BreakingViews: Xi’s contract with China needs more signatures

HONG KONG, Oct 23 (Reuters Breakingviews) – Xi Jinping has effectively secured a third presidential term in the Chinese Communist Party’s recently concluded conclave. His prize: a $16 trillion economy in a vulnerable state, dependent on American technology and facing a demographic crisis. Xi also faces popular resentment over the economic pain his draconian policies have caused ordinary citizens. China’s so-called president of everything has the power to relieve his people, but it’s unclear if he has the will.

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

This can be more difficult than it looks. Over his decade in charge, China has ended extreme poverty and nearly doubled gross national income — which reached $11,890 per capita in 2021, just short of the World Bank’s definition of high income of around $13,000. However, the middle class seems strangely disappointed. A “lying down” movement analogous to the US-centric slacker phenomenon of the 1990s is gaining in popularity. The United Nations-backed World Happiness Index 2022 report placed the People’s Republic at 72nd: the saddest place in East Asia.

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An inflexible “zero Covid” policy has not helped, turning cities from Shanghai to Chengdu into giant cells. The attempt to isolate 1.4 billion people from exposure to Covid-19 was a wrecking ball for commerce; one in five young workers is unemployed, the highest on record. Xi has harshly cracked down on tech entrepreneurs, and his campaign to reduce real estate debt levels is depressing the price of homes where most Chinese families deposit most of their savings.

More diplomatic approaches in these areas – especially breaking severe lockdowns – can yield quick results. There are other low-cost fruits that could be harvested with a little more political force: strengthening the social safety net, for example; redistributing wealth by reconfiguring the cumbersome tax system; and reform of vocational schools and universities to better meet business demand.

Xi can also conclusively end the “hukou” regime that blocks migrant health and education workers. The government owns large stakes in companies such as the US$218 billion Industrial and Commercial Bank of China (601398.SS), the world’s largest asset lender, and its state-owned enterprises held 260 trillion yuan (36 trillion US dollars) in assets at the end of 2021. This wealth could be transferred into private hands through injection into underfunded pension schemes or other methods.

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So far, however, Xi has seemed more focused on securing loyalty, suppressing dissent and fighting Western influence than redistributing wealth. Its pandemic stimulus package was remarkably stingy compared to its peers, as was its healthcare spending. The focus on moving China away from foreign software and semiconductors implies a major duplication of efforts. That means Chinese people can get smart drones before they get decent unemployment insurance. It won’t make them happier or richer, and it might not make Xi any safer in the end.

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

(The author is a columnist for Reuters Breakingviews. The views expressed are his own.)

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Edited by John Foley and Katrina Hamlin

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, in accordance with the Trust Principles, is committed to integrity, independence and freedom from bias.

Pete Sweeney

Thomson Reuters

Asia Economics editor Pete Sweeney joined Reuters Breakingviews in Hong Kong in September 2016. Previously, he served as Reuters Chief Correspondent for China Economy and Markets, leading teams in Shanghai and Beijing; prior to that, he was editor of the China Economic Review, a monthly magazine focused on providing news and analysis on the mainland economy. Sweeney came to China on a Fulbright Fellow in 2008 and, in that role, conducted research on the Chinese aviation industry and exit mergers and acquisitions. In previous incarnations, he’s helped resettle refugees in Atlanta, covered the European Union from Brussels, and turned the craft beer entrepreneurship around in Quito, even as the Ecuadorian currency collapsed (it wasn’t his fault). He speaks Mandarin Chinese, at the expense of his Spanish.


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