AS THE NEW YEAR festivities wind down, this Bystander is looking ahead to the first anniversary next month of Xi Jinping assuming the presidency of China.
In effect, Xi has been China’s leader since taking over as Party general-secretary 14 months ago. He has since consolidated his power far faster than most expected and centralized his control over the parts of the body politic and economic he most intends to change. He is a throwback, in that respect, to the strongman leadership of yore after the decade of consensual leadership of his predecessor, Hu Jintao. It is, perhaps, what China needs if it is to steer itself through what will be a critical decade of transformation for both the country and the Party that has exercised monopoly rule over it for more than 60 years.
Xi moved quickly and decisively to take charge of the tiller. He has set his course for rebalancing the economy in the way necessary if China is to reach the next level of economic development. What is unknown is the extent to which factional political resistance will cause him trouble along the way regardless of his tightening of control over the bureaucracy and Party officials. Indeed, that very tightening could cause a troublesome backlash. One reason for Li Keqiang’s diminished role in managing the economy compared to his predecessor Wen Jiabao is that his principal role now seems to be managing coordination throughout government to ensure the successful implementation of Xi’s reform program.
More clear, though equally unquantifiable, is the risk of foreign affairs blowing Xi unexpectedly off course. The South and East China Seas are the obvious cases of troubled waters. Yet Xi is encouraging the modernization of China’s military and the concomitant extension of the People’s Liberation Army’s global reach. It is part of the price, willingly paid by Xi, it should be said, to secure the military’s support. However, the PLA has national ambitions of its own, and what is seen domestically as the improvement of the PLA’s technological and operational capabilities is readily seen elsewhere as an assertive flexing of military muscle. That is never without risk, and especially in a region that contains a long-standing rival in Japan, an unflinching one in Vietnam and an unpredictable one in North Korea.
Xi has been able to play the dangers of an unexpected economic blow-up to his immediate advantage. The local government debt bomb puts in harm’s way big state owned financial institutions and local governments — to which are attached many of the vested interests that would be potential losers from economic reform. That has let Xi start to tackle the broader fragilities of the banking system and its shadow by expanding financial services and making interest rates more market-driven. That, in turn, is the gateway to the structural reforms needed to address the economy’s distorted price incentives and capital misallocations, and to give the private sector a bigger role.
It will not be plain sailing. There will be defaults and failures with political fallouts to navigate. The global economy will provide squalls. Xi’s rapid centralization of power will make it easier for him to drive the recalcitrant at home into line. His new leading group to coordinate the rebalancing of the economy along with his anti-corruption campaign reaching into even the most powerful state-owned enterprises sends strong signals of top-down political intent to officials, while the new National Security Commission is intended to stifle any bottom-up activism or popular unrest that threatens to compete with Xi’s course of reform.