Financial commentators continue to be shocked by Xi’s moves during and after the recent party congress in Beijing. It’s hard to see why. The regime has made clear for some time that the pursuit of rapid economic growth will, if necessary, be subordinated to the party’s social and political objectives. The economic system that prevailed in China prior to Xi was hardly a free-market paradise, but it has been replaced by an ever more harnessed capitalism that bears some resemblance to the model favored by mid-century fascist (or fascist-adjacent) theory and, to a degree, practice. Call it fascism with Chinese characteristics.
The best explanation for this change, if I had to guess, is that there was growing concern in sections of the party hierarchy that, if left to develop more or less unchecked, China’s extraordinary economic development could become a threat to the CCP’s monopoly of power. Thus the clampdown on Jack Ma, a billionaire beginning to trespass on political territory (the same “mistake” made by Mikhail Khodorkovsky in Russia). And thus the regime’s repeated declarations that “common prosperity” was its goal.
Rather less benign than it sounds, it is a concept (not to be confused with Maoist egalitarianism) designed to deliver a message of social solidarity and national community, a statement of intent designed to reassure the poor and the middle class, and send a warning to the rich. Like so much else in Xi’s China, it is an instrument of control, and it was yet another signal ignored by many international investors of where the regime’s priorities lay.
The Financial Times:
When China’s president Xi Jinping moved to tighten his grip on power last weekend, he sent a ripple of fear through global financial markets.
Analysts and fund managers had expected Xi to balance his seven-man leadership team by including at least a couple of moderates. Instead, it became clear that he had taken sole charge of the world’s second-largest economy.
“Investors were imagining a scenario where Xi basically got his own way, but there would still be some adults in the room with some kind of pro-market pushback,” said Thomas Gatley, an analyst at Gavekal Dragonomics in Beijing.
“Now there won’t be anyone in the room saying, ‘we need to pull back a little bit’,” Gatley said. “If everyone there is just nodding their heads, there’s nothing to stop share prices falling as far as they can.”
Quite why (by implication) the pro-market view, much as I approve of it, was the only one that could be taken by “adults” escapes me. Perpetuating and deepening the CCP’s grip on China is morally repulsive, but to suggest that it is anything other than a project of considerable sophistication — the work, if you like, of “adults” — seems odd. To suggest otherwise can probably be best understood as an echo of the idea that greater prosperity must sooner or later lead to democracy or something close to it. That’s an idea connected to the liberal view of historical determinism, a historical determinism that, like all other historical determinisms, does not stand the test of time.
The FT:
Investors on Monday pulled a record $2.5bn out of China’s stock market, according to an analysis by the Financial Times, while the Nasdaq Golden Dragon index tracking the largest and most liquid Chinese technology stocks on Wall Street also fell by an unprecedented 14.4 per cent.
This reflects a sense that Xi’s focus on national security and pandemic policies will go unchallenged — even if it means slower growth and more painful losses for shareholders.
But here’s the thing: Xi will care about shareholders only to the extent that he believes that disappointing them will deprive him of capital he needs to secure his regime or to enable it to pursue his agenda. The same goes for slower growth. That won’t worry him overmuch unless it slows so dramatically that it threatens his hold over the country or the pursuit of his other goals.