From Deng to Xi: What next?

When Xi Jinping assumed the leadership of the Chinese Communist Party (CCP) in 2012, the reason at that time was the elite in China were frustrated by his predecessor Hu Jintao. In the late 1970s, Deng Xiaoping introduced economic reforms that led to the Chinese economic miracle that made it the second superpower.

These reforms, however, began to slow down under Hu Jintao. Hu did not have full control of the CCP and his attempts to continue the reforms largely failed. Corruption became so widespread it even spread to the police and the military.

Many of the leaders in China thought that Xi would have the clout and the will to introduce badly needed reforms which Hu had failed to implement. In an article written by Jonathan Czin of the Brookings Institution, the reality was that Xi’s ascension to power was the beginning of the end of the reform era introduced by Deng Xiaoping.

Czin wrote: “What Xi saw when he returned to Beijing in 2007 as Hu’s heir apparent was not endless prosperity and a stable leadership structure, but deeply rooted dysfunction… From Xi’s perspective, the rickety collective membership model that Deng bequeathed was the source of many of the parties’ maladies. With power diffused among top leaders and their allies in the bureaucracy, party discipline was slack. Xi seems to have further judged that China’s prosperity had made the Party’s cadres soft.”

The economic reform had also opened China to the outside world which exposed a large sector of the population to the liberal values of the outside world. This threatened core communist beliefs.

China was also becoming increasingly dependent on other economies. Its domestic market was not enough to absorb all its production. Therefore, it became increasingly dependent on foreign trade. At the same time, Chinese business became increasingly dependent on foreign materials and supply chain.

Instead of advancing the reforms of Deng Xiaoping, Xi started what political observers called “counterreformation.” This meant stripping the Party down to its Leninist core of political and social control and rewiring it not for revolution or reform but for a disciplined march towards technological, industrial and military might to enhance China’s power in the world.

To many global observers, these moves indicated a return to strongman rule. Rather than pushing economic reforms further, Xi Jinping has focused his political power and resources on enhancing China’s capabilities to address the threats that emerged from the economic reforms. Xi Jinping, according to many geopolitical analysts, view these economic reforms as the barrier to eventually catching up with the United States.

Throughout the 1990s and early 2000s, China registered double digit GDP growth, averaging 10 percent per year from 1992 to 2012, the year Xi Jinping ascended to power. This was the period when China’s modernization was being viewed around the world as an economic miracle. Deng also promulgated a foreign policy whereby China avoided geopolitical confrontations and focused on economic progress. These reforms brought economic growth but also corruption and inequality. This was also the time when China experienced a real estate boom when prices soared to unprecedented heights but started falling in 2021.

Xi Jinping used an aggressive anti-corruption campaign to control the military and security services. This campaign also kept other leaders’ obedience and increased Xi’s hold over them.

In another crucial strategic move, Xi Jinping set aside Deng Xiaoping’s low-key foreign policy in favor of a more aggressive foreign policy. This is very apparent in the South China Sea and the West Philippine Sea. Xi Jinping has aggressively started asserting China’s territorial claims along its periphery. His most conspicuous move has been to claim more than 3,000 acres of territory in the South China Sea.

Again, according to geopolitical observers, it is likely that Xi Jinping really believes that the time had come for China to assume its status as a superpower. However, as I wrote in my previous column, Xi Jinping has created a problem for himself and his party.

By taking out the process for a peaceful transfer of power to a successor, he has practically ensured that there will be a serious struggle for power once he is gone.

Xi Jinping’s confidence in his counter-reformation strategy is his perception that the United States under Trump is in decline as a superpower. It is notable that the two superpower rivals both see their rivals as being in decline.

China’s biggest economic problem now is its “overcapacity.” It is producing more than what global demand needs. China lacks enough domestic demand for what its factories produce, which then causes a glut of exports. This has caused negative reaction from other countries which has led to protective tariffs. Other countries feel that they need to protect their local industries.

China observers seem to be unable to decide whether China will surpass the United States or become an economic basket case. As Jonathan Czin writes: “Depending on whom one asks, China’s growth model is either dynamic or moribund, relentlessly innovative or hopelessly stuck in the past.”