For the overseas China-watching community, there is a pressing need to evaluate and reconcile two seemingly contradictory observations about the Chinese leadership on the eve of the 20th Party Congress. On the one hand, Beijing has made drastic policy moves –– what foreign analysts often describe as hardline and coercive approaches –– on both domestic affairs and foreign relations. But at the same time, the leadership of the Chinese Communist Party (CCP) has been noticeably concerned about the need for both socioeconomic stability at home and a less hostile environment abroad.
These observations are perhaps both valid. The Chinese government has undertaken a sweeping crackdown on numerous giant private companies like Didi, Alibaba, and Evergrande as well as many education and entertainment stocks in recent months. There has been no sign that the CCP leadership will change its position on Xinjiang and Hong Kong. Beijing will firmly continue its pressure campaign against Taiwan’s independence. China’s tit-for-tat economic coercion against U.S.-led “selective technological decoupling” –– and retaliatory sanctions targeting individuals and institutions in North America and Europe —has fomented deep concern in the United States and among its allies.
To a great extent, the Chinese leadership also recognizes the competing needs to play hardball and maintain socioeconomic stability during this sensitive political season. In the past few months, Xi Jinping made several long speeches at meetings with several hundred senior officials and upcoming younger leaders during which he has emphasized the daunting challenges confronting the CCP and the great importance of solidarity and stability in China. Understanding how the Chinese leadership can come to terms with these tensions, and especially how it perceives its leverage and adoption of countermeasures, may help explain Beijing’s perspective and conduct.
Challenges confronting Beijing on the eve of the 20th Party Congress
Following the highly publicized centenary of the founding of the CCP, the Chinese leadership has been in a celebratory mood. Paradoxically, it also has conveyed to the Chinese public that the country faces many challenges and risks. In the official narrative of the People’s Republic of China (PRC), some tests facing domestic governance, development, and stability are unprecedented (qiansuo weiyou).
In the speech he delivered at the 6th Plenary Session of the 19th Central Committee in November 2021, Xi Jinping raised a question to characterize the overarching challenge confronting the ruling Party: “Our Party has such a long history, such a large scale, and has been in power for such a long time, how can we jump out of the historical cycle (lishi zhouqi lü) of the rise and fall of chaos?” The tests and challenges to which Xi and the Chinese leadership refer certainly include those in both domestic and international settings.
Domestically, Beijing has confronted major challenges such as economic structural changes, continuing economic disparities, and the huge costs of draconian measures to control COVID-19. According to Chinese official sources, in 2020, about 4.5 million micro-and-small enterprises (xiaowei qiye) closed, almost twice the number as in 2019 and about 10 times the number as in 2018. The closure of micro-and-small enterprises in 2021 was even higher than in 2020, leading to worsening unemployment. Micro-and-small enterprises, almost all of which are privately owned, are regarded as an indispensable part of China’s economy. The private sector (of which micro-and-small-enterprises serve as the foundation) accounts for half of China’s tax revenue, 60 percent of the country’s GDP, and 85 percent of urban employment, providing 440 million urban jobs and accommodating 290 million migrant workers.
Additionally, this year China is expected to have 10.8 million college graduates, an increase of 1.7 million over 2021, accounting for the largest numbers of college graduates in PRC history. An increasing number of college graduates registered for the national civil service examination in 2021, reflecting the market weakening of the private sector. The total number of applicants exceeded two million, an increase of half a million over the previous year, setting a new record. As Chinese analysts have observed, the era of rapid economic development supported by labor and export advantages in the early decades of the reform and opening-up era has now passed. It is also expected that the post-COVID openings around the world will undermine China’s strong exports, as was the case in 2021.
Furthermore, Beijing seems to be keenly aware of the persistence of economic disparities in the country, including the growing gap between provinces and among income groups. For example, in 2021, rich provinces such as Guangdong, Jiangsu, and Shandong saw a much higher GDP growth rate than China’s “rust belt” northeastern provinces of Heilongjiang, Jilin, and Liaoning. Premier Li Keqiang’s stunning recognition in 2020 that 600 million people in China have a monthly disposable income of less than 1,000 yuan (an equivalent of $157) was a sobering warning about the economic plight of a large number of people despite its ascendance as the largest middle-class country in the world.
Externally, the ties between China and the United States, the world’s most consequential bilateral relationship, have deteriorated at a speed and scope beyond what could have been predicted. Not only has each side accused the other of being a genocidal regime and speculated that the COVID-19 pandemic originated from a lab leak in the other country, but the risk for military confrontation and war between both superpowers is on the rise.
From Washington’s perspective, for the first time since World War II, the United States has encountered a country whose global economic outreach, technological capability, and comprehensive national strength are on par with its own. The conclusion of the Rand Corporation’s recent report seems to reflect sentiment in Washington today: “there are risks in competing with China, but the risks of not competing are greater.” The new Congress in the first half of 2021 introduced more than 300 China-related bills (although most have not become law). President Biden has apparently wanted to compete with Republicans on the question of which party is tougher on China. Biden’s emphasis on collaborating with American allies in Europe and Asia against China has exerted more pressure on China’s political, economic, military, and diplomatic fronts.
Beijing’s perceived leverage and political measures
Chinese authorities believe that they can afford to play hardball when dealing with these challenges in today’s rapidly changing environment. From their perspective, the CCP leadership has gained sufficient political capital, resulting from widely perceived successes regarding public health improvement, poverty elimination, green development, technological advancement, and military modernization.
Not only do the PRC’s own public opinion polls show tremendous public support for Xi and the Party, but several recent opinion surveys in China conducted by American scholars all show a high degree of public satisfaction with the Party leadership. A longitudinal survey conducted by scholars at the Harvard Kennedy School found that the satisfaction of Chinese citizens with the government (township, county, provincial, and central) has increased virtually across the board. This is particularly evident in public opinion of the central government, which has remained consistent at about 95 percent satisfaction in the past decade. Other recent opinion surveys conducted by scholars at the University of California at San Diego, Professor Andrew Nathan at Columbia University, and analysts of Edelman PR Worldwide all revealed similar findings.
For Xi Jinping, the recent call for “common prosperity” along with some drastic populist policy moves are much-needed measures to tackle economic disparities. These moves will strengthen rather than undermine sociopolitical stability in the country, especially given the Chinese public’s growing resentment toward large private corporate monopolies. Some policy measures such as building more affordable housing, improving public services for the elderly population, and reducing the financial burden of children’s education for low-income families aim to help vulnerable social groups, including college graduates from less privileged families and less developed regions. In the Chinese official narrative, the CCP leadership’s crackdown on these giant private companies has important justifications, including the legitimate fear of a property bubble and financial crisis, valid concern about China’s national security, and preventive measures to counter the risks of decoupling with the United States.
On the foreign policy front, Xi Jinping believes that China now has more leverage in the current global economic landscape. About 130 countries and regions count China as their largest trading partner, compared to 57 for the United States. Among EU countries, for example, China has been Germany’s largest trading partner for five consecutive years. This year’s implementation of the Regional Comprehensive Economic Partnership (RCEP), which connects about one-third of the world’s population and output, reinforces China’s economic leverage.
In the eyes of Beijing, assertive foreign policy and nationalistic appeals are also resonating well with the Chinese public. Biden’s anti-China coalition has pushed China to accelerate its collaboration with Russia and Iran. Despite the absence of an “ideological glue” among these three countries, they are willing to show solidarity to combat what they perceive to be a formidable threat from the U.S.-led military bloc. Last year China and Iran formally signed a 25-year strategic cooperation agreement. Understandably, Chinese public opinion has been biased against the United States regarding Iran’s nuclear development and Russia’s moves in Kazakhstan and Ukraine.
Finally, despite the media’s publicity of his crackdown on corruption, Xi’s overriding message is the importance of leadership unity. As he said at a Politburo meeting in November 2021, “the unity of the Party leadership is the life of the Party.” This sentiment is certainly in line with the fact that, in his second term, only three members of the 376-member Central Committee were purged, compared with as many as 43 members arrested on corruption charges during his first term.
When it comes to forming the new top leadership, while loyalty to Xi can explain many promotions, Xi will also likely allow some leaders from other factions or without factional identities to obtain seats on the Politburo and Politburo Standing Committee (PSC) to sustain leadership unity. For example, current Politburo member Hu Chunhua, a protégé of Hu Jintao and a prominent tuanpai leader who advanced his career from the Chinese Communist Youth League, will most likely enter the next PSC.
To address growing concern about public sector development, Xi’s proteges often have substantial leadership experience from Zhejiang, Shanghai, Fujian, and Guangdong, regions that are known for their vibrant private sector and international economic engagement. They include Shanghai Party Secretary Li Qiang (1959), Guangdong Party Secretary Li Xi (1956), Zhejiang Party Secretary Yuan Jiajun (1962), Fujian Party Secretary Yin Li (1962), and Shanghai Mayor Gong Zheng (1960).
The two Lis are leading candidates for the next PSC, and the others rank among the top candidates for the next Politburo. Some other leaders who previously worked in these regions, for example, former Guangdong Governor and newly appointed Xinjiang Party Secretary Ma Xingrui (1959) and former Shanghai Mayor and current Hubei Party Secretary Ying Yong (1957), will likely gain seats in the new Politburo. These appointments, in the hopes of Zhongnanhai, will revitalize the confidence of the Chinese public –– and especially private entrepreneurs and the middle class –– in the new leadership.