Long Read: Xi Versus The World

Note: This is a mid-week long read. And it’s one heck of a long read. 

China this week is undertaking its twice-a-decade exercise in doing work – much like what Canberra does every beginning of a new parliamentary term. Unlike Canberra however, the head honcho in Beijing has a major onus to deliver upon his people but so far, the remarks seem to have the mood and productivity of Canberra. Beijing is at a crucial political and economic juncture – and Xi Jinping has the task that no leader would envy. A new era has truly emerged – and if China doesn’t set the pace in re-energising the people and Beijing’s policies, the Western world will sock it to them.

The Chinese New Era, as has been dubbed by the Western media, seeks to herald in a renewed focus on military might and economic levelling. How those new policies of Xi will be implemented and particularly, where and when is what is in question. Xi spoke Sunday about the importance of “socialism with Chinese characteristics” – a kind of independence model that cites China’s rampant economic success and promotes the death of democracy’s effectiveness. By that definition, it seems that Xi is trying to hit an equilibrium – between Mao’s stringent controls on people power and Deng Xiaoping’s foreign interests as a world leader in economic benchmarking.

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(Picture Credit: The New York Times)

This week’s activities at Tiananmen Square have so far demonstrated that Xi is willing to negotiate on a wide range of issues – and tackle them head on with the Politburo always verifying his rationale. China is playing opposite the United States card in many ways – and it does help that the current White House resident is as brash and unpredictable as he is. Xi’s role as President of China is about “certainty, security and stability” – with a touch of power and prestige. While he certainly knows how to remain stable and secure, the backing of the military will not be enough to cement his place as a fervent world leader. To do better, President Xi must be up front with his people and have the new actions to follow it up. Popular policies of the past will not work in the new world order – and China’s new era needs to be forward thinking in that sense. Reiterating old policies just won’t cut it anymore.

Xi’s time in the chair has been ruled by three things – the military (in the case of sovereignty in Taiwan, Urumqi, the Spratly Islands and North Korea), the economy (double digit growth and record output) and control (in the case of bitcoin and clamping down on internet controls). And all are clearly his favourites – or at least he thinks they are favourite enough to have mentioned in the aforementioned Sunday speech he gave to Chinese lawmakers.

First – to address the military. And it’s my genuine hope that he is not saying this just because of Japan and Mr Abe’s plans to “stretch” Japan’s military and weapons capacities. Nonetheless, Mr Xi was upfront and blunt on his vision for the military – he wants to achieve a Chinese dream of a massive military. The speech contained blanket content on these dreams – but did contain one key note: “[we must] consolidate the unity between the military and civilian”. And it makes me think what that means…China already has conscription and the military features heavily in the Chinese curriculum. So do they plan to put more education (the ‘milder’ option)…or does the fostering of the Chinese military actually have much bigger plans (the ‘stronger’ option)? The key to that will lie in how China deals with North Korea and Taiwan. Taiwan separatists have already signalled their disappointment over the constant reminding of the 1992 Consensus – otherwise known as the “One China” policy.

Xi’s tone was mild and confused over Taiwan – but he did enough to make sure Taiwan’s separatists were reminded that Taiwan remains part of China. Having said this, bringing up the Taiwan story nine times in one speech should have at least made those separatists think about their next move.

North Korea is also a fascinating story. Just last month, Japan’s Prime Minister Shinzo Abe (who incidentally just won re-election with his two-thirds majority truly intact) noted this about Pyongyang:

“Now is not the time for dialogue. Now is the time to apply pressure,” (Abe speaking to the UNGA, September 2017)

I could write about North Korea all day to be honest. However, it is common knowledge by now that China has been told numerous times to deal with its neighbour. An Abe re-election is dangerous to this common knowledge. With Trump visiting Asia in November, the next part of the New Era develops – when will China crack and deal with North Korea? And is dealing with North Korea a sign of giving into Western competitors? To Xi, this problem will no doubt be in his mind – even if it didn’t appear at all in his three and a half hour speech. The military better be ready to look at this one quite closely – otherwise the next head to be chopped will reverberate all the way to East 42nd Street, New York City – the office of Antonio Gutierres.

The other major issues are in Urumqi and the Spratly Islands – although these have been ongoing for some time. The Xinjiang (Urumqi) independence conflict has been a problem since the middle of Mao’s rule. Xi made no explicit references to the Xinjiang conflict in his Congress speech Sunday, but did invite interest for a “Great Wall of Steel” to control the ongoing unrest. Minor reference was also made to the South China Sea crisis where key military opportunities lie for Japan, China and many South East Asian countries including the Philippines. Xi continues to arrest power in the South China Sea (albeit vaguely), noting that construction has seen “steady progress“. In the past, Xi has been defiant of rulings from the Hague and criticised US intervention in the area.

To hear more on this story, you can listen to my co-production with Sean Britten for 2SER’s Friday Daily: http://2ser.com/china-taking-aim-australia-south-china-sea/

To focus now on the economy – another major concern for China. While the ‘going out’ policy will no doubt be a concern for the future, as will keeping Chinese manufacturing rolling along, there is a much bigger problem facing Beijing…

Poverty.

According to the World Bank, some 88% of Chinese lived under US$1.90 a day when statistics started recording in 1981. Even more startling, China’s Xinhua News (the state-run, English news service of Beijing) remarks that 800 million people have been brought out of poverty in the 30 years since reform. That makes poverty alleviation a huge priority for Xi Jinping and makes it the key policy to win the Chinese population over. And it will have to take some serious bottle to raise even more out of poverty…especially when their new goal is to eradicate China-originated poverty by 2021.

China reports (with some scrutiny) that their poverty rate went down in 2013 to 1.9%. If we assume that the 1.9% figure has stayed steady since 2013 and then use it as a proportionate of the 2017 population, that means 26 million people are still in poverty – that’s more than Australia’s population.

So how does Xi plan to tackle this one?

If you looked solely at his speech? Nothing of note. However, Beijing does have poverty alleviation goals that have been set since 2012 – mainly targeting rural poverty. According to the State Council Poverty Alleviation Office, the rural poverty rate has more than halved to 4.5%. Other measures include getting villagers into occupational training and investing more money into public health services. Will this strategy work into 2021 and into the 20th Congress? Only time and adaptation will tell – but Xi must be ready to realise that his love of other economic initiatives like the Belt and Road may prove costly at home where the money is most needed.

Finally, we look at the economy and government. And if there is any one way for Xi to peacefully (or sneakily) cement China’s place in the world, this would be it. Xi has spoken about China’s economy and with it, promoted globalisation and freer trade on almost countless occasions. Xi has promised to crack down on corruption in the government – and since coming into office, he has imprisoned nearly 200 former and current officials. Xi has also imprisoned military officials and conducted investigations which have received Western media attention. However, critics say that Xi’s dealing with ‘corruption’ has also served as a means to imprison political opponents.

Western outlets have not been kind to Xi’s crack down on corruption – although generally Western media is not kind to non-democratic countries like China and Cuba. However, Xi did enlighten the world with this to say about his anti-corruption game:

“the overwhelming force of the anti-corruption struggle has coalesced and is being consolidated and developed.” (As quoted in The New York Times, October 2017)

There is no doubt that China has been proactive on dealing with its corruption crisis. However, both international media in China as well as analysts internationally continue to hold their quiet concerns about whether President Xi is actually overusing the technique as a way to take the heat off his rule. General consensus from analysts in the US and Australia find that Xi’s ‘war’ on corruption is merely that – a war in quotation marks.

“I suspect Xi can claim to be ‘winning,’ but the ‘war’ is far from over and much work, both in rooting out corruption and addressing the forces that drive it, remains to be done,” Andrew Wedeman (Georgia State University, director of China Studies)

“Xi Jinping’s crackdown on corruption is potentially welcome…but it needs to be accompanied by a more thorough reform of many of the institutionalised state-business relations that underpin it.” Mark Beeson (Professor of International Politics, UWA – speaking in January 2016)

On the economy, Xi and Premier Li Keqiang have been forthright and powerful in cementing China as the number two world economy. Speaking of the economy, Xi said that striking a development balance was the most challenging prospect facing China over the next five years. Xi also assured that the country would continue the open trade path laid out first by Deng Xiaoping in 1976. This openness has been linked to the “going out” policy which has encouraged state and private enterprises to invest in international projects – including a plethora in Australia. Signalling more trade openness also means including more foreign investors into China – although this clearly has its boundaries as Beijing’s ban of bitcoin trading demonstrated. This makes the definition of a Chinese socialism even more fascinating – and eyebrow raising.

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Xi’s comments about trade openness and Chinese socialism has fuelled debate (and confusion) about which way the Chinese economy will really go. Projects like the Belt and Road Initiative and the Nigerian Coastal Railway suggest that China is willing to invest heavily overseas – billions are being spent inside China’s major cities as well as in overseas contracts to connect the world through mass infrastructure projects. Having said this, Chinese investment in foreign and domestic projects clearly has its restrictions. Investment will not (at least, so far) be taken in countries which explicitly support Western values. With the rejection of bitcoin and further restrictions in market reform commentary suggests that economic liberalisation will be limited. Any liberalisation undertaken by Xi would scare him and the Politburo’s political precedent on the nation.

An unresponsive China will only encourage businesses to look elsewhere. Xi needs to realise that although all countries at some level depend on China (even if it’s just for cheap manufacturing), there is still a whole world which can be scouted for. Paranoia over power is a natural feeling for Xi – as has been for every Chinese leader since Mao. However, to exercise that paranoia over a one-sided market relationship may prove detrimental to Xi and the entire economy.

The economic challenges ahead will be quite severe on the market front as well. The debate over the devaluation of the yuan has been a constant economic news topic since the Obama administration’s first term. Equally fascinating will be China’s policies to uphold the nation’s extraordinary economic growth – and there is still stark interest despite double digit growth not existing since late 2011. How will Xi tackle this? Well – much like the other policies, this was very murky and sparse in policy meat in his speech. But the new Politburo, containing economic stalwart Liu He may provide some answers in the coming weeks and months.

So the conclusions from Beijing over the past week have been cryptic yet fascinating. While hiding the meat of policies is not new for any government, the way Xi has cemented his role as President, as kingmaker and then as socialism’s stalwart has attracted deserved attention. Should Washington be worried? Well – yes. But naturally, bigger concerns will come from their domestic issues, Iran and North Korea. Should Canberra be worried? Well – yes too. After all, this Australia-China-US love triangle is very dangerous and will truly test the Turnbull administration (and the Shorten opposition) about where their loyalties lie and how risk averse they are in this game of political economy ‘risk’.

I leave you with this thought from former Prime Minister Kevin Rudd, as written in the Financial Times on Monday:

The list of what could go wrong in Beijing’s policy project is formidable. But it would be reckless to assume, as many do in Washington, that China’s transition to global pre-eminence will implode under the weight of the political and economic contradictions alleged to be inherent in the Chinese model.

(Kevin Rudd, The Financial Times, October 2017)

That’s plenty of reading and writing for one day. Or multiple days probably to you, knowing the way I write. I appreciate your reading and your interest – but I implore you to not go away too far. This saga continues – and it can only get more exciting.

Additional Sources and Commentary provided by The Straits Times, The South China Morning Post, Bloomberg, the Financial Times and The Diplomat.

Feature Image: Shutterstock

(C) Hans Lee Media, 2017. No duplication of this article is permitted without written approval from the author.

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