Xi Jinping’s third term is a tragic mistake

Xi Jinping is about to be confirmed for a third term as General Secretary of the Communist Party and head of the military. So, is its attainment of such unassailable power good for China or good for the world? no It’s dangerous for both of them. It would be dangerous even if he had proved himself a ruler of unparalleled skill. But he didn’t do that. In any case, there is a risk of ossification at home and increasing friction abroad.

Ten years is always enough. Even a first class leader falls apart after such a long tenure. Someone with unassailable strength tends to decay faster. Surrounded by the people he has chosen and protective of the legacy he has created, the Despot becomes increasingly isolated and defensive, even paranoid.

Bar chart of share of expenditure in China GDP (%), showing that investment still has a large share of China GDP

reform stops. Decision-making slows down. Stupid decisions are not contested and therefore remain unchanged. The zero Covid policy is an example. If one looks outside of China, one can see the madness fueled by continued power in Putin’s Russia. In Mao Zedong, China has its own example. In fact, Mao was the reason Deng Xiaoping, a genius of common sense, instituted the term limits system that Xi is now overthrowing.

The advantage of democracies is not that they necessarily choose wise and well-meaning leaders. Too often they choose the opposite. But these can be fought without danger and dismissed without bloodshed. In the case of personal despotism, neither is possible. In the case of institutionalized despotism, dismissal is conceivable, as Khrushchev noted. But it’s dangerous, and the more dominant the leader, the more dangerous it becomes. It’s just realistic to expect Xi’s next 10 years to be worse than the last.

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How bad was his first decade?

in one recent article in China Leadership Monitor, argues Minxin Pei of Claremont McKenna College that Xi has three main goals: personal dominance; revival of the Leninist party state; and the expansion of China’s global influence. He triumphed at the first; formally successful on the second; and had mixed success on the last one. While China is now a recognized superpower, it has also mobilized a powerful coalition of fearful opponents.

Pei does not count economic reform among Xi’s main goals. The evidence suggests that this is quite true. It is not. In particular, reforms that could undermine state-owned enterprises have been avoided. Stricter controls were also imposed on famous Chinese businessmen like Jack Ma.

Column chart of Chinese debt as a percentage of GDP, by sector, showing that China's debt mountain continues to grow

Most importantly, deep macroeconomic, microeconomic and environmental difficulties are largely ignored.

All three were grouped into former prime ministers Wen Jiabao’s description of the economy as “unstable, unbalanced, uncoordinated and unsustainable”.

The fundamental macroeconomic problems are excessive savings, the consequent excessive investment and the resulting mounting piles of unproductive debt. These three things go together: One cannot be solved without solving the other two. Contrary to popular belief, excess saving is only partly the result of a lack of a social safety net and the consequent high household savings. This is also due to the fact that household disposable income makes up such a small proportion of national income, while profits make up a large part of the rest.

Bar chart of China's national savings as a percentage of GDP, showing that household savings are not the dominant source of China's national savings

The result is that national savings and investments are each over 40 percent of gross domestic product. If investments were not so high, the economy would collapse permanently. However, as growth potential has slowed, much of that investment has gone into unproductive, debt-financed construction. This is a short-term remedy with the adverse long-term side effects of bad debt and reduced return on investment. The solution is not just to reduce household savings, but to increase households’ share of disposable income. Both threaten powerful self-interests and have not materialized.

The basic microeconomic problems were pervasive corruption, indiscriminate interference in the private sector, and waste in the public sector. In addition, environmental policy, not least the country’s enormous carbon dioxide emissions, remains an enormous challenge. To his credit, Xi recognized this problem.

Line chart of household disposable income as a percentage of GDP in China, showing that household disposable income is a strikingly low share of GDP

More recently, Xi has adopted the policy of containing a virus freely circulating in the rest of the world. China should have instead imported the best global vaccines and reopened the country after they were administered. This would have been sensible and also demonstrated an ongoing belief in openness and collaboration.

Xi’s program of renewed central control is not surprising. It was a natural response to the eroding effect of greater freedoms on a political structure based on power that is not accountable except upwards. Pervasive corruption was the inevitable result. But the price of trying to suppress it is risk aversion and ossification. It’s hard to believe that a top-down organization under one man’s absolute control could reasonably, let alone effectively, govern an increasingly sophisticated society of 1.4 billion people.

Bar chart of percentage change, January to July 2022 compared to the same period in 2021, showing that the private sector suffered particularly badly in 2022

Not surprisingly, China has become increasingly self-assured. The West’s unwillingness to adapt to China’s rise is clearly part of the problem. But also China’s open hostility to core values ​​dear to the West (and many others). Many of us cannot take seriously China’s adherence to Marxist political ideals, which have a proven track record of failing to prevail. Yes, Deng’s brilliant eclecticism worked, at least as long as China was a developing country. But the reintroduction of the old Leninist orthodoxies into today’s highly complex China has to be a dead end at best. With Xi remaining in office indefinitely, the worst-case scenario could be something even more dangerous than that, for China itself and the rest of the world.

martin.wolf@ft.com

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https://www.ft.com/content/fa1510a3-0ea9-4eab-a67c-392c7704fdb1 Xi Jinping’s third term is a tragic mistake

Adam Bradshaw

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