On track or off? US analysts say 20th party congress suggests difficult bilateral relations ahead
- New military leadership looks solid, but appointees to domestic positions seem more experienced in party ideology than in economics, which could destabilise ties
- ‘Looking into the future, it is uncertainty as far as the eye can see,’ one analyst says
The twice-in-a-decade Communist Party meetings are generally reserved for handling succession issues and outlining broad vision. But China is facing a property crisis, consumer slump tied to its zero-Covid policy, weakening currency, capital outflow and historically low growth rates even as youth unemployment hit a record high of 19.3 per cent in June.
The party congress “does not normally deal with that set of things, but these are not normal times”, said Dan Rosen, founding partner at the Rhodium Group, which tracks China’s economy. “There’s really nothing other than just that the triumph of the will is somehow going to produce a fiscal reform strategy that resolves the obstacles of the past. And I didn’t see it and I think nobody sees really any of that.”
Many of the new leaders ascending to the top ranks of the Central Military Command, China’s defence oversight body, have management skills, experience in multiple military theatres – including the China-India border, South China Sea and East China Sea – and technological expertise important for modernisation, analysts said. There is also continuity, with a solid mix of promoted leaders and those remaining in their jobs, serving China’s interest.
In the economic realm, however, the linchpin of China’s historic rise, many of those earning promotions are more versed in Communist Party ideology and politics than technical know-how, even as a large number with economic experience and technocratic skill head for the exit.
“Looking into the future, it is uncertainty as far as the eye can see,” said Scott Kennedy, a fellow at the Centre for Strategic and International Studies (CSIS). “You’ll see maybe some continuity on the military side and foreign policy side. On the econ side, we are going to see a significant changing of the guard.”
Premier Li Keqiang, 67, an economist known as a reformer and pragmatist, is stepping down. Others expected to follow include economic tsar Liu He, 70, a vice-premier and Harvard-trained economist; Yi Gang, 64, China’s central bank governor with a PhD in economics from the University of Illinois; and other heads of regulatory agencies.
The man slated to be China’s next vice-premier overseeing the economy, He Lifeng, 67, who is now head of the National Development and Reform Commission, has an economics PhD from Xiamen University.
But many analysts see in his résumé an inordinate focus on state-led projects, including the Belt and Road Initiative, rather than watching over high-quality private sector growth that some believe is required to revive the Chinese economy.
“Addressing fundamental economic problems in achieving growth like they did in the past seems to now not be the primary motivator of major policy decisions,” said Thomas Duesterberg, a Hudson Institute fellow and former US Commerce Department official.
A big indicator of how quickly and effectively Beijing will be able to jump-start its economic engines will be the fate of zero-Covid, the pandemic policy closely associated with Xi. Analysts watching closely for signs of a reversal have been disappointed, with the president defending the policy as recently as Sunday followed within hours by another lockdown in Guangzhou.
Even after the policy is eventually eased – the pending winter flu season suggests it will be at least 2023 before it is – the process is likely to be protracted. Hundreds of millions of people need vaccines and boosters; vaccine manufacturing must be accelerated; warehousing, scheduling and awareness campaigns rolled out.
Also unclear is whether the world’s second-largest economy will bounce back quickly or struggle as a wary population worries of recurring lockdowns, undercutting consumer confidence.
Market analysts said investor concern over China’s economic messaging and the prospect of more tension with the West were evident on Monday as Hong Kong’s Hang Seng Index fell 6.4 per cent – its largest drop since the 2008 financial crisis – the Chinese yuan hit a 14-year low against the US dollar and a Goldman Sachs index of US-listed Chinese stocks fell 15 per cent, before partly recovering later in the week.
The Biden administration has been understated in its response to the 20th party congress and Xi’s third term leading the People’s Republic of China.
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Chinese President Xi Jinping unveils new line-up of country's top decision-making body
“We’re not going to comment on internal party politics of the PRC,” said White House Press Secretary Karine Jean-Pierre. “President Biden and our administration are focused on responsibly managing our competition with China while cooperating on areas where our and the world’s interests align.”
Where analysts see zero-Covid policies undercutting consumer and business confidence, fuelling frustration among ordinary Chinese and driving up migrant unemployment, Beijing sees China’s far fewer deaths than Western countries have suffered.
On other counts, Beijing sees the benefits of political stability, particularly relative to the US and other democracies, touts its growing list of patents and hi-tech companies even as many developing countries continue to regard China as a source of growth and support.
“They come up with a more successful scorecard than we give them, which is why they are willing to do things which we would otherwise consider against their self-interest,” Kennedy said.
At a time when Xi has amassed unprecedented power, many objectives the party outlined at the congress – common prosperity, a better social safety net and a narrowing of the wealth gap between the rich and poor – ultimately depend on tax reform, not good intentions, analysts said.
“These extraordinarily and clearly difficult set of policy agendas are about fundamentally tackling China’s tax and fiscal system,” said Jude Blanchette, another CSIS fellow. “If he doesn’t go after that with all this power, well, what the heck is it for?”
While the People’s Liberation Army was heralded at the congress – having undergone significant reform and upgrading in recent years and having carried out the unprecedented intimidation campaign around Taiwan after the August visit there by US House Speaker Nancy Pelosi – it is under pressure.
Xi’s report last week included repeated calls for China’s military to speed up battle readiness by 2027 and accelerate efforts to be a “world-class military” by 2049, the centenary of modern China.
“There’s this sense of urgency that’s being attached to military modernisation,” said David Finkelstein, vice-president at the Centre for Naval Analyses and a former adviser to the US defence secretary. “It is a sense of foreboding about Beijing’s external security environment that Xi Jinping’s report exudes.”
That does not mean an attack on Taiwan is imminent, or that Beijing is moving up its timeline for any invasion, even as tensions involving the island mount, analysts said. But Xi appears intent on being ready and having that option.
Beijing views Taiwan as a breakaway province to be eventually united with the mainland, by force if necessary. Few countries, including the US, recognise the self-governing island as an independent state, though Washington is bound by law to defend it, which Beijing strongly opposes.
Many in Washington – including some Biden administration officials – accuse China of unilaterally changing the status quo over Taiwan. But both sides have a part in elevating tensions, analysts said.
“The United States is not a choir boy on this score,” said Michael Swaine, East Asia director with the Quincy Institute for Responsible Statecraft. “Similarly, the Chinese have been doing things that really call into question their commitment to peaceful unification as a top priority.”
Furthermore, Swaine said, each side considers itself blameless while attributing the worst motives to the other side. “And that is a guarantee for more confrontations.”
A handful of barometers in coming weeks will provide clues on whether a post-congress reset is in the cards. In early November, German Chancellor Olaf Scholz is set to visit China – the first by a Western leader since the pandemic. Later in the month, Xi and President Joe Biden could meet on the sidelines of the Group of 20 session in Indonesia.
“This could indicate whether Xi Jinping is now in a position, on the other side of the 20th party congress, with his third term, to stabilise the relationship and put a floor under it, or whether he’ll continue to signal to his domestic population that the US is implacably hostile,” said Bonnie Glaser, Asia director with the German Marshall Fund of the United States. “I think the administration sees a potential opportunity there.”
Washington says the move is aimed at preventing their use in advanced Chinese military weapons but Beijing has accused the US of trying to frustrate its economic development.
Xi’s focus on centralised authority – solidified by his team of loyalists on the Standing Committee of the Politburo – in strengthening party discipline, mounting a protracted anti-corruption campaign and preserving order, is viewed by Beijing’s leadership as a successful response to a country that was in drift a decade ago.
If overdone, however, it could threaten the dynamism that has seen China expand its economic, diplomatic and military footprint globally and further stiffen foreign resolve, analysts said.
“It can go way too far and can be used in ways that really inhibit and stifle exchange of information, innovation, free thinking, debate within China about what the future long-term role of China should be in the international system,” said Swaine.
