Financial Risks to get More Attention.

The headlong push for growth has led not only to many failed projects, but to an inverted yield curve. Many, if not most, banks are insolvent and survive only on the largesse of the State. We expect to see this sector cleaned and consolidated over the next few years. It won’t be easy or quick because the problem is so big. But we can expect to see a start.

Xi’s plate is over-full. There’s no way to complete his work in the next five years. His selection of Chen as his replacement will ensure that a kindred spirit seeking to continue and improve on Xi’s reforms will be in place. Chen is likely to be more than a puppet but less than a free agent. That’s likely to make many people breathe easier.

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