Amid the flurry of news about Hope Hicks and Jared Kushner and this week’s Trump reality show on guns, it would be easy to miss what’s happening in China. But it is huge and consequential. China is making the most significant change to its political system in 35 years. What impact will this have on China and the world? That’s the question that every policymaker, business executive and investor should be asking.
Deng Xiaoping is generally remembered as the man who began China’s economic reforms. But perhaps more important were his political reforms. He took a system that had been utterly dominated by one man, Mao Zedong, and institutionalized it. Perhaps the single most significant transformation was in 1982, when the Chinese Communist Party wrote into the country’s constitution that its president and vice president could serve no more than two consecutive terms. This made China unique: a dictatorship with term limits. In most authoritarian regimes, the ruler accumulates power and over the years becomes more arrogant, corrupt and unaccountable. This wasn’t possible in the Chinese system, which limited any individual’s power and focused instead on the collective, the party.
China’s unique model also produced an economic miracle. The country has had three decades of merit-based selection and promotion within the Communist Party, wise long-range planning and smart pro-growth economic policies. Since 1978, China’s gross domestic product has grown at an astounding average annual rate of almost 10 percent, which the World Bank calls “the fastest sustained expansion by a major economy in history.”
For decades, China seemed to be getting more institutionalized. Deng had ruled as a supreme leader, wielding power more from behind the scenes than from any offices he held. His successor, Jiang Zemin , held all the key posts when he was in power. After his two terms as president, he continued to lead the Central Military Commission for two more years and even after that remained influential informally. When Jiang’s successor, Hu Jintao , finished his two terms as president, he simultaneously relinquished the top military position and lost nearly all power at once. But that trend has now been turned on its head. If term limits are abolished, which is now almost certain, Xi Jinping could stay China’s president, general secretary of the Communist Party and chairman of the Central Military Commission for the rest of his life. And he is just 64.
Xi has been a strong leader for China. He has tackled two of the nation’s most pressing problems, the corruption within the Communist Party and the pollution caused by China’s fast growth. These efforts have been very popular within the country at large. He has not, however, tackled other crucial challenges for China: long-stalled economic reforms and reduction of its rising debt levels. Xi’s supporters argue that his consolidation of power will now allow him to take these difficult steps and begin the next stage of reforms.
The real challenge for China, however, is not about Xi’s economic policies. He has been reluctant to pursue tough, unpopular measures, but so are most governments everywhere, democratic or dictatorial. (Has the United States done anything about its rapidly rising debt?) The real danger is that China is eliminating perhaps the central restraint in a system that provides staggering amounts of power to the country’s leaders. What will that do, over time, to the ambitions and appetites of leaders? “Power tends to corrupt,” Lord Acton famously wrote in 1887, “and absolute power corrupts absolutely.” Perhaps China will avoid this tendency, but it has been widespread throughout history.
China under Xi has also become more ambitious internationally. It is now the world’s second-largest economy, the third-largest funder of the United Nations and the supplier of more peacekeepers than the other four permanent Security Council members combined. The country has been bulking up its military while devoting significant resources to far-flung cultural arms such as the Confucius Institute. It has announced loans and investment spending — the Belt and Road Initiative — that will be about 10 times the size of the Marshall Plan, by some estimates. It is determined to lead the world in fields such as solar and wind power, electric cars and artificial intelligence.
Chinese scholars say China is entering a new era with a new system. After the Communist Party took power in 1949, it had roughly 30 years of Mao’s rule. That was followed by roughly 30 years of Deng and his system. It is now clear that we are in the third era, which might be 30 years of Xi. Is anybody in Washington paying attention?