In The Third Revolution: Xi Jinping and the New Chinese State, Elizabeth C Economy considers the fault lines in China’s domestic affairs.
In March 2018, Xi Jinping addressed legislators at the end of the annual National People’s Congress session in a first-of-its-kind event. Xi had just been unanimously elected as the president of China for a second term. Simultaneously, the NPC had passed constitutional amendments removing restrictions on presidential terms. With his stature as the “core” leader cemented, Xi outlined a grand narrative of China’s development trajectory, clearly identifying his role in it. China under the Communist Party had “stood up, grown rich, and is becoming strong,” he proclaimed. The last of those is the goal of the “new era,” which Xi has heralded.
It is this era that Elizabeth C Economy discusses in her new book The Third Revolution: Xi Jinping and the New Chinese State. The first two revolutions in this framework refer to the upheavals under Mao Zedong, which were followed by Deng Xiaoping’s Reform and Opening Up era.
Economy begins by meticulously tracing Xi’s ascent to the top of the Chinese political system before delving into the policies that he has espoused in pursuit of expanding China’s national power.
Taking over as the General Secretary of the Communist Party in 2012, Xi set out his priorities early on i.e. tackling corruption, ideological corrosion in the Party and economic reform. Economy argues:
In the eyes of Xi, nothing less than dramatic, revolutionary change could save the party and the state and propel China forward to realize its full potential as a great power.
That vision was first expressed in the slogan of the China Dream, which is premised on the rejuvenation of the Chinese nation, and then cemented through the target of achieving socialist modernisation by 2050.
At home, Xi’s roadmap towards this goal, Economy contends, has included restructuring China’s policy-making architecture in order to centralise authority via specific central leading groups, launching a vicious anti-corruption campaign to target political opponents, expanding the party’s penetration across society and directing economic activity towards innovation with the state playing an expanded and critical role.
Abroad, Xi has sought to emphasize China’s standing as a “big country.” He has stated a desire to shape and reshape international institutions by injecting Chinese elements into the international system. And finally, he has put into motion the ambitious Belt and Road Initiative.
Intensifying control domestically, therefore, emerges as a key tool in Xi’s revolution. That control, Economy tells us, manifested in the form of stricter regulations on speech in cyberspace and across the media, state interventions in the market and greater support for state-owned enterprises, along with deepening party and state influence over the private sector, be it in enterprises or by curtailing NGOs.
That is not to say that there weren’t early indications under Xi that the party would let the market play a “decisive role” in the Chinese economy. However, as Economy explains, Xi’s policies have displayed a “preference for control rather than competition — both in the economic and political realms.” She further argues that such an approach has consistently yielded suboptimal outcomes.
Take the case of China’s electric vehicles market. Economy examines the development of this sector since the 1990s. What she finds is that there has been a concerted central government effort, which included offering direct subsidies, tax relief and a host of preferential policies, to boost the sector. However, competition among local governments and central ministries, misreporting of data, a skewed incentive structure for private players and restrictions on foreign companies have meant that the efforts have yielded underwhelming results. For instance, even today, Chinese electric car manufacturers can primarily compete with their Western counterparts on price as opposed to quality.
However, that doesn’t imply a failure to develop the electric vehicles sector. Nearly 7,77,000 electric vehicles were sold in China last year, and government support has resulted in the emergence of players like Geely and BYD as potential powerhouses. Instead, what it does point to is the inefficiencies inherent in the Chinese developmental model, along with the state’s willingness to accept these as the costs of control in the pursuit of its long-term strategic vision.
That, in a nutshell, is Economy’s central thesis: under Xi, China is increasingly ambitious yet walled. It is an “illiberal state seeking leadership in a liberal world order,” and is willing to play the long game and endure inefficiencies in order to achieve its objectives.
However, it is unlikely that such costs can be acceptable in perpetuity or over the long run. For instance, decades of high growth have led to serious environmental degradation, with pollution emerging as a major public concern. There is now a clear acknowledgement at the highest levels of power in China that failure to tackle pollution can potentially threaten social order and thereby the Party’s legitimacy. Similar threats exist in terms of potential job losses as China transitions from a low-cost to high-tech manufacturing and investment to consumption-driven economy. Eventually, as in the past, there will come moments when the costs are no longer sustainable. Such inflection points will likely lead to systemic changes.
The advice that Economy, therefore, offers actors in the international arena is to focus not just on China’s foreign policy but also its domestic affairs. It is only then that one can frame appropriate policy responses towards a nation whose rise is undoubtedly re-shaping our world.