China’s Sputnik Moment?
How Washington Boosted Beijing’s Quest for Tech Dominance
The Chinese Communist Party’s National Congress, which is held every five years, was once considered a dull affair, recalling images of old men dozing through long speeches. That changed in 2012, when an intense intraparty competition before the 18th National Congress led to a diplomatic incident at a U.S. consulate. It involved a Chinese official who sought asylum for having confronted Bo Xilai, a rising-star Politburo member whose wife was later implicated in the murder of a British businessman. That was followed by a Ferrari crash in Beijing that killed a senior official’s son and rumors of a coup attempt. The prelude to this fall’s 19th National Congress seems unlikely to be so dramatic. But with the July dismissal of Chongqing’s party chief Sun Zhengcai, who is under investigation by the party’s disciplinary watchdog, the atmosphere is tense. As one of only two next-generation leaders on the party’s Politburo, Sun was at least tentatively earmarked to succeed President Xi Jinping or Premier Li Keqiang at the 20th National Congress in 2022. His ouster comes amid other signs that Xi’s pre-congress maneuvering is getting more aggressive, and it changes key calculations on who gets promoted—decisions that will shape China’s leadership for at least a decade.
The question of leadership in China may seem a moot point—many observers already see Xi as the all-powerful “new Mao.” This assessment masks growing uncertainty, however, about two fundamental factors behind China’s remarkable achievements over the past quarter century: elite leadership cohesion underpinned by limits on power and a capacity for transformative economic restructuring that prioritizes pragmatism over ideology. These are the key features of a system built by the architect of modern China, Deng Xiaoping. At stake now is whether Xi can dominate the system without destroying it. How far will he seek to monopolize power? Will he tackle economic challenges in his second term as tenaciously as he tackled internal political ones in his first? Most likely, Xi will save his real power grab for the 2022 National Congress, but his fixation on strengthening political control is weakening other crucial foundations of China’s success and stability.
A STRONGMAN CONSTRAINED
The pace of Xi’s power consolidation, anticorruption offensive, and elevation above other leaders is unprecedented: he is already officially referred to as the “core” of China’s leadership, state media have recently played up Xi’s role as military “supreme commander,” and there are signs that “Xi Jinping Thought” or even “Xi Jinping-ism” might enter official vocabulary at the 19th National Congress. This is more than symbolism and semantics because such labels would elevate Xi above any leader since former Chairman Mao Zedong—and not even Mao went as far as having an “ism” attached to his name. Yet for all his evident clout, Xi has not yet broken out from the main constraint on his power: informal rules guiding retirement and promotions that will make it difficult for him to dominate politics after 2022 (and would thus weaken his hold on power before then). Deng established leadership transition norms in the 1990s to prevent succession crises and power struggles—the great weakness of one-party states. The rules are informal and have been bent before, but they still matter to leaders and they matter for the party’s survival. By removing Sun, Xi bent the rules significantly.
Such tactics are perhaps unsurprising given Xi’s predicament: if he follows Deng’s rules, he will have to relinquish leadership of the party in 2022. In the meantime, he would certainly not be a lame duck but would very likely see a decline in his ability to dominate decision-making and succession during his second term. Xi’s predecessors all used their incumbency to garner factional support in the roughly 200-member Central Committee, as well as in the more influential 25-person Politburo and its currently seven-member Standing Committee, China’s most powerful leadership organ. Yet Xi is building support from a lower starting point, having commanded no faction of his own before taking office. His stakes are also higher—corruption crackdowns create enemies. Although Xi may feel that retaining power beyond 2022 is necessary for his mission to save the party and make China great again, self-preservation must be a strong motivation, too.
There are different ways for Xi to sustain his influence: at the 19th National Congress he will at least tip the factional balance in his favor, but he could also more brazenly install and informally control a handpicked leadership in 2020 or even retain formal office as party general secretary or head of the Central Military Commission, which oversees China’s armed forces. (Xi’s third post, the presidency, has an explicit two-term limit and is actually less powerful than the other two.) With myriad permutations for each of these scenarios, it is easy to get lost in the minutiae of how the transition might play out, since it involves considerations such as age limits, ranks, and factional ties that are rarely clear-cut. Before assessing where Xi may be going, it is useful to scrutinize common assumptions about where he stands now and how he got there.
It has long been speculated that Xi will ditch Deng’s succession norms, but until recently, he had taken few overt steps in that direction. His rapid crackdown and consolidation began not as a unilateral power play but as an attempt, based on a consensus among top leaders, to build a stronger, centralized leadership and party discipline to tackle mounting risks to economic and political stability after the traumas of 2012. After nearly five years of consolidating authority over key institutions, Xi may no longer need consensus, but in important ways he has still acted with restraint—or within party constraints. His anticorruption crackdown, carried out by the Central Commission for Discipline Inspection (CCDI), is usually seen as a thinly veiled purge of potential rivals, yet until this year there was no pattern of targeting contenders for top jobs at the 19th and 20th National Congresses or those in the one group that could dilute Xi’s power: the Communist Youth League faction of former President Hu Jintao and Premier Li.
Before Sun’s demise, only one other candidate had been targeted: former Fujian governor and Sinopec boss Su Shulin; but he was likely part of the post-2012 cleanup. Most of the senior officials targeted from 2013 to 2016 had discernible ties to a prominent patron and seem to have been linked either to the purge of four former Politburo members who had allegedly challenged the 2012 succession or to Xi’s efforts to cleanse and control the military. The four ousted Politburo members were associated to varying degrees with former President Jiang Zemin, as was Sun. Ling Jihua, once a top aide to Hu, belonged to the Major Youth League, but the case never escalated into a wider purge beyond the “Shanxi clique” or those associated with Ling. This may reflect a 2012 bargain whereby Hu backed Xi’s accession and the purge of those who challenged it and agreed not to interfere in politics from behind the scenes after retirement, as Deng and Jiang did. It may also be that Xi does not yet feel strong enough to directly oust top Youth Leaguersusing the CCDI and is biding his time. Perhaps more likely, he may simply feel he can sideline them without resorting to such tactics.
Although selective with the CCDI sledgehammer, Xi has certainly been undercutting rivals in other ways. He and the CCDI have publicly criticized the Youth League as an arrogant institution that enjoys excessive privileges. In May, it emerged that the party leadership may force the league to close programs that have been part of its recruitment system. These developments signal the Youth League’s declining fortunes and likely portend further efforts to end its era as one of China’s most effective factional bases (although Xi can present this approach as overdue intraparty reform rather than a power play).
PROTÉGÉS IN THE PROVINCES
Like his predecessors, Xi is altering the factional balance through appointments to senior provincial and central government positions that serve as pathways to the Central Committee and Politburo. There is no need for a naked anticorruption rampage through rival ranks if, via the party’s Organization Department led by his ally Zhao Leji, Xi can improve his position through normal turnover. He has been doing this throughout his tenure but particularly this year. From January to July, a total of 30 provincial governors, party chiefs, and heads of central government agencies were appointed. Not one has a strong Youth League background, while at least 12 have discernible links to Xi. Another dozen have a background beyond politics—in defense and aerospace, large state-owned enterprises, legal and CCDI bodies, or science and academia. The rest have résumés suggesting no close factional ties.
It is possible to interpret these trends as a meritocratic move away from factionalism, but the pattern clearly undermines the Youth League and Jiang’s already faded Shanghai faction and will strengthen Xi’s following among younger leaders entering the Central Committee and Politburo this year. Although all this could have a decisive influence on the 20th National Congress, it did not change Xi’s relatively small following among Politburo members in line to reach the Politburo Standing Committee at the 19th National Congress, which explains his apparent shift to more aggressive tactics in recent months.
The most striking instance—Sun’s removal by the CCDI—is all the more significant since he was replaced by Xi’s protégé Chen Min’er. Of the other five Central Committee–level officials removed in CCDI investigations from January to July, three have Youth League ties. It also emerged in July that several Central Committee members and alternate members were missing from lists of officials elected as delegates to the 19th National Congress. This is highly unusual and suggests top-level intervention to sideline them; at least five of them are rising Youth Leaguers.
Clearly Xi is maneuvering to dominate, but how and how far he will push his power remains unclear. In this sense, the next few months may reveal more about his intentions and the extent of his power than the last three years. The fortunes of the next—or sixth—generation of Politburo Standing Committee contenders are a key indicator. Removing Sun leaves key Youth League faction member Hu Chunhua (a protégé of Hu Jintao’s but no relation) as the only sixth-generation leader on the Politburo and thus the front-runner to succeed Xi if past practices are observed. This might support the idea that some degree of consensus and factional balance still endures. It could equally reflect that Sun was simply an easier target than Hu Chunhua; the latter has adeptly avoided major controversy in the high-profile role of Guangdong party chief. All eyes are on Guangdong for Xi’s next move, but there is little sign so far that Hu is in trouble.
With Sun gone, Xi could promote a sixth-generation Central Committee member directly into the Politburo Standing Committee as an alternative successor in 2022 instead of Hu. The 18th Central Committee, elected during the 2012 National Congress, contained seven members whose age makes them contenders. One is Chen and another was the now sidelined Su Shulin. Another, Nur Bekri, is among those missing from the list of congress delegates, raising doubts over his future. Of the remaining four, Zhang Guoqing and Zhang Qingwei have no strong factional ties and were both promoted this year, while two with Youth League backgrounds have not been promoted since 2013. Chen, or perhaps one of the Zhangs, seems well placed for a rapid rise. If Xi removes Hu or picks a Politburo Standing Committee with no sixth-generation members, it would seem to portend a more flagrant power grab.
Perhaps the most discussed congress-related question in the past year is whether CCDI chief Wang Qishan will remain on the Politburo Standing Committee for another term despite being due to retire. Were he to stay on, it would be a significant break from tradition but on its own would not necessarily mean the abandonment of succession norms. His retention could be framed as an exception for a critical mission—to lead a planned overhaul of the anticorruption system or, less likely, to replace Premier Li and spearhead a change of approach to economic policy. It is possible Wang could be tarnished by U.S.-based Chinese tycoon Guo Wengui’s sensational social media campaign against him and alleged business dealings involving his family, but there is little evidence so far that Guo’s campaign is seriously undermining Wang. Regardless, although individual promotions and rules matter, the main question is how far the overall transition follows or abandons norms: one or two cases of rule bending or line jumping would not be surprising, but blatantly stacking the Politburo Standing Committee and Politburo with Xi’s favorites would be highly contentious.
BLACK BOX BARGAINS
It is easy to get carried away in analyzing all the various scenarios in which China’s power transition can unfold. With so many details to dissect during congress season, China watchers always risk being sucked into the numbers game and losing wider perspective. It helps to be honest about how little solid information there is on these issues and how speculative any forecast must be. Deciphering elite Chinese politics was often termed “Pekingology” (a nod to Kremlinology), harking back to an era when most China analysis was done from outside the country by making interpretations through sources such as party newspapers. China is now one of the most analyzed countries in the world—and has been through four decades of “opening up”—yet elite political competition at the highest levels of the party remains remarkably opaque.
Sinologists, and even the vast majority of people within China’s party state, have only a vague picture of how major pre-congress decisions are made: closed-door horse-trading involving very senior leaders and—at least in the past—a few retired ones. Beyond all the gossip and punditry, nobody is really sure who gets a seat at the table or when, where, and how bargains are struck. With politics looking increasingly Xi-centric and the presumed rules of transition in doubt, it is not even clear whether meaningful collective decision-making still occurs or how important numerical balance on the Politburo and Politburo Standing Committee still is. In stark contrast with governments elsewhere, China’s highest forums of power somehow remain largely leak-proof. Rumors emerge regularly, but usually from lower down the system and with decidedly mixed reliability. Even the best-connected observers were in the dark about most of what mattered in 2012, and pretty much nobody foresaw Xi’s rapid emergence as such a strong leader.
Factional politics is similarly hazy, a topic so widely discussed among China watchers that it can sound like a clearly defined feature of the system with explicit membership and organization. Factions in China have never been so defined. A popular view of Chinese politics as a simple contest between two or three groupings—“elitists and populists,” the Youth League, or Jiang’s faction and “princelings”—has persisted even though such frameworks cannot explain events in 2012 or since. Xi may be genuinely working to reduce factionalism in the party, but it seems more likely that he is eroding established power bases and gradually building his own—promoting people from his small existing pool of confidants and co-opting others by promoting neutrals and political outsiders. Either way, both the details and the fundamental nature of factional politics are murky and now in flux.
Extrapolating policy implications from personnel change is also difficult: factional affiliations are not primarily based on policy or ideological cleavages, and most officials make a career out of avoiding strong, explicit views besides supporting the party line of the day. Xi himself is the prime example: after some 30 years in significant political office and almost five as president, his intentions and beliefs in some major policy areas remain ambiguous. These are sobering limitations on our ability to forecast. Together with the drama of 2012, they highlight how pre-congress turmoil can remain obscure for long periods—many of the events discussed here may hint at such upheaval behind the scenes. Despite these constraints, there are plenty of indications from Xi’s first term on where he will take China next.
Xi could yet stick to bending the rules rather than burning the rule book—tipping the balance rather than rejecting the whole principle of limited individual power in order to establish a “Xitocracy.” His intentions will probably remain an open question after the 19th National Congress: most likely he will maintain some semblance of balance and rule following but secure an outcome that leaves him a pathway to more decisive domination of the 20th National Congress should he choose it. Some rule breaking, such as retaining Wang on the Politburo Standing Committee, will not necessarily spell the end of Deng’s system—Xi could present some changes as reforming rather than discarding it.
The party’s retirement system is, after all, an anomaly. In Xi’s case it will require him to retire at 69—below the age at which U.S. President Donald Trump took office. Given that the party’s age limits require those in power to voluntarily relinquish their positions (often to rivals) while still at the peak of their political careers, it is perhaps remarkable that the system has outlived Deng by 20 years. Xi is not the only one whose interests it threatens—the whole Politburo Standing Committee and indeed most of the Central Committee have reason to be frustrated by age limits. So does it matter if Xi unravels the succession system? The answer is a resounding “yes.”
The party’s effectiveness and resilience, which are in such contrast with what is exhibited by most other authoritarian regimes in rapidly developing countries, have depended on a number of factors relating to political and economic strength. In some respects, the party’s political strength looks as solid as ever. Its monopoly on power is not seriously threatened, and Xi has greatly bolstered controls over the political sphere. The state has built surveillance and security apparatus worthy of a George Orwell and George Lucas collaboration, and the interests of some key groups—such as the military, economic elites, and urban middle class—remain tied in many ways to the prevailing order. The party enjoys more legitimacy than outsiders tend to assume, and Xi may be more in tune with the masses than he seems. His anticorruption drive and “China Dream” mantra strike a chord with many Chinese despite the repressive side of his rule. Xi also seems to understand that the grandiose nationalist-tinged vision and military parades will not grant legitimacy unless the party delivers on mundane issues such as health care and the cost of living.
In short, the party faces no credible opposition from without as long as it avoids fracture from within. This is why shedding succession norms would be so significant: China has avoided the succession crises and power struggles that historically have plagued Leninist political organizations, but thanks only to a formula that is fragile. Deng was able to implement it because he stood above it; there would be little to protect it if another leader achieves that status—this is not an institutionalized system of checks and balances. The 18th National Congress was the first succession to install a top leader—Xi—who was not handpicked by Deng, and that transition may have come close to being derailed in 2012.
Xi is a true believer in the party and a student of its history (and that of the Soviet Union), so he may wish to preserve Deng’s norms for the sake of party unity. But that same belief will make him reluctant to relinquish power while his mission is still in progress. He may seek to dominate and reform the system rather than abandon it, but that is a delicate operation. The system depends on a degree of power balance to constrain the top leader. Once that is gone or the rules are no longer taken seriously, the party will be vulnerable to the same high-stakes power struggles that Deng strove so hard to avoid.
CRACKING DOWN, NOT OPENING UP
The other side of the party’s impressive reform-era performance is economic strength: rapid economic growth has been both a result and a driver of the regime’s success. Plenty of fundamentals suggest China will see many more years of strong economic expansion, but even if reasonably stable growth can be sustained at around five to six percent (which is questionable), it will not afford leaders the same policy and political leeway that came with double-digit growth in past decades—for example, supercharged growth helped restrain debt-to-GDP ratios, while rapidly rising prosperity has helped keep most young, urban Chinese relatively apolitical. More important, the challenge of sustaining that growth has changed fundamentally in nature, from “the mobilization of resources to the efficiency of resource use,” as the economist Arthur Kroeber puts it. The party state excelled at mobilizing resources; efficiency—to put it mildly—has never been its strength.
To meet this challenge, Xi will have to pull off a complex, painful restructuring and transition to a different economic growth model. China has done this at previous critical junctures in its development, first under Deng and later under Jiang and former Premier Zhu Rongji, when significant changes were needed to prevent or overcome major threats to growth and stability. Individual phases of China’s record-breaking growth can be attributed to advantages such as demographics and to the government’s vaunted competence. But the four-decade phenomenon of China’s relentless rise depended on more than competence. It depended on a capacity for transformation, dragging the economy—and sometimes a kicking and screaming political elite—from one phase of growth to another. This has always required strong state capacity but also the leadership vision and flexibility to make necessary but politically daunting changes. The last time the party really showed these qualities, however, was when it joined the World Trade Organization in 2001. Leaders have recognized the need for another transformation—a new growth model and, more recently, a major deleveraging—since the mid-2000s but have shown little sign of delivering.
By late 2013, Xi had put forth a relatively ambitious market-oriented reform agenda and signaled new urgency and central authority to drive it forward. Generally speaking, however, he has disappointed. Such transformations will of course take time, and the optimistic scenario is that his first-term focus—consolidating his control and communist credentials—was a prerequisite for forcing through painful reforms in his second. In this narrative, Xi may not like economic liberalization but accepts that another dose of it is necessary to build a strong party and country.
This scenario is credible. Xi set out his reform agenda in 2013 and has clearly revived similar rhetoric this year, painting himself as battling to secure China’s future prosperity over resistance from unspecified vested interests. Along with a resurgence of calls for “supply-side reform” (shorthand for tackling industrial overcapacity), he has taken much tougher action against behaviors in the financial and corporate sectors that have fueled concerns about rising debt risks and capital outflows. Xi has framed financial stability as matter of national security and taken a direct role in shaking up the banking, securities, and insurance regulators, removing several senior officials and establishing a high-level committee in July to coordinate regulation.
This has been followed by a series of remarkable interventions into several of China’s largest private companies. Anbang Insurance Chairman Wu Xiaohui was reportedly detained for investigation in June, and in July reports claimed Beijing had ordered Anbang to sell its overseas assets and repatriate the funds. Reports also claim that Xi personally approved a directive to state-owned banks to restrict lending to Dalian Wanda Group, one of the world’s largest property developers, because it breached rules on overseas investments. Wanda Chairman Wang Jianlin subsequently said the company would “respond to the state’s call” by keeping future major investments in China. Other targeted firms, like Wanda and Anbang, are among China’s most active and high-profile buyers of assets in the United States and Europe.
DREAMING OF ALCHEMY
There are certainly more subtle and market-oriented changes under way, too, and the tougher tone from the top on issues such as financial regulation and excessive leverage is a positive sign in many ways. Greater top-down, centralized control can help Xi to reduce corruption, overcome siloed bureaucracy, and force local governments and powerful state and private-sector business players to better comply with important policies. This is all very necessary, but it is not sufficient. The problem is that China’s political economy is long past the stage where its problems can be fixed through strong-state solutions alone. Many of China’s biggest challenges now require the state’s letting go, not just cracking down. Presidential intervention is not a lasting solution to wasteful investment—government will have to genuinely cede more control over credit and approvals to market forces. Unleashing the private sector and small to medium-sized enterprises, attracting more foreign direct investment, fostering domestic technological innovation, and creating more competitive industries are other tasks for which state-led approaches have historically proved ill-suited beyond a certain point of development.
Xi probably grasps much of this in theory and must of course proceed cautiously given the negative short-term economic and social impact that aggressive restructuring and liberalization could have. Unlike his predecessor, he is probably capable of surprises in his second term—perhaps in the form of foreign policy departures or with a hitherto restrained zeal for economic reforms. However, the latter is more a hope than an expectation. Xi’s political instincts seem to favor short-term stability and state-centric, controlling approaches. These sometimes complement longer-term, market-driven approaches, but very often they conflict, and his first-term record suggests that Xi simply does not believe in market-based reforms the way he believes in party-state control.
Xi’s biggest, boldest moves have included industrial policies to create globally competitive advanced industries primarily through state direction and support and through major, heavy-handed interventions into some of China’s largest private companies. Similarly, his Belt and Road strategy—an ambitious attempt to connect Asia with Europe, the Middle East, and Africa—is driven heavily by political rather than commercial imperatives.
Meanwhile, even assuming his disciplinarian style and revival of ideology are means to an end rather than a throwback to Mao, they are still eroding another of the party’s strengths: experimentation and adaptability among officials to find policies that work locally. Much anecdotal evidence now depicts officials more worried about political correctness than policy effectiveness. Xi addressed this at a recent party meeting, which stressed that making mistakes will be tolerated but inaction will not. Officials seem not to buy this, given the current atmosphere.
China’s leaders, including Xi, may be dreaming an impossible dream: they have sought for years to engineer a system with the benefits of market competition, rule of law, and checks and balances, but without giving up strong state control and a party monopoly on political power. If any nation were to be the first to achieve such a historic feat of alchemy, it might be China, but the possibility looks remote. Xi’s instincts so far imply lengthening odds on another successful economic transformation. If his drive for political control erodes the foundations of elite cohesion, it will weaken, not strengthen, the party.
Raising such fundamental doubts about China’s future is often dismissed as forecasting “collapse,” but there has to be more to the debate on China than whether or not dramatic meltdown is imminent. (It is not.) Less extreme and more likely scenarios could still have profound implications given China’s global significance. For 20 years, Sinologists have been rightly pointing out the strengths that have helped China avoid pitfalls common to comparable economies and polities, but the pitfalls are still real while the strengths are impermanent. On the current trajectory, it should no longer be considered radical to suggest that China could experience both a succession crisis and economic strife by 2022—historically a potent combination. Ahead of this year’s congress, a recent series of propaganda documentaries on state television have drawn many parallels between Xi and Deng as two strong, bold reformers. Xi has indeed shown Deng’s uncompromising belief in party control of the political sphere, but Xi’s impact on China will now depend on keeping alive the softer side of Deng’s legacy: daring to “let go” in the economic sphere and avoiding the authoritarian’s succession trap.