By remaking pillars of the nation, the president hopes to secure the Communist Party’s rule. But entrenched interests keep getting in his way
South China Morning Post
Cary Huang
10 September, 2015
The leadership at the third plenary session in November 2013. Photo: AP
One of the surest signs came late last month.
On August 21, People’s Daily said President Xi Jinping’s wide-ranging reform push, covering everything from politics to the military, was meeting “unimaginably” fierce resistance.
It was unusually strong language for the Communist Party mouthpiece and was followed up the next day with a warning for officials to get behind the reform efforts or face demotion.
The commentaries raised eyebrows not just for the strength of the language but also for their timing – they came out right after the annual closed-door meetings in Beidaihe, where party and government elites should have reached consensus on major issues.
To analysts, it was as clear a sign as any that Xi’s reform programme had upset both conservatives and liberals alike. By changing the rules of the game, by redistributing power and resources, he had undermined those with vested interests – and they weren’t taking it lying down.
IN THE BEGINNING
When Xi came to office in late 2012, he quickly charted his own course by taking charge of a new agency to steer the national reform agenda – a task previously handled by the premier. He initiated ambitious overhauls of the economy, fiscal policy, governance, the military and the judicial system.
President Xi Jinping waves during the September 3 military parade in Beijing. He has launched an ambitious agenda to overhaul the economy, fiscal policy, governance, the military and the judicial system. Photo: Reuters
The idea is to ensure the economy can withstand a slowdown and the military is prepared for battles in a modern era. Xi’s campaign to put corrupt officials behind bars is also part of his attempts to consolidate his control and bolster the legitimacy of the party.
And this is all to one end – to secure the future of the party his father signed up for when it was still just a guerilla force.
FIRM PRESSURE
One of the main targets of Xi’s reforms are state-owned enterprises, the government businesses that have traditionally played a huge role in the national economy. Last month, the State Council finally approved a long-awaited blueprint to implement the changes after coming up against fierce resistance from people likely to lose out under the new regime.
The plan is to regroup state enterprises, to prepare them for listing and to reduce the State-owned Assets Supervision and Administration Commission’s grip on their operations. More power would be given to each firm’s directors but party control would also be strengthened. In addition, some underperforming firms would be eliminated and some would be turned into non-profits.
The aim is to introduce more market-oriented practices while ensuring the party remains paramount. Boards will have more power, but senior party members are encouraged to have a significant say as chairmen and directors.
Invariably this would mean taking power out of the hands of some and putting it in the hands of others.
“It may no longer be realistic to expect that the board of directors of SOEs will have sufficient power to make important personnel or business decisions,” Jianguang Shen, chief China economist with Mizuho Securities, said in a research note.
MILITARY MISSION
Xi has also taken aim at the armed forces. As all eyes were on Beijing for a huge military parade to mark the 70th anniversary of the end of the second world war on September 3, Xi announced plans to shed 300,000 personnel from the People’s Liberation Army. The South China Morning Post reported that at least 170,000 of those to go would be land-based officers of lieutenant ranking to senior colonels.
The PLA would also overhaul its structure and regroup into fewer military commands, hacking back at the army to allow for an expanded air force and navy.
The change in military tack came after a sweeping crackdown on corruption that has toppled some of the biggest “tigers” in the PLA. Among those to be brought down were two former vice-chairmen of the powerful Central Military Commission – Xu Caihou and Guo Boxiong.
Former president Hu Jintao with military leaders Guo Boxiong (middle) and Xu Caihou. The generals were key nodes of power before they were removed in the corruption crackdown. Photo: China News Service
Observers say Xi only managed to kick-start the changes after he removed these strongholds of power.
So while the parade sent a message to the world of China’s growing military might, it also telegraphed to local viewers that the PLA remained loyal to the party, despite the upset his agenda has caused.
The anti-graft campaign goes well beyond the military. Other major scalps have been former security tsar Zhou Yongkang and former top presidential aide Ling Jihua.
Xi has spent the best part of his roughly three years in power trying to clean up the party, wielding the Central Commission for Discipline Inspection as his biggest weapon. At times, there were announcements almost every week of the detention of senior officials.
The anti-graft campaign has reached beyond the military, netting former security tsar Zhou Yongkang and ex-presidential aide Ling Jihua (above). Photo: EPA
Those detentions are a hallmark of Xi’s highly personalised, strongman approach to leadership that is in marked contrast to the culture of collective governing his predecessors practised. While some welcome the show of strength and the attempt to tackle the worst excesses, the crackdown has bred resistance across the political spectrum, analysts say.
Xi now has enemies in all camps, from retired leaders, to serving military officers, government officials and SOE executives whose powers and privileges – and extravagant lifestyles – have been clipped.
RED SONS
Edward Friedman, a sinologist at the University of Wisconsin-Madison in the United States, said that one of the many sources of opposition came from powerful families whose influence had been eroded. Among those are “princelings” – children of prominent revolutionaries – who have lost control over important sectors or local economies.
Ling’s detention, meanwhile, uprooted the entire “Shanxi gang” which controlled the government and economy of the coal-rich province. And Zhou’s departure shattered the powerful “petroleum gang”, which held sway over the oil industry.
“Because the Chinese Communist Party economy is not based on legally established market institutions, deals involved many grey areas,” Friedman said.
That opposition has now become widespread, according to Zhiqun Zhu, a political science professor at Bucknell University in Pennsylvania. “Resistance has been strong from within the party, within the military and within state-owned enterprises,” Zhu said.
Despite Xi’s agenda, he was not a reformist. His high-handed ideological crackdown on dissenting voices and human rights lawyers showed that his changes were just means to the end of maintaining the party’s rule.
In a nationwide campaign that started in July, 284 lawyers and activists and their family members were detained or arrested, or barred from leaving the country, according to the China Human Rights Lawyers Concern Group.
Among them, 21 have been detained on criminal charges or put under “residential surveillance”, a form of detention that can last up to six months.
IT’S THE ECONOMY
Opposition aside, other factors that cast the leadership in a bad administrative light threaten to undermine Xi’s reform push. Chief among them has been the government’s failure to stabilise the stock market with multibillion-yuan cash infusions. Then there is the mounting pressure from other countries over the devaluation of the yuan and the massive blast in Tianjin that took 164 lives.
“All these problems will become more complicated by the current underperformance of China’s economy, which is bound to pose the greatest challenge to Xi’s authoritarian leadership,” said Warren Sun, a professor of Chinese studies at Monash University in Australia.
That challenge does not appear it will lessen any time soon. On September 7, the National Bureau of Statistics said that after a “preliminary confirmation” it had cut the estimate for gross domestic product growth for last year to 7.3 per cent, down from 7.4 per cent announced in January. The new figure remains the lowest since 1990, when expansion plummeted to 3.9 per cent.
As a result of the mounting concerns, Premier Li Keqiang, who is attending the World Economic Forum in Dalian in Liaoning province this week, went to unprecedented lengths – at least for China – to assure audiences at home and abroad the economy was on the right track.
The government’s inability to stem the market rout could undermine popular support for Xi’s reform push. Photo: EPA
“During the process of structural adjustment, it is inevitable to see changes in monthly or quarterly indicators, but the [overall] economy is still within reasonable range,” he told international business leaders on Wednesday.
Over the past 20 years, China has deregulated most of its product markets, boosting competition and generating enormous economic gains. But key production factors – notably capital, energy, raw materials and land – have not been completely freed from the grip of government. At all levels, officials retain influence over who gets them and at what price. Invariably, connected actors within the state sector benefit.
This produces well-known distortions in the economy – an overreliance on exports of manufactured goods, wasteful infrastructure spending and excessive investment in industrial capacity.
WHERE TO NEXT?
Xi faces a powerful opposition composed of entrenched interests, in his quest for seeking new growth models. He has begun to put allies in key positions such as national security, the military and the propaganda wing. But he will need more if he wants to sustain his reform agenda.
“At first Xi gave many people hope, but now his controversial policy agenda has let everyone down,” said Zhang Lifan, a Beijing-based commentator. “His programme has failed both reformists and conservatives within the establishment.”
This article appeared in the South China Morning Post print edition as The many hurdles in Xi’s race to reform
