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Xi Jinping and China’s Economic Future 

China is entering a transition period from the high annual growth it has been accustomed to for many years.

By Alex de Ramon.

The 20th Party Congress of the Chinese Communist Party (CCP) officially closed on October 22nd. The main outcome was, as expected, that General Secretary Xi Jinping will continue for a third term as the CCP’s and China’s leader. Xi’s opening speech promised continuity in China’s domestic and foreign policy, as well as setting out the lofty ambition of the CCP to guide China to becoming the most powerful nation in the world by 2049, the 100th anniversary of the People’s Republic of China. Xi defined this goal as leading the world “in terms of composite national strength and international influence.”

Xi defended China’s “zero-COVID” approach to the pandemic which has taken a toll on economic growth as well as business and consumer confidence. He also denounced corruption, committed to gender equality, and commented that Hong Kong had a major transition from “chaos” to governance. In his words, “order has been restored” in Hong Kong. 

In foreign affairs, he remarked that China’s international influence and power to shape the world “has significantly increased”. On the important flashpoint of Taiwan, Xi did not renounce the use of force, although his position has not changed from China’s long-term rhetoric of a “peaceful reunification” of the People’s Republic of China (PRC) and the Republic of China (ROC) under CCP rule. The Guardian noted that Xi mentioned Taiwan far earlier in the speech than the previous party congresses of 2017 and 2012, perhaps signalling an increase in the relevant importance of Taiwan to Xi and the CCP.

Xi also talked about “common prosperity”, a slogan that has gained prominence under his tenure. Previously, Mao Zedong used this slogan to advocate for “egalitarianism” and collective ownership. Under Deng Xiaoping, this was redefined so that common prosperity now meant that some could get rich before others. What has this slogan meant for Xi?

The answer is somewhat complicated. Xi has written extensively about the wealth gap and the collapse of the middle class in foreign countries, stating that these trends have led to populism, increased social divisions, and political polarization. Therefore, common prosperity is an essential requirement of socialism and a key feature of China’s modernization mission. Xi has, however, spoken out against “welfarism” which he says can promote laziness, and he has warned against the trend of “lying flat” and shrinking social mobility.

Lying flat, or tang ping, is a social movement beginning in April 2021 that spread from grassroots origins. It can be defined as a rejection of pressure to overwork since some companies in China – especially IT companies- expect a 72-hour workweek, known as the “996 working hour system.” This number stems from the schedule going from 9 AM to 9 PM, six days a week.

This number is well above the average Western full-time work schedule of 40 hours a week. The tang ping movement has been compared to the Western “Great Resignation” or “Quiet Quitting” and is seen by many as a countercultural movement. It is no surprise that Xi is moving against this trend, for both economic and political reasons. Young people in China who subscribe to this idea are simply choosing to lower their professional and economic ambitions. Tang ping is a re-centring of personal and psychological health at the core of individual well-being and a conscious or semi-conscious rejection of materialism, the “rat race”, and a never-ending quest for higher socioeconomic status.

From a macroeconomic perspective, China is entering a transition period from the high annual growth it has been accustomed to for many years. According to the Asian Development Bank, ABD, expects economic growth for China in 2022 will be 3.3%. Rising inflation and energy prices in the West will soften demand for consumer goods in advanced economies, which is predicted to “moderate” external trade. Domestically, continued COVID lockdowns and the suffering Chinese real estate sector are both significant drags on consumer confidence and investment. However, higher government spending is expected to support growth in the second half of this year, according to ADB predictions. Xi and the CCP plan to address high youth unemployment, support the property sector, and encourage household demand.

Essentially, this is the root of common prosperity as defined by Xi. This policy has however also had a chilling effect as Xi has moved to assert state dominance over prominent Chinese companies such as the Alibaba Group and Tencent. Regulatory crackdowns caused Chinese tech companies to lose around a trillion dollars of stock market value last year. 

Views on this vary widely, with probusiness Western sources such as the Wall Street Journal reporting that the ultimate aim of common prosperity was to move the CCP closer to its socialist roots by increasing state control over the economy. Whether the ultimate goal is greater CCP control is impossible to say. However, Bloomberg projects that if successful, common prosperity policies as a whole would lift fertility rates, which remains a significant problem in China following the long-term one-child policy and lead to average growth of around 3.2% in the 2040s, compared to a base scenario of 2.6%.

On the other hand, if the policies do not succeed, there will be no benefit to long-term growth, while the short-term outlook will suffer. In sum, it is fair to say that “common prosperity” as a slogan has already led to contested policy outcomes. Its future trajectory remains to be seen. 

Much will depend on the key strategic relationship between the US and China. Though the potential economic effects of confrontation in this bilateral relationship are often exaggerated, it is undoubtedly true that US-China relations have become increasingly frosty since 2016. Former President Trump’s more confrontational approach toward China has been largely adopted by Democrats and the Biden administration, showing a relative bipartisan consensus. It will be critical to avoid conflict in the next decade over Taiwan, and any other Indo-Pacific conflict that could conceivably involve both countries. 

In sum, watching Chinese policy in the future will be crucially important for global trends for everything from future patterns in global trade growth, arms control, and most critically, trends in energy security and supply.

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