Flux in China’s top ranks could be a moment of acute geopolitical risk
For decades before and after the 2008 financial crisis, China was an exciting prospect. The Chinese century became a widely accepted notion, pandering to a CCP narrative that Beijing remains keen to propagate.
President Xi Jinping wants to exploit the historic opportunity, as he calls it, to re-frame the global system, including the rules and values governing how nations interact.
Yet this isn’t quite going according to plan. While China will likely remain the world’s second-largest economy and a key geopolitical power, the country is experiencing unusual political and economic volatility. The outcome is anything but predictable.
The most visible signs of flux are political. In June, a little over three months after Xi announced his cabinet at the annual National People’s Congress, his hand-picked and fast-tracked foreign minister Qin Gang disappeared suddenly from public view.
Officially, the story appears to be that Mr Qin is being punished for “lifestyle issues” – in this case, an extramarital affair leading to the birth of a child while serving as the ambassador to Washington. Yet, despite remaining a state councillor, his whereabouts, actual transgressions and likely fate are unknown.
Then, in August, the government replaced the commander and political commissar of the elite People’s Liberation Army “Rocket Force” – responsible for China’s nuclear missiles. Both men were earlier acknowledged to have disappeared amid a claimed investigation into the leaking of military secrets.
Finally, in September, another of Xi’s proteges, the defence minister Li Fangshu, also disappeared. Mr Li took up his role in March; even by the standards of authoritarian states, his has been a remarkably swift downfall. Outside of China it has been reported that he is under investigation for corruption in procurement, but no official word has followed.
The Chinese Communist Party is notoriously opaque in its internal dynamics, and has become more so under Xi, but it has released some interesting information. The “anti-corruption” campaign that has investigated and incarcerated many party members was initiated by Xi Jinping when he came to power in 2012, and shows no sign of ending.
While the motive has been to tighten party loyalty – and more importantly Xi’s personal control – the persistence of the campaign suggests it isn’t working. We know millions of people and family members have been affected, but so far, no one has dared to show opposition to Xi.
There are other reasons for domestic dissatisfaction. The Chinese economy has faltered badly over the last year, and while some will point to the disappointing emergence from the Covid pandemic – and in particular the extreme measures taken to suppress the virus – as the primary cause, this is a misdiagnosis.
In truth, Beijing’s economic travails began over a decade ago. Xi and Covid just made them worse.
Economic and political missteps by Xi might at some point translate to party officials considering a change in leadership.
However, those hoping for such a change soon are likely to be disappointed.
Many of the causes of economic frailty blamed on Xi Jinping – repression, centralisation of power and poor governance – in fact are a consequence of China’s failing model of economic development. This failure is now becoming institutionalised and self-replicating; changing the person at the top of the machine will have little effect on its performance.
Analysts are now starting to diagnose China with “Japanification”: a painful period of adjustment following a debt binge involving sluggish growth and deflation.
In this analysis, despite huge scientific and technological capabilities, Beijing’s economy is systematically flawed and faces years of awkward adjustment.
Some have even taken to alluding to “Peak China”, not in order to suggest an immediate precipitous decline, but to emphasise that optimistic expectations about Chinese economic growth – the basis for the projection of its power – will only be possible in the event of political reforms that its Leninist regime cannot possibly make.
Perhaps unsurprisingly, between domestic political and economic turbulence there is a sense that we are now at, or nearing, a geopolitical tipping point.
The most visible manifestation of this shift is in Xi’s international appearances and no-shows. In August, he attended but failed to make a scheduled speech at the Brics summit in Johannesburg, while earlier this month he failed to attend a G20 Summit in India in what appeared to be a deliberate snub.
Reading the tea-leaves of these gestures is challenging, but it is quite possible that Xi now feels more comfortable in Brics-type forums – including its now significantly expanded membership – than in the G20 where the United States and liberal leaning democracies still hold considerable sway.
This shift would certainly align better with the China-centric global order to which Xi Jinping aspires. It is in this role as aspiring hegemon which we should contextualise, for instance, China’s intensifying military activities in the South China Sea, truculent posturing towards Taiwan, marriage of convenience with Russia, and carefully thought out governance strategies designed to appeal to the so-called Global South.
Yet this ambition, too, might falter as China’s economic muscle atrophies.
Even leaving the pushback from G7 and other developed countries to one side, China’s international relations have not been exactly one-way traffic.
It has encountered resistance in its Belt and Road projects, and among several international debtor nations for its opaque and unilateral lending practices. It has fractious relations with India, which also aspires to Asian and global leadership status. It has also clashed politically with the Philippines and Vietnam, but more widely encountered resistance from other nations in Asia that dislike Beijing’s economic and maritime policies of coercion.
The viability of Xi’s vision is hanging in the balance, and protracted uncertainty and tensions are likely to lie ahead for the foreseeable future.
Volatile economic and political conditions are certainly assured inside China as systemic problems continue to come to the fore, and in international relations as Beijing’s growing pains continue to hamper it.
We should assume that Xi Jinping’s projection of confidence to his people and to the outside world is for real, even if this is partly illusory. Global businesses should not assume that the fabled Chinese middle class and market will provide a sufficient reason not to recalibrate sources and supply chains away from the mainland. Instead, businesses should be eyeing carefully the rising politicisation of the business environment.
On an intergovernmental level, meanwhile, the British government cannot dither in setting a balance in dealing with China that is neither too complacent nor too cautious. The troubles which have been bubbling beneath the surface may soon bubble over, and we will need to be ready for when they do. Too much hangs in the balance to get this wrong.