Xi’s Permanent Struggle

ON OCTOBER 1, the Chinese Communist Party (CCP)-led government in China celebrated its 75th anniversary of the liberation. Amidst the celebrations, it is remarkable to notice China’s transformation from a backward, feudal and war-ravaged society in 1949 to the second-largest economy, a tech-savvy modern society and a great-power military in the millennium’s third decade. China’s social indicators on health, education, medical care, and basic services have undergone substantial enhancements and CCP rule has a definite claim on these achievements. However, China is going through considerable challenges on domestic and external fronts and the CCP appears bereft of ideas and the nerve to deal with them. The decelerating economic growth and falling indicators across the board on trade, exports, employment and real estate have driven China into stagflation, damaging the CCP’s aura of invincibility. The Party urgently needs to rejuvenate itself before seeking China’s rejuvenation, otherwise the portents are getting darker on the horizon.

It would be folly to expect the CCP to rely exclusively on communist ideology in a nation with over 2,000 years of imperial history. The Chinese emperors, their tales and mores, flow liberally into China’s social and individual fabric. During the revolutionary years, the CCP’s top leaders were keen students of China’s imperial history and often used ancient principles to resolve issues emerging during the communist revolution. Mao Zedong himself was obsessed with ancient emperors and their strategies to govern China.

Therefore, the CCP’s communist ideology has become a veneer over China’s imperial mindset and predictably, its office bearers have arrogated the status of imperial bureaucrats to themselves. Furthermore, the princelings or succeeding generations of CCP’s founding families consider themselves as China’s ruling clan, represented by President Xi Jinping and, hence, exist beyond the reach of the common laws. This sharp divide between rulers and the ruled, coupled with a lack of merit-based entry into this exclusive group, converts the CCP into an inherently weak and unstable organisation for China’s future.

This inequality and consequent disillusion have become stark in Chinese society as reflected by the Gini coefficient which has hovered in China around 0.5 since 2003. A study conducted by Stanford University scholars in 2004, 2009, 2014 and 2023 on growing inequalities, popular pessimism, and opportunities to get ahead found enormous frustration on the ground against the existing socio-economic structure. The study revealed that in the 2004-14 surveys, Chinese participants considered lack of ability, lack of effort, and poor character as the main reasons for their lower affluence and low social rank. However, in 2023, Chinese participants blamed unequal opportunity, an unfair economic system, and other bad policies of the Chinese state and the communist party for their poor condition.

This survey’s findings are further corroborated by various social movements in China that have become popular among the youth, such as lying low, lying flat, and worse, en masse migration to foreign shores. Earlier, only the Chinese elite were migrating from China, but in the last few years, Chinese nationals from middle and lower strata have become one of the largest contingents trying to cross the US and European Union (EU) borders illegally. Therefore, the growing inequality and lack of aspirational growth to CCP’s higher ranks make the Chinese social situation unpredictable.

China’s social indicators on health, education, medical care, and basic services have undergone substantial enhancements and CCP rule has a definite claim on these achievements. However, China is going through considerable challenges on domestic and external fronts and the CCP appears bereft of ideas and the nerve to deal with them

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The CCP frequently states that only under its leadership can China maintain its economic prowess. This argument was true a decade ago when the Party’s rule seemed invincible. China’s economic growth had attained astonishing speed, and its multi-dimensional and positive trade balance was pouring into the CCP’s coffers, its cadres and the state. Therefore, consistent economic growth granted the CCP the legitimacy to rule.

However, the Chinese economy has, of late, moved into the doldrums. Three main reasons have worked in this regard. First, Covid and the consequent lockdown brought China’s industrial sector to a grinding halt. Workers had to move back to their home provinces and manufacturing shut down as China moved from a partial to a complete lockdown aiming for a ‘zero Covid’ situation. Consequently, global supply chains were severely disrupted and the situation compelled even advanced economies like Germany, Japan, the US and the UK to seek a China-plus-one model to ensure stable international supply chains. Covid also dealt a double whammy to the Chinese economy which was already grappling with hostile trade and economic measures from then US President Donald Trump since 2017.

Second, in a planned economy, access for Chinese companies depends on the CCP’s prevailing policies. These policies frequently shift among various economic sectors, depending on the political direction. Xi Jinping’s call for “common prosperity” is one such policy. It seeks to reduce inequality in Chinese society and distribute socio-economic benefits to everyone. However, the policy reflects a persistent political solution to an economic problem.

This macro-management and exclusive control over crucial inputs into the industrial sector, such as finance, land and other resources, grant enormous discretionary power to politicians to decide which companies will thrive and which will fail. As long as the economy was flourishing, this system seemed effective but when the chips are down, this discretionary power has become a major bottleneck hindering the economy.

For instance, China’s biggest issue currently is its industrial overcapacity. This problem was previously dormant as the country heavily exported its excess production, often killing industries overseas through price-cutting, market manipulation or bribery. While these cheap imports controlled global inflation temporarily, their predatory influence invited trade controls and heavy tariffs in many countries as seen in the case of electric vehicles where China faces punitive tariffs everywhere.

Third, China’s slowing economy has resulted in a significant influx of workers into the unemployment pool, with the situation becoming so severe that the government has ceased publishing official unemployment figures. This increased unemployment has created a vicious cycle, negatively affecting domestic consumption and real estate prices, and generating enormous social dissatisfaction which the CCP appears incapable of handling, as evident in the recently held Third Plenum.

Instead of addressing economic and social challenges, the CCP and Xi have intensified their focus on the permanent struggle against subversive forces, both within the party and in Western political systems. Xi’s anti-corruption campaigns and internal CCP purification initiatives coupled with external propaganda aimed to smash China’s perceived enemies, those seeking to hinder its economic growth or contain it through multilateral alliances, are the flavour of the season. Xi often claims that China is in a period of intense struggle, requiring absolute loyalty and ideological purity from its civil and military cadres.

However, Xi and the CCP’s attempts to distract the Chinese populace with external or internal, real or imagined, adversaries have a finite threshold. The CCP’s legitimacy to govern China relies on an implicit pact to keep the economic growth engine running. Once that engine begins to stall, the entire edifice is likely to crumble. People may tolerate tyrants but only up to a limit, as large societies harbour multiple simultaneous undercurrents. When one is disturbed, the resulting turbulence is felt throughout society. The CCP has been adept in moulding itself to the shifting demands and aspirations of ordinary Chinese, resulting in its success in controlling the levers of power for so long. It now faces another inflection point in its evolution.

About The Author

Harsh V Pant

Harsh V Pant is Vice President, Studies and Foreign Policy, at Observer Research Foundation (ORF), New Delhi

Atul Kumar

Atul Kumar is Fellow, National Security and China Studies, at ORF