Xi’s contract with China needs more signatures


HONG KONG (Reuters Breakingviews) – Xi Jinping effectively secured a third presidential term at the just-concluded Chinese Communist Party conclave. Its price: a $16 trillion economy in a vulnerable state, dependent on American technology and facing a demographic crisis. Xi also faces popular resentment for the economic pain his draconian policies have caused ordinary citizens. The so-called president of all of China has the power to relieve his people, but it is unclear if he has the will.

Xi’s third term as head of government is anything but a formality, after he was confirmed as the ruling party’s general secretary on Sunday, with loyalists taking key roles on the seven-man Politburo Standing Committee. Presidential term limits were removed in 2018. The next term, which would officially begin in March 2023, should bring more freedom to act on its “common prosperity” and “Chinese dream” goals.

It might be harder than it looks. During his decade at the helm, China has ended extreme poverty and nearly doubled its gross national income – which reached $11,890 per capita in 2021, just below China’s high-income definition. World Bank of about $13,000. Yet the middle class seems oddly outdated. A “flat” movement analogous to the US-centric slacker phenomenon of the 1990s is gaining popularity. The World Happiness Index 2022 report, supported by the United Nations, ranks the People’s Republic in 72nd place: the saddest place in East Asia.

An inflexible “zero Covid” policy has not helped, turning cities from Shanghai to Chengdu into giant detention cells. Attempting to isolate 1.4 billion people from exposure to Covid-19 has taken a wrecking ball for trade; one in five young workers is unemployed, the highest on record. Xi has cracked down hard on tech entrepreneurs, and his campaign to reduce debt levels in the real estate sector is driving down the price of homes where most Chinese households put most of their savings.

Tenderer approaches in these areas – especially stopping severe blockages – could yield quick results. There are other fruits at hand that could be reaped with a little more political force: strengthening the social safety net, for example; redistribute wealth by reconfiguring the clumsy tax system; and the renovation of vocational schools and universities to better meet business demand.

Xi could also permanently end the “hukou” regime that excludes migrant workers from health care and education. The government has large stakes in companies like the $218 billion Industrial and Commercial Bank of China, the world’s largest lender by assets, and its state-owned enterprises had 260 Trillion yuan ($36 trillion) in assets by the end of 2021. This wealth could be transferred into private hands via injection into underfunded pension plans or other methods.

So far, however, Xi has seemed more focused on securing loyalty, suppressing dissent and fighting Western influence than redistributing wealth. Its pandemic stimulus package has been particularly stingy compared to its peers, as has health spending. The focus on weaning China off foreign software and semiconductors implies a vast duplication of efforts. This means the Chinese can get smart drones before they get decent UI. It won’t make them any happier or richer, and might not make Xi any safer in the end.

Follow @petesweeneypro on Twitter


The Chinese Communist Party elected President Xi Jinping as general secretary on Oct. 23, his third five-year term, according to Chinese state media.

(Editing by John Foley and Katrina Hamlin)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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