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How Xi Jinping is recasting China in his strongman image

Last Updated:2017-09-06

By Geoff Raby






As President Xi Jinping's first lustrum draws to a close, focus is inevitably on speculation about the new leadership line-up that will walk out on the stage at the Great Hall of the People in October, or possibly November. Speculation on who might be in the new Standing Committee of seven is futile. We don't even know if it will be seven, or nine as in 2007 when Xi was the surprise appearance, or even five, or some other number. Such is the opacity of the world's other superpower in the 21st century, itself extraordinary.





This column has, for many years now, pointed to the radical transforming nature of Xi's rule. He has done away with collective political leadership to emerge as the most powerful political figure in China since Mao in the 1950s, before Mao went mad in a Kevin Rudd sort of megalomania.


Deng Xiaoping pulled off a remarkable trick for a one party, authoritarian state, by instituting a system of collective leadership. The most difficult thing for a one-party state to manage is the transfer of political power from one leader to the next. Until China of the reform era, only three ways applied: wait until the ruler died in office as in the old Soviet Union, meanwhile the system atrophied; dynastic succession as in North Korea or Singapore; or civil war.


The Deng period of reform, which is well and truly over under Xi Jinping, instituted a mechanism for a stable and predictable transition of power. Each leader would have two five-year terms. At the end of the second, the new leader would be identified by being appointed vice-president. Meanwhile, the exercise of power by the leader was constrained – not by a constitution and an independent judiciary – but by an elderly group of revolutionaries. The leader – including Deng at the height of his power – had to persuade and find consensus among this group before major policies could be adopted.


The demagogic ruler


With Xi, all that has gone. Xi at one level is now China's unchallenged, demagogic ruler. But, of course, China itself has changed so much that even how he exercises power is vastly different from earlier Chinese despots.









China is a modern sophisticated country, with a demonstrated record now of amazing achievements in all fields of human endeavour. We may find the political system archaic, brutal at times, but it is the reality and for most Chinese it works better than anything else they have experienced in living memory.


Imagine if you are the leadership in the Zhongnanhai compound and you are surveying the past decade since the financial crisis hit in 2007-08. It is difficult to believe that if you were one of the policymakers you would not feel an enormous sense of satisfaction.


Over that decade, China's per capita income has more than doubled. China has built more high-speed railway than the rest of the world combined. China has spored global companies with household recognised names around the world – Alibaba, Tencent, Huawei, Lenovo, Haier, and many more. Its companies have acquired some of the world's great brands such as Volvo. It has entered every sphere of global commerce from shipbuilding to high tech and outer space. Most analysts say that the future of electronic automobiles will be decided in China.


Today China is not riven by existential insecurity or doubt. Its government and people are supremely confident at what they have achieved and what they can do. The future is limitless.


Debt still comparatively low


Foreign commentators, as this paper did recently, ring their hands over China's debt. China does indeed have some major economic challenges, and the rapid build in debt is one of them. But China's total debt as a share of GDP is still not near the US or Japan's, and Chinese debt is almost entirely denominated in RMB so a currency run is not going to happen. China's savings rate is still one of the highest in the world, and every RMB of debt is today matched by an RMB of savings.


This is not to say it is something the government can ignore, but if this is China's biggest challenge to manage, then it is a relatively comfortable place to be compared with most economies in the world today.


Xi Jinping, however, is not taking any of this for granted. As he has set about recasting China's post 1979 political system, so he is doing the same with the economy. For everything that Xi does, the starting point is the Communist Party and its unchallenged and unchallengeable control over every aspect of Chinese society.


All organs of state power must serve to sustain and entrench the party's control. It is now emerging that as Xi transformed the political model over the past five years he has now started to transform the economic model. Whereas at the Fourth Party Conference in 2013, the policy was to make the market the "driving force of the economy" and the private sector was to be "on the same level as the state-owned" sector, today this has all changed.


Strengthening the party


Xi now has a new model. It is where state-owned enterprise reform means amalgamating already colossus-sized entities into even bigger ones. Massive Wuhan Steel was forced to amalgamate with even bigger Baosteel; China northern rail with China southern rail – two unimaginably huge companies, to make one even bigger; and power construction companies like Power China and Three Gorges Dam have been created by amalgamating several other behemoths.


While the state-owned sector is only about a quarter of China's GDP, and a vibrant private sector economy is a major part of China's economic success, in the old Leninist concept, the SOEs are the "commanding heights" of the economy – power, transport, finance. Control these and you control the country. As monopolies they also generate huge rents for the Communist Party that can then go into security and military assets to perpetuate Communist Party rule.


Xi Jinping seeks to strengthen Communist Party rule in China. He views the party as China's best hope for the future. Having dabbled with market reform, he has now



determinedly decided that China's economic model will be one of a dominant state- owned sector. Private entrepreneurs are welcome, as long as they do the party's bidding. If, like Wanda and Fosun recently, they seem to be freelancing, the party will snap on the handbrake and bring them back into line.


Over the past 30 years, talk of economic reform meant more market- driven economic decisions. Today it is an empty phrase in China.


For Xi Jinping, as he approaches his re-appointment for another five years, party control and the economy serving the party are paramount. On these measures, he has been one of he world's most successful political leader of the past five years.










Geoff Raby is Chairman and CEO of Geoff Raby & Associates and a former Australian Ambassador to China.


This article first appeared in the Australian Financial Review:

http://www.afr.com/opinion/columns/how-xi-jinping-is-recasting-china-in-his-strongman-image-20170829-gy685d