He has been declared, in effect, president for life, with party propagandists trying to elevate him as the next Chairman Mao Zedong. Just pick up a recent issue of Qiushi, the theoretical bible of the Chinese Communist Party. It features an essay by Xi himself with a clear message: The party? C’est moi.
But behind the big victories and bigger ego, Xi faces some intractable problems — all caused by Xi and his followers themselves. Perhaps the most serious ones are the fear and rigidity that Xi and China’s security services have nurtured throughout society.
Since the 1970s, when China set down the path of economic reforms, the key element in sparking the earthshaking increase in the material wealth of the Chinese people has not been the genius of the Chinese Communist Party. Rather, it has been the willingness of Chinese people to embrace risk, to take chances and to strive for a better life. But under Xi, these qualities have become liabilities. This has been the case for years in academia, journalism, the legal profession and the nongovernmental organization sector. But now this fear has infected the economy and policymaking as well.
Take Hong Kong. Xinjiang is not the only restive territory that presents a challenge to Beijing. The mass protests that began against a bill allowing the extradition of Hong Kong residents to China have morphed into a broader movement to push back against Chinese rule.
The Hong Kong government led by Carrie Lam had an opportunity early to satisfy the protesters’ demand. But a fear of Xi’s reaction tied their hands. Now it’s clear that no one is considering innovative ways to promote political reform in Hong Kong to alleviate the protesters’ concerns. Proof of that came in the party conference’s Oct. 31 statement, which ominously vowed to perfect “mechanisms for safeguarding national security” in Hong Kong and elsewhere.
Meanwhile, the demonstrations continue to unsettle a financial hub important to China’s economy.
These missteps have had a knock-on effect on Taiwan, which China has long claimed as a province. Scared of appearing weak, the Communist apparatchiks who manage Taiwan policy these days spend more time threatening the island with sticks than trying to lure it with carrots. Ironically, the main beneficiary so far has been the reelection prospects of Taiwan’s current president, Tsai Ing-wen, who is despised by Beijing. According to the latest polling, Tsai has pulled ahead of the more PRC-friendly Nationalist Party candidate, Han Kuo-yu, and the pro-Beijing businessman Terry Gou.
Rigidity has also contributed to Xi’s mishandling of China’s relationship with the United States. Granted, Xi has had to deal with a mercurial counterpart in President Trump, who on alternating days is either Xi’s best friend or his worst enemy. But in Xi’s unwillingness to accommodate U.S. concerns on a broad array of fronts, he has accomplished the impossible: The threat from China is arguably the only issue that U.S. progressives and conservatives agree on.
Fear is also damaging China’s economy.
That China’s economy is slowing is natural. China has been on a super cycle of growth for the past 30 years, fueled by a demographic sweet spot of young workers, pent-up consumer demand and state and foreign investment. Things were bound to slow down.
But that can also bring opportunity. In this climate, venture capital and private equity firms swoop in to hunt for distressed assets and attractive valuations. But that’s not happening in China. In fact, according to CVSource, the leading aggregator of private equity and venture capital statistics in China, in the first eight months of 2019, compared with the same period last year, the volume of venture capital or private equity deals has dropped by half, and the size of the deals by almost 60 percent. Investment bankers attribute the issue to widespread worries about making a mistake. People are so afraid of being hauled before the Central Commission for Discipline Inspection to explain a failed investment or a bad bank loan that they have chosen inaction instead.
When it comes to the listing of Chinese companies on stock markets, again risk aversion is winning out. In the first eight months of 2019, the China Securities Regulatory Commission approved only 85 companies to list on China’s two main stock exchanges, compared with 464 in 2017. What’s worse, the median revenue of those companies is far higher than 2018. These are big companies by Chinese standards, with median revenue over $150 million and median profits of more than $20 million. These firms really don’t need more capital, but China’s securities officials are so afraid that one of the listed companies might fail that they only want to pick winners.
Even more telling is data from China’s Technology Innovation Board, which was set up with much fanfare last year when Xi made a speech calling on China’s financial markets to foster new technologies. Xi did this because many innovative Chinese companies were listing on foreign exchanges such as the Nasdaq in New York. But, again, caution is trumping ambition. Since the board was opened in March, about 160 firms have applied, but only 30 have listed. And among those that listed, most of them are already mature. The board was set up to nurture start-ups; instead it’s serving established companies.
With all his opponents in jail and his fellow citizens either cowed into silence or awed by China’s wealth and power, Xi should be in a prime position to celebrate his nation’s birthday and bask in the glory of a successful plenum. But his actions and the society he and his minions are creating speak less to confidence than to a small-minded obsession with control. China shook the world because its people dared to dream big. Those dreams are being squeezed into the narrow Chinese dream of Xi Jinping.