The upcoming US-China summit in Korea will be the first in which the People’s Republic of China holds a strategic advantage over the United States. How did Xi consolidate power internally, and what are his risks? It’s an appropriate time to reprint my essay on the topic from 30 months ago.
It will be the sixth meeting between US President Donald Trump and his Chinese counterpart, Xi Jinping. A rough count shows there have been about 20 summits between China’s top leaders and American presidents since their first in 1972, between Nixon and Mao.
Yet, this will be the first time China holds the advantage, in a position where it can leverage its position and where reunification with Taiwan seems closer than ever. Xi achieved this by leveraging China’s strategic resource, rare earth elements, which make up 70% of the world’s supply; 90% of the world’s processing is done in China. Rare earths are essential for manufacturing electronics. Without Chinese rare earths, industrial production outside the People’s Republic of China would come to a halt.
Never before in the PRC’s history had Beijing been able to speak to the United States from a position of genuine strength. It’s unclear how long Beijing can maintain this advantage — whether it’s a few years (as some American optimists suggest) or over a decade (as some Chinese analysts estimate), before the US begins its own large-scale production of rare earths. This timeline is crucial because it determines how long Beijing can consolidate or lose its current lead.
In the 1970s, Arab countries challenged US power through oil, and in the 1980s Japan did so through computers. The United States eventually won both contests. It’s unclear whether China will follow the same path. It won’t be easy for China to maintain its lead, but neither will it be easy for the US to beat China.
Indeed, 13 years ago, when Xi came to power, almost no one saw what was coming. And only a few months ago people were still dismissive of his leadership.
Xi not only succeeded in managing the US. He also achieved something unprecedented domestically. In the latest Party plenum, he oversaw the biggest PLA purge in its history.
The plenum was attended by 168 of the 205 full Central Committee members and 147 of the 171 alternate members. This means 37 full members and 24 alternate members did not attend, totaling 61 members. Most of them are likely under investigation. The attendance rate is approximately 84% among a total of 376 members (full and alternate).
How did Xi manage to do that? Two years ago (after I had started explaining in a different article here), I presented on Settimana News an analysis of what he was doing with the military, how he rose to power and the challenges he faced. For convenience, I am reposting the essay on Xi here:
Xi Jinping’s De-structuring Power
May 7, 2023
When President Xi Jinping came to power at the 2012 Party Congress, he had to face grave and systemic challenges to the structure of the Chinese state.
Simply speaking, these challenges were branded “corruption.” It was far more than corruption; it was the complete disruption of the state’s decision-making process, following years of festering long-standing problems.
It was unclear who made decisions, how and through what process – and things could be hijacked at any moment for any given reason. The Chinese state was facing unprecedented fissures that could disrupt the country and, by extension, also create significant problems abroad.
This predicament didn’t happen because of ill feelings or the poor judgment of past leaders, but because China was facing new problems that the old state structures had not been geared for from the beginning.
In 1949, when the People’s Republic of China (PRC) was established, the new country faced issues unprecedented in its long history.
Unlike other dynasties established through foreign intervention (such as the Manchu-founded one in 1644) or through “popular revolutions” (such as the one that brought the Ming Dynasty to power in 1368), the PRC didn’t want to dust off or reenact the feudal dynastic past. That is, it didn’t want to reapply most of the toolkit that had made the Chinese state reestablish itself over and over again during the past 20 centuries.
The People’s Republic of China was founded by a Western-inspired Communist Party that believed the old Confucian thinking was the root of decadence. The fall of the past dynasties was in imperial thinking and imperial statecraft. Therefore, the new state had to be grounded on different rules. However, these rules were not ready-made. Possibly, China never suffered a similar situation.
Buddhism, like Western influence?
In the third century AD, China was torn by centuries of internal wars that slaughtered most of the population. As the vast bloodshed was under way, China also underwent an unprecedented cultural and intellectual revolution. Buddhism came to China from India and radically changed the Chinese way of thinking about the world. After some five centuries of turmoil and strife, and an uncertain power balance, a unitary China was reestablished under the Tang dynasty, and the empire was very different than before.
A similar political and cultural shock swept China in the last moments of the Qing empire through the civil war, the Japanese invasion and the foundation of the People’s Republic. China was searching for a new identity, a new way of thinking, and a new way of ruling itself.
The PRC underscored its distinct nature by invoking “Chinese characteristics.” These Chinese characteristics were meant to set the Chinese Communist Party (CCP) apart from the Russian Communist Party and to claim that the CCP – and, therefore, its PRC – were quite different from the USSR and how it was managed.
In the first decade or so of the PRC, the influence of the Soviets was paramount in China; still, after less than a decade or so, the PRC started to shed the Soviet influence and tried to move in a different direction, which was not that of Moscow, not the example of Western countries and not the feudal past of China. It was uncharted territory, where only the wisdom and practical sense of the leaders of the time tried to guide statecraft and decision-making.
Without points of reference, however, the Chinese state soon became engulfed in a messy decision-making process that eventually centered solely on Mao Zedong, who ruled by issuing statements to be followed nationwide.
The fledgling state structure set up after the republic’s foundation, the Party design that took shape in the anti-Japanese resistance and then in the civil war and the first attempt to manage the country were de facto destroyed by this method of rule and by the systemic punishment and reeducation of Party leaders.
In 1976, at the end of Mao’s rule, the Party and the country were in shambles, and it was not clear how they could move forward. Everybody was disillusioned and no longer believed in the Party. Fortunately, at the time, China was not under heavy external pressure, and the demise of Mao’s rule created new hope in the people.
Therefore, the country moved forward. The big step in moving forward was Deng Xiaoping’s reform and opening up, which provided economic inspiration and real fuel for the nation. It motivated everybody and held the country together because, collectively, the Chinese felt they could reach a better tomorrow.
On the other hand, as a system of rule, Deng Xiaoping and his comrades established a new arrangement aimed at bringing order to Mao’s previous autocratic personal rule. They set up an agreement under which Deng was the first among a group of party veterans called upon to make crucial decisions by consensus. This method created confusion by dividing the party’s, the state’s and the army’s power without clear boundaries for their competencies and attributions.
In some Western countries, power is distributed among different parties, but each has some limits on its strength. In the United States, for example, the Federal Reserve can intervene in the money supply, but the president cannot. There are some gray areas, but if somebody steps into them, there is a whole array of institutions and procedures to sort them out clearly and reasonably quickly.
Yet, at the time in China, the boundaries of attributions of power were unclear. This lack of clarity contributed to the situation in 1989, when confusing, contradictory orders came down from the top to ordinary people. People didn’t know what to obey, and they chose to follow what they liked.
It was also a time when diverse ideas emerged from society, and it was unclear how the central government should respond. From the late 1970s to maybe the early 1990s, there was talk of the fourth modernization, democracy. Until the late 1990s, there were strong voices in the Party – supported by Qiao Shi, then chairman of the National People’s Congress and president of the Central Party School – claiming that the rule of law should be paramount and should be followed by the Party, and that the Party shouldn’t be above the law but subject to the law.
No democracy, confusion
These drives and the confusion in the lack of clear borders in the top leadership led, after 1989, to the decision to concentrate power in one man, Jiang Zemin. At the 1992 Party Congress, he had all the levers of power in his hands. He was the president of the state, the Party’s general secretary, and the chairman of the military commission.
Still, this concentration of power was largely formal and not entirely real, because power was still distributed among elderly veterans who could exert influence and essential sway over the decision-making process of the Party and the government. Meanwhile, the push to put the Party under the law never quite worked out, as it conflicted with the notion that the Party had a role in the country’s ultimate leadership. This was difficult to reconcile with the idea of subjecting the Party to the rule of law.
For a spell, Jiang Zemin managed to have greater power than everybody else. After Deng Xiaoping died in 1997, he was the unchallenged paramount leader of the Party. Still, the decision-making process remained unclear. Because of the rules the Party set up in 1997, Jiang Zemin was supposed to retire in 2002; however, in contravention of those rules, he remained officially in power until 2004 and continued to wield influence and authority even after that year.
It created a situation in which the following top leader, Hu Jintao, although officially the head of the party, the state, and the army, had to juggle different pushes and pulls from Jiang and retired leaders, as well as from members of the Politburo and the Standing Committee of the Politburo.
The decision-making process became even more chaotic, confused, and disorderly than before, leaving ever more significant loopholes for corruption and profiteering that were pillaging the country’s wealth. The process was accompanied by massive economic growth, creating unprecedented wealth for everybody, but at the cost of growing social disparity, ballooning internal debt and ample chaos in the organization of the party and the state.
On the surface, it led to corruption among ordinary people. Junior and senior officials took on large amounts of money in return for favors granted to private or public companies. Corruption was just a superficial sign of a much deeper issue: a profound disruption and a messy decision-making process in China.
How could one make decisions? Ideas came from below and from above, findings came from sides and everything was total mayhem. The two episodes involving the ex-Chongqing party chief Bo Xilai and the ex-chief of the party general office Ling Jihua showed that senior leaders were not following the rules at the very highest level – the Politburo level.
The condition was messy and difficult to understand, let alone set in order. Not only was the Party not subjecting itself to its rules and regulations but senior leaders were shunting all laws in the name of their pursuit of personal power. It was breaking the party and the country apart. If the state crumbled down, there would be no business opportunities either. It would be simply a time for pirates plundering the spoils.
Xi Jinping came to power amid this tricky situation. His answer, correctly so, was to concentrate power in his hands and establish direct, clear lines of communication and decision-making across the country, bringing borders and limits where the situation was getting muddled and entirely out of hand.
Perhaps even worse than during the time of Mao and the establishment of the PRC, Xi Jinping had no clear precedents or examples to draw on. He apparently sought inspiration in the imperial past.
Xi Jinping as emperor. Image: Apple Daily
Still, he knew very well that imperial history was just an example, an inspiration, and not something that could be fully applied in the new China. The other ready-made tool, known to himself and his cadres, was the old communist, Soviet-era party organization. The imperial past culture and the Soviet precedent were the two instruments for his consolidation and reorganization of power in China.
Democratic institutions were not there, nor were tradition and thought. Conversely, some parts of the party, looking at the existing situation in China compared with the United States, and with India, a democratic country similar in size to China, didn’t understand democracy and came to believe it was unsuitable for China’s dimensions and traditions.
Xi Jinping was facing issues that China had possibly not seen since the fall of the Zhou dynasty sometime in the 7th or 8th century BC – that is, the fall of an old “imperial” order and the birth of hundreds of independent states, each claiming its own tradition and hierarchy.
The 2012 desert
It was a situation of permanent war when states were being destroyed and entire peoples were annihilated. Then, various pundits sought to bring order by setting clear rules of engagement among existing states, as did the Confucians and the Mohists.
Eventually, the Qin state managed to eliminate all competing states. It established a short-lived, tight order that lasted only a few years before plunging the country back into chaos, until the Han managed to piece together a different set of rules in a newly unified empire. That empire became the paragon and example for all realms to follow.
In 2012, there was little or nothing of practical use for Xi and his allies to apply in the new situation. But the example from 25 centuries ago may illustrate the kind of confusion that he was facing. The risks weren’t as dangerous, but the intellectual challenge of producing something new without a script to follow was there.
Of course, Xi Jinping was not literally facing the disintegration of the state, but the process of its meltdown was in place. He responded that while working on the integration of the state, he had to concentrate power and establish clear channels of organization and decision-making processes.
The anti-corruption fight was the superficial reason for this process, but the deeper reason was the reorganization of the state along more efficient lines. He decided to do that along the contours that the official Chinese bureaucracy managed to understand. He drew inspiration from the imperial past and from ideas of the Soviet tradition.
Both are part of Chinese political culture and could help China quickly reshape itself into an effective administration. Other paths could have been more challenging and might have taken longer with uncertain results.
Xi Jinping did it: He uprooted corruption. He established a new set of rules that shaped his decision-making and, in turn, created an organized system for addressing internal and external problems. The system externally may look like the old imperial system. In it, everybody is subject to the law, except the top leader, who can move the needle of the law, if necessary, in one direction or another.
But nobody else can, and therefore, he managed to reinforce and isolate power.
However, this process has not ultimately ended. There are clear challenges to this effective yet rigid form of rule. China established an immense bureaucracy grounded in the party, with 97 million members.
While in imperial times the official bureaucracy organized by Beijing didn’t go below the county level, in modern China, we have two new phenomena. Bureaucracy goes down to the level of the village, a community that may have only 2,000–3,000 people. They were ruled for millennia by affluent landowning families who contributed massively to the national treasury through their taxes. Now, private hoarding of land has disappeared.
Moreover, for the first time in Chinese history, the countryside itself, which for centuries has been home to some 95% of the population, is being wiped out. It is happening in two ways: by moving peasants and farmers to the cities, which are now home to over 60% of the population; and by urbanizing the countryside, so that most counties have urban facilities and organization.
These elements created a bureaucracy far larger than any other in the world, in a country with a population far greater than at any other time in Chinese history. And despite the aid and support of critical new technologies such as electronics and computers, there is only so much – or so little – that the top leadership can do and decide in a given day.
Timely rain
The challenge for the future is how to make the Chinese bureaucracy responsible and proactive in performing its duties.
One answer, of course, is motivational – through political education. However, this may not be enough because of the fear of making mistakes or of doing something wrong. There is also a lack of upside – that is, there will be few or no prizes, or prizes will be extremely rare or questionable if something goes right. Therefore, these de facto elements push officials to be loyal but not to take initiative because they don’t know how the top leadership thinks or how they will judge their performance. Any judgment at the time could turn out to be wrong in the future, and guessing the intentions of top leadership could also be risky, as it could create conflict and friction with other middle-ranking officials.
It creates new challenges for the present government. However, each new policy solves some problems and, in the long run, creates others. Since ancient times, the Chinese political tradition recognized politics as like timely rain. It cannot rain too much; it cannot rain too little. Sometimes it doesn’t need to rain, and sometimes it does. That is, new policies create new problems that must be addressed in new ways, opening up new solutions and perspectives for the country.
Xi Jinping has effectively concentrated power, making decision-making cleaner and more direct. However, in addressing increasingly complex internal and foreign problems, he’s not making wrong decisions or committing corruption; he’s facing inertia because it is simply tricky to act in such a substantially rigid system.
The lack of proactivity in a country could be tolerated and absorbed if two other factors did not pressure it. One factor is that the domestic market economy needs proactive pushes by entrepreneurs and government officials to make decisions on the spot and take risks. But if taking risks routinely results in punishment, nobody will take risks. De facto entrepreneurship will subside, and at the same time, the market economy will become less vibrant, with a massive impact on the overall economy.
The second challenge is external; China’s external situation is highly volatile, complex, and complicated. Countries around China and Western governments are increasingly dissatisfied with China and are defying it with new issues almost daily.
These issues should be handled systemically, and we cannot wait for the top decision-maker to call the shots and move ahead. These internal and external elements were very different two or three decades ago and were extremely important for the development and growth of China’s economy, society, and politics.
The vibrant, dynamic internal and external markets enabled China to open a new road and contribute to the world with great wealth.
It means that the opening, both internally and externally, is essential to China’s welfare and well-being and has contributed to the rise and consolidation of President Xi’s power. Therefore, the future of the Party and Xi Jinping’s rule lies in adapting this party structure to both internal and external situations. If, conversely, it pulls out from the international free market and suppresses the vibrant internal market, the country and the Party will suffer greatly.
The challenge, then, is to adapt quickly to internal and external pressures. This is a task Xi already faced in 2012 amid unprecedented decisions, and now the Party should study deeply, work hard, and dare to have bold ideas and make bold decisions that can project the country into the future.
Here, there is an exciting element in Xi’s reforms. He created a clear division of powers between officials and enterprises for the first time. Deng’s reforms transformed all officials into entrepreneurs. In the name of “getting rich is glorious,” some officials ran their administrations and, at the same time, they ran their businesses.
They did it personally at first. When limits and rules were introduced, they were implemented through family, friends and supporters, and administrative and financial chaos ensued from a system that went on unregulated and undisciplined. Again, there is continuity between business and administration abroad, and solutions are not clear-cut or definitive. Still, long-term practices and regulations limit what can and can’t be done. In China, it was far more confusing.
Along with foreign experiences, Xi’s reforms have ruled that officials can’t take a direct role in business, and businesses have only clearly marked venues to deal with officials. This division of competence is one of the hallmarks of modernity. It could be one of the essential venues for solving the new issues emerging from completing the first part of Xi’s reforms.
In the imperial past, private wealth was subject to the goodwill of the emperor, but there was a basic guarantee – imperial power didn’t get down to the county level. Therefore, if someone were only rich at a lower level, the emperor would guarantee “basic affluence.” Now the party can go down to the village and, in theory, strip anybody of all his means. One can lose everything for doing the wrong thing at the wrong time, even inadvertently.
Moreover, modernity establishes laws and institutions that safeguard one’s property and market activities. Without these security guarantees, no significant economic activity can take place. Foreign and Chinese entrepreneurs can obtain these safeguards in other countries and thus expect to receive them in China if they risk their capital. Otherwise, they can idly spend their money or invest elsewhere, where they can calculate their risks more clearly.
During past “corruption times,” risk calculus was somewhat clear. Short of a clean, transparent investment environment with laws, institutions, and procedures, an investor had to rely on a significant power broker and know the ropes to navigate a complex system, like a jungle. The main challenge was finding the right broker and guide in the jungle to provide timely access to necessary permits and ways forward – someone who knew who’s who and how’s how. It was a market for opportunities and people.
The old ways have been banned, but there are no transparent market institutions or guarantees. Without them, it could take decades – if it ever happens – to have a large number of investors eager to risk their capital again on something that could change overnight, as happened with the Covid crisis at its onset and end.
There is a trust deficit between the state and entrepreneurs. The trust deficit is presently managed if businesses are already in China and can’t really pull out of the country, or if people have access to the top leadership and personally trust them. These are limited in number and can increase only at a limited rate.
Then, even resorting to a return to the old “corruption ways” could not really solve the current trust deficit, and it would lead back to the old risks of state and party dissolution.
Deng realized that the party’s power was proportionate to the wealth it generated. He let it happen openly, with the direct involvement of party officials in economic activity, which created chaos that was spoiling wealth creation. Xi addressed the mess, but he cannot risk wealth creation. The necessity for orderly process and proactive enterprise must be somewhat reconciled.
Plus, the foreign environment has dramatically changed, also conditioning the domestic investment climate. Before, it was favorable and relatively easy; now, it has grown more complicated and hostile. For this, China can hope to invent something completely new or just adapt what is already there.
Francesco Sisci is director of Appia Institute, which originally published this article. It is republished with permission.
