Forecast 2016: China’s Rectifications and ‘New Normals’

10 Feb, 2016    ·   4987

Bhim Bahadur Subba makes projections for China's domestic social, political and economic trajectories under President Xi Jinping

Externally, China’s ever growing power has been felt significantly, even more than it previously was. With the Renminbi’s inclusion in the Special Drawing Rights (SDR) basket under the IMF basket of currencies, the influence of Beijing’s international image has been tremendous. In the domestic sphere, the Communist Party of China (CPC) had few things to cheer about. President Xi Jinping’s – who has become a paramount leader, after Mao Tse Tung – strengthening grip over the Party demonstrates a gradual re-emergence of cult personality and concentration of power under a single hand. In fact, China’s politics is at a crossroad, a contrast between the external and domestic landscapes.

On 28 September 2015, on the commencement anniversary of Hong Kong’s ‘umbrella’ movement’, protest leaders had a ‘mute’ march, unlike the year before. Large scale demonstrations were absent. Instead, academic seminars and prayers were held at the square. The stock-market crash led to the wiping of several trillion dollars, and also highlighted the uncertainty of Chinese economic policies in the long run. Scores of retail investors lost their highly coveted investments within a fortnight. The 6.9 per cent growth rate in 2015 also demonstrates that the state of China’s economy is not so nice.

However, the numbers of registered strikes have been annually increasing. China Labour Bulletin’s official data shows over a 56 per cent increase in 2015 in comparison to the previous year. Some reports also indicate that mass social unrests have been escalating higher than before. The worsening environmental problems, with air pollution reaching epidemic levels in some metropolises, mine collapses, and chemical blasts – as the one in Tianjin (twelve in a year) – have taken a swipe on China’s industrial safety policies.

China’s crackdown on social media and the Internet via strict censorships and surveillance, and persecution of religious minorities, civil society groups, intellectuals and lawyers, have disenchanted the country’s rising middle class. Recent trials and illegal detentions of journalists, publishers and human rights lawyers have seriously undermined China’s path to legal reforms. The recent detention of five published from Hong Kong show China’s intolerance towards anti-establishment literature.

Some high points of 2015 can be viewed in the scrapping of the hukou system i.e. compulsory household registration system, which barred migrant families from availing benefits in cities or places other than their hometowns. Social benefits may not be availed soon, but gradual initiatives complement rapid urbanisation and migration. Similarly, a new law permitting the right to bear a second child is a welcome policy for an ageing society. On the political front, corrupt Party leaders and cadres were arrested and expelled. Within the country’s People’s Liberation Army (PLA), corrupt generals and commissars faced disciplinary action and dismissal. Major reshuffling and reorganisation of the PLA took shape with the appointment of the younger lot.

With China’s rapidly ageing society and gender imbalance, the workforce is shrinking even faster. However, how far the population will actually avail of this opportunity is yet to be seen. Political and social reforms were side-lined in 2015 due to the looming economic problem. 2016 might not be very different.

No End to the Anti-graft Campaign
In 2015, 54,000 Chinese officials were investigated by prosecutors for bribery, dereliction of duty and other duty-related crimes. In fact, since its launch in 2013, the number of entities inspected so far reached 90 in 2015. The campaign against SOE, especially in the petroleum sector, led to arrests of two Petro China Co. & Sinopec Corp bosses. The petroleum sector was a fiefdom of Zhou Yongkang, a former member of the CPC Politburo Standing Committee (PBSC) who is now serving a prison sentence. The Party has been emphasising on “building a discipline system with cleaner governance.” The Central Commission for Discipline Inspection (CCDI) stress on anti-corruption crackdown is unlikely to end soon.

In 2016, the anti-graft campaign may concentrate on the financial sector, especially after the 2015 stock market crash. Inspections have begun against the speculators under the leadership of Meng Qingfeng, Vice Minister, Public Security Bureau. As Wang Qishan, an anti-corruption czar, is a former banker and many people facing the heat are in his circles, some reports indicate intensification and deepening of the anti-corruption campaign, which may not end soon. Since Xi also heads the Small Leading Group on Economy, this campaign can also be seen as a ‘tool’ of economic reforms.

Political Consolidation and Rectification Movement
With the arrests of many ‘tigers’ and ‘flies’, the anti-corruption campaign has also led to disenchantment of the party leaders. In December 2015, Xi called to the Politburo, the CPC’s top decision-making body, to stay united and loyal to the party and to follow Party leaders’ instructions. Besides, Xi also asked the leaders to supervise their family members and warn against abuse of power. This reflects his determination to strengthen and consolidate his authority via the use of a rectification movement, as Mao did in 1942.

The resurgence in persecution – including denying work visas to foreigners – of journalists, social activists, human rights lawyers, academics, and publishers, indicate the CPC’s continued zero tolerance on dissent. However, Xi’s call encourages self-introspection within the leadership that has been increasingly sensitive to criticism; and such arrests may continue in the coming days.

Simultaneously, Xi must be cautious of squeezing too much. Despite the CPC’s overwhelming power, silenced dissident views may lead to policy errors in pursuing reforms. Already, at the January plenary session of the CCDI, it was proposed that inspection teams visit the entire provincial and ministry level institutes before the 19th Party Congress in 2017. As proposed, these inspectors will assess the cadres following Party instructions, loyalty and implement the political line in the spirit of Xi’s speeches. As Wang Yukai of the Chinese Academy of Governance points out, ‘emphasis on party loyalty during inspection tours’ is to assess the ground situation for political mobility, and also to assess the cadres on corruption and disloyalty.

The Party and the PLA
As the Chairman of the Central Military Commission (CMC), both of the Party and State, Xi has ensured that the writ of the party is respected. With successfully bringing down the former Vice CMCs, Xu Caihou and Guo Boxiong, and other Military Region Commanders during 2014-15 via the anti-graft campaign, Xi has strengthened his control over the PLA more than ever. In January 2016, Xi became the second person after Mao to make what is called a ‘precept’ speech xun ci, which translates to “admonishing words”), in which he called for a complete remodelling of the PLA, and for utmost loyalty to the Party.

If successfully implemented, many commentators argue that Xi is at par with Mao, as his other three predecessors, Deng, Jiang and Hu were not so determined to challenge the conservative military.

Xi has urged the PLA to adhere to political principles and follow the Party’s leadership i.e. the Central Committee and the CMC. With a thrust on restructuring the military, technological modernisation and also job cuts, Xi has embarked on a major step towards overhauling the old soviet style military, as well as boosting the military’s morale in ‘winning battles’. Thus, ‘If the power flows from the gun,’ Xi Jinping has resolved to bring the ‘gun under the control of the party’.

New Normal’: Legitimising a Slowing Economy

In 2015, Hu Angang, a close aide of Xi Jinping, remarked that China is entering a new stage of economic development with an emphasis on rebalancing and diversifying the economy, embracing sustainable growth and evenly distributing benefits in the society. The GDP growth of 7.4 per cent in 2014, and 6.9 per cent in 2015 – lowest since the 1978 reforms – clearly portray the deceleration in China’s economy. Under the ‘new normal’ (xinchangtai), Xi has asked the Chinese people to accommodate growth that is far slower than those of the previous years.

With the 2015 crash landing of the stock market, the anti-graft crackdown against those responsible can pacify some, but many unfortunate investors may look for transparency and stringent rules.

Solutions towards fiscal stimuli and fixed asset investments have only led to a burgeoning of national debt. Without sound economic reforms, 2016 may bring more unwarranted challenges to the economy. Despite several social regulations, decreased funding and strict control of the public purse may have led to over-capacity. Thus, xinchangtai, can become a mere story for justifying the sluggish mismanagement of economy, and if handled imprudently, the coming months might be quite painful.

With external highs, and domestic lows, the CPC has more daunting tasks ahead. In the politically volatile border regions, the Chinese state faces security risks from the increasing numbers of Uighur origin volunteers fighting under the Islamic State (IS) banner in Syria. Counter-terrorism expert Li Wei states, that “with the rise of ISIS and as more Chinese nationals are smuggled over the border to join it, China faces a bigger threat of terrorism.” However, sporadic attacks such as the September 2015 attack in Baicheng, Aksu Prefecture, continue. To that end, a Counter-Terrorism Law was passed in December 2015. However, the Law is extremely controversial as it provides sweeping powers that the Party is likely to use as a tool to control minorities.

China’s 13th Five Year Plan (2016-20) will be also on the anvil this year. The national planners have stressed on the role of innovation, green development and inclusive growth. Beijing aims to double its 2010 GDP and per capita income of residents of cities as well as rural areas by 2020, and a 6.5 per cent growth rate will be ideal to achieve those levels. Social insurance, population reforms and hukou registration are some important issues the Party and the government have to deal with.

At the leadership level, there has been a rising trend in concentration of power with a single individual. The leader has outgrown the Party. With Xi’s coming to power, its ‘harmonious development’ is nowhere mentioned in speeches and Party documents. Xi is not only trying to cleanse the Party, but also his political rivals, which is often not accepted by the Party. Despite commanding immense powers, Xi cannot try to undermine the role of party and state structures to legitimise his authority. For, if such a trend continues and/or intensifies, the political institutionalisation process that has insofar been the Party’s mainstay may be adversely affected. If Xi is concerned about the future of the CPC, he would do well to understand that no individual can be bigger than the Party itself.