Guess Who's Back: Xi Sheds Low Profile to Navigate the Trade War

Guess Who's Back: Xi Sheds Low Profile to Navigate the Trade War
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What you need to know

Xi Jinping laid low throughout the summer, leading to rabid speculation from China watchers. He's back now, but is he here to stay?

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By Willy Wo-Lap Lam

Chinese President Xi Jinping seems to have resumed his status as “leadership core” and primary decision-maker after a two-month period of adopting a low profile within the party. The leader was blamed for self-aggrandizement by abrogating term limits to the state presidency, and more importantly, a failure to avert the trade war with the U.S. and to counter President Trump’s efforts to rein in China’s rise.

Since returning to Beijing on Aug. 16 after two weeks of informal meetings at the seaside Beidaihe resort, however, Xi has restored enough authority to reassert his ultra-conservative line on socialist-style economic policy, imposing ideological conformity within the Chinese Communist Party (CCP) and challenging America’s position as the pre-eminent world leader. That Xi, also CCP General Secretary and Chairman of its Central Military Commission, still faces opposition, however, is evidenced by the dearth of top civilian and military cadres willing to offer ritualistic public praise of the wisdom of the “highest commander” and “pathfinder for the Chinese people.”

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Xi Jinping: Still a 'pathfinder for the Chinese people'?

Apart from cutting its trade deficit with China, the Trump White House has asked Beijing to adopt market liberalization and stop interfering in high-tech development sectors and state-owned enterprise (SOE) conglomerates.

A series of post-Beidaihe articles in major PRC official media, however, have upheld Xi’s long-standing view that reforms must serve the interests of the party leadership, despite the fact that the CCP is preparing for the celebration of the 40th anniversary of Deng Xiaoping’s market-oriented reforms. While the People’s Daily published a commentary on Aug. 13 apparently saluting Deng’s contributions to economic liberalization, the mouthpiece made clear that “Chinese-style socialism is the fundamental guarantee for smoothly pushing forward reform and the open door.”

Officials were asked to be “bold ‘believers’ [in socialism] and their hearts must be filled with faith” in socialism with Chinese characteristics. Another commentary in the conservative Red Flag Archives (红旗文稿) warned against reform going down the “evil path” (xielu or 邪路) of capitalism. “Changing our flags and standards… deviations from the socialist direction and negating the socialist order means an evil path that will lead to a cul de sac, bringing about grave dangers [to the party and state],” the piece noted.

A full Politburo session on July 31, the most recent high-level meeting on the economy, emphasized the party-state’s role in promoting stability in six areas: employment, finance, foreign trade, foreign investment in China, domestic investments (largely by the state), and other “anticipated work” in ensuring economic health. This meeting set the tone for Xi’s insistence at the Beidaihe meetings that ultra-conservative economic measures be followed. In an apparent reversal of a major economic policy – deleveraging or cutting debt sustained by different levels of government – the Politburo vowed to use fiscal and monetary policy to sustain a sufficiently high GDP growth rate. It urged more effective fiscal means to expand domestic demand and indicated that “the flow [of liquidity] must be rational and sufficient.” This seemed an indication that a significant degree of quantitative easing would continue to prevent damage to the economy from the trade war.

Xi’s twin task of boosting his own authority within the party while rallying officials and the populace behind his “new-era” theories was evidenced by the National Conference on Ideology and Propaganda held on Aug. 21-22. Xi pointed out in his keynote speech that seminal political thoughts such as “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era” and “21st-century Marxism,” “should be used to arm the entire party, educate the people, and push forward work.”

Cadres and officials were asked to “sing the leitmotif of the times and enhance positive energy” by rallying around the leadership of the “party core,” meaning Xi himself. Of equal importance was Xi’s insistence that the guiding principles of governance and economic construction be based on Marxist and socialist ethos with “Chinese characteristics, Chinese style, and Chinese qipai 气派 [flair].” Xi’s speech was a striking call for ideological conformity amid a deepening trade war with Washington.

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Can Xi weather the storm of the deepening US-China trade war?

At the start of the trade tiff, even fervently nationalistic media such as the Global Times counseled restraint in China’s rhetoric regarding its relations with the U.S. However, in the past month party mouthpieces have returned to high-decibel attacks against the Trump administration’s alleged unilateralism. A key commentary in Xinhua urged the Chinese media to “continuously raise its voice against unilateralism, protectionism, and trade bullying.” Xinhua added that Chinese propaganda units must be “bold, frequent and adroit in raising [Beijing’s] views.” “We do not favor fighting [a trade war],” it added. “But we are not afraid of fighting – and we will fight if there were no other choice.”

Chinese officials and media have reiterated that Beijing has no intention of displacing the U.S. as the most powerful arbiter of world affairs. As the Foreign Ministry spokesperson said at the end of May, “Irrespective of the level of development that China has reached, she will never seek hegemonism and she will never adopt expansionist [policies].”

At a late August speech marking the fifth anniversary of the inauguration of the Belt and Road Initiative (BRI), however, Xi said his administration was eager to build a “community of common destiny for mankind.” The paramount PRC leader cited the age-old Chinese tianxiaguan (“worldview”) of hexiewanbang (“using harmony to unity 10,000 countries,”) which, Xi added, would facilitate China attaining the “commanding height of the international moral high ground.” While making no reference to alleged U.S. “isolationism” and “unilateralism,” Xi said Beijing was eager to help “perfect the global development model and global governance so as to push forward the healthy development of economic globalization.”

That Xi is after some version of “Pax Sinica” was further evidenced by the China-Africa Forum of early September. In an apparent throwback to the chieftains of vassal states paying homage to the Imperial Court of the Middle Kingdom, the heads of state of 53 African nations gathered in Beijing to give thanks and praise for China’s economic aid and the BRI. The Chinese administration gave US$60 billion worth of loans, grants and aid to its African “brothers.” Much of the largesse was used to cover infrastructure projects that fall within the BRI’s fold.

Xi again linked China’s illustrious ties with Africa – the establishment of a China-African Community of Common Destiny – to the glories of the Chinese model of economic development. To better fulfill its obligations to the poor continent, Xi said, the country would “ceaselessly improve its mechanisms, be innovative in ideas [of economic construction], and extend territories [of international cooperation].” In an editorial justifying the US$60 billion largesse despite considerable poverty in China, the Global Times wrote, “Chinese must realize that a big country must fulfill the obligations of a big country,” the party mouthpiece said. “Otherwise we cannot retain our [global] stature for long, let alone hope to continue marching forward [on the world stage].”

To remain China’s paramount leader, Xi has to address multiple threats from Washington. As U.S. President Donald Trump indicated on Sept.7 that the U.S. was preparing to levy 25 percent tariffs on US$200 billion worth Chinese imports, he also warned that an additional US$267 billion worth of Chinese products might also be subject to extra duties.

Beijing’s reaction has been to reassure China’s businesses and populace that the U.S. administration’s aggressive tactics would have an insignificant impact. Senior financial expert and former Governor of the People’s Bank of China Zhou Xiaochuan told foreign media that the tariffs would have less than half a percent of an impact on the Chinese economy. Zhou’s optimistic projections contrast with other officials who fear that unemployment caused by the trade war could ignite massive political disturbances. For example, Finance Minister Liu Kun noted that prolonged trade disputes with the U.S. would produce a “more pronounced” impact on the economy.

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Can Xi, shown here on a TV screen on Oct. 25, 2017, retain his unprecedented public stature?

One reason that Beijing has been reluctant to engage in talks with the Americans is Xi’s apparent decision not to adopt the relatively realistic and conciliatory policies of his erstwhile principal economic adviser Liu He, who is also Politburo member and Vice-Premier in charge of finance. While at the beginning of negotiations Liu had been designated “head of the Chinese team in comprehensive dialogue with the U.S.” (中美全面经济对话中方牵头人), he has ceased to play a prominent role in U.S.-related commercial ties since his inability to reach a deal with the White House after leading a high-level delegation to Washington last May. This is despite the fact that, in an apparent attempt to give him face, Xi has bestowed on Liu three additional portfolios: leading the reform of SOE conglomerates; heading a State Council unit on industrial safety; and being Deputy Head of the newly founded National Science and Technology Leading Group within the State Council.

Liu, who went to the same high school as Xi, used to accompany the president when he traveled abroad or within China. Since July, his prior role has been taken over by He Lifeng, the Minister at the National Development and Reform Commission, one of the most powerful State Council units. Minister He had worked with Xi when the latter was a regional official in Fujian Province from 1985 to 2002.

Yet Liu He, who has retained the respect of party cadres who think that Beijing should adopt a more flexible attitude toward the U.S., is only a small problem compared to the lack of heavyweight regional officials who have come out to openly support Xi. What is striking is that the generals, who are considered a key power base of the President’s, have also failed to openly profess their undivided fealty to the paramount leader.

Almost immediately after returning to Beijing from Beidaihe, Xi called a meeting of the PLA top brass on the subject of “party construction within the army.” The commander-in-chief noted that the task of building up party cells and beefing up party disciple in all branches of the military was essential to the goal of “upholding the party’s absolute leadership over the army.” “The key to our army’s construction and development is party leadership and party construction,” he said.

While Xi seemed to be asking top generals to rally around himself as the unchallenged leader of the country’s military and police forces, there was a surprising lack of senior generals joining the biaotai (“show your allegiance”) ritual. PLA officers who went on the record seconding Xi’s speech included, for example, the Deputy Political Commissar of the Southern Theater Command Bai Lu, the Deputy Secretary of the PLA Commission for Disciplinary Inspection Yang Chengxi, and the Political Commissar of an unspecified division of the Rockets Forces Zhang Youxiang. Xi still has a long way to go before he can reclaim the title of “Mao Zedong of the 21st century” by convincing the party and other vested interests that his ultra-leftist ideas are the best for China.

Dr. Willy Wo-Lap Lam is a Senior Fellow at The Jamestown Foundation, and an Adjunct Professor at the Center for China Studies and the Program of Master’s in Global Political Economy at the Chinese University of Hong Kong.

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The News Lens has been authorized to republish this article from The Jamestown Foundation’s China Brief. China Brief is a primary source of timely information and cutting-edge analysis for policy-makers, intelligence and military personnel, academics, journalists, and business leaders.

TNL Editor: Nick Aspinwall (@Nick1Aspinwall)

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