China: Xi Jinping’s 20th Congress caps five years of political disasters
But whatever the formal outcome of the 20th Congress, the next instalment of Xi’s rule, up to the 21st Congress in 2027, will be completely dominated by a social and political crisis of historic proportions. The CCP’s state capitalist economic model is facing systemic breakdown. This is especially with the implosion of the property sector, which for almost two decades has been China’s main locomotive of economic growth accounting for 30 percent of GDP.
Xi’s manic implementation of a zero-Covid policy, with around 20 percent of China’s population currently in some form of lockdown, has stoked an unprecedented backlash. The latest example was an audacious “flash” protest in central Beijing just days before the congress opened, with slogans calling for Xi to be removed (see statement below).
The demographic crisis, which is also a crucial ingredient in the property sector crisis because almost half of China’s cities are not growing or are actually shrinking, means that India will next year strip China of its mantle of “most populous nation”. That fact alone is a blow to the CCP’s imperialist superpower ambitions. It is an additional setback for China’s economy with massive implications for the imperialist Cold War against the US.
Economically, on the basis of capitalism even of the “state capitalist” variety, a shrinking population means fewer workers (the size of China’s labour force peaked in 2012), fewer consumers, and a growing proportion of pensioners (very poor pensioners by international comparisons).
The CCP’s brutal one-child policy of 1980-2016 bears much of the blame for this, but even after that policy was relaxed China’s birth rate has continued to drop. Capitalism has priced children out of the market. Studies by Chinese think-tank YuWa Population show the cost of raising a child in China is nearly seven times per capita GDP, compared with four times in the US. Since Xi came to power in 2012, the number of births per year has fallen by a jaw-dropping 45 percent. And now Xi’s zero-Covid policy is making would-be parents even more reluctant to have children.
Japan’s population also began to decline just a few years before its property sector crashed in the 1990s. While this is not the sole cause of the crash – the main cause in Japan and China is the bursting of financial bubbles based upon extreme levels of overproduction – China is now experiencing a similar combination of factors only on a much bigger scale than in Japan.
Cold War reverses
The economic crisis is hobbling the CCP’s grand plan to supplant US imperialism as the top global economy and superpower. The NPC’s March target of 5.5 percent GDP growth for this year is no longer talked about, because nobody – probably not even Xi – believes it is realistic. Most forecasters have downgraded their China outlook to 3 percent or lower (the World Bank last month predicted 2.8 percent growth, down from 5 percent it predicted in April). But in reality, zero is a more realistic prognosis.
More importantly, 2022 looks set to break the trend of China gradually closing the gap with the US economy. Potentially, this has huge implications and invalidates Xi’s mantra: “the East is rising, the West is in decline”. According to former World Bank China chief Bert Hofman: “This year will see a reversal of China’s catch-up with the United States in US dollar terms. Due to low real growth in China, modest inflation and sharp depreciation of the yuan, the gap between China’s and the US’s GDP will jump from US$5.3 trillion in 2021 to an estimated $8.3 trillion.”
Xi who has gathered all the levers of power into his own hands cannot shift the blame elsewhere. Zero-Covid has been an economic disaster of course, but most of all it’s the regime’s culpability in allowing the property bubble to inflate year after year, leading to its inevitable implosion. CCP policies created the bubble because debt-driven property investment was its default position to support GDP growth, especially under adverse conditions such as the 2008 financial crisis and again in 2020.
Tech war on an “incredible scale”
In the shadow of the Ukraine war, the US has massively stepped up its Cold War agenda against China. The latest example is the draconian new export controls imposed last week that block the sale to China of advanced computer chips and the tools to make such chips. The measures from the US Commerce Department apply not only to US companies but also to foreign companies if their products contain US-made components or software.
The latest measures follow a raft of tech-related policies from Biden’s government such as the CHIPS Act, which allocates over US$50 billion for homegrown research and production of semiconductors as a way to expel China from global tech supply chains.
The latest US restrictions clearly target China’s military programs, to prevent it developing weapons systems that can match those of the US. It is a thinly disguised act of war “by other means” in other words.
“In weaponizing its dominant choke-point positions in the global semiconductor value chain, the United States is exercising technological and geopolitical power on an incredible scale,” declared former Defense Department official Gregory C. Allen.
Significantly, the new chip restrictions are modelled on sanctions imposed on Russia after its invasion of Ukraine in February. This underlines how US imperialism, at the head of a re-consolidated western capitalist bloc, has exploited Russia’s ill-fated military adventure to conduct a proxy struggle in the larger long-term conflict with China. This dynamic is something ISA has explained since the start of the Ukraine war.
Jake Sullivan, Biden’s national security adviser, referred in a recent speech to the Russian tech sanctions saying these had forced “Russia to use chips from dishwashers in its military equipment.” Sullivan continued, “This has demonstrated that technology export controls can be more than just a preventative tool. If implemented in a way that is robust, durable, and comprehensive, they can be a new strategic asset in the US and allied toolkit to impose costs on adversaries, and even over time degrade their battlefield capabilities.”
The Biden administration’s escalation of the tech war will inevitably bring forth countermeasures from Xi’s regime. There are also significant risks of blowback from these restrictions, harming key sectors of the US economy (China is the final market for around 25 percent of global chip production). The export controls could also lead to new strains within the US-led western camp.
No way out
The escalation of the imperialist Cold War, which is also the main driver of economic deglobalization, imposes additional pain on China’s economy. Xi Jinping appears to be in denial on this score too, just as he has been over the chaos and unpopularity of zero-Covid and over the scale of the property collapse.
Xi emphasizes self-reliance and building up domestic consumption (“dual circulation”), in a nod to Mao Zedong. But there is a vast difference between China’s capitalist economy today, the world’s second biggest, and the largely closed and much poorer China of the 1960s, which operated as a primitive and very bureaucratic planned economy.
Recent economic trends do not offer much encouragement for Xi’s “dual circulation” schema. Mass unemployment and wage cuts now affect wide layers of the population, with one-in-five young people unemployed, more than double the rate in the United States. Starting salaries for graduates who managed to get jobs this summer are on average 12 percent lower than a year ago. Official data shows job vacancies in the second quarter were down 19 percent from a year earlier while job applications were up 135 percent. It’s hardly surprising that young people are the demographic most disenchanted with CCP rule.
China is now in the second year of its property sector slump, which Xi’s regime has been powerless to stem. This year the crisis has spread to local governments, the main drivers of investment in China’s state capitalist system. Most provinces and cities carry unsustainable debt loads as the bills mount up after years of wasteful “white elephant” infrastructure projects that were built to inflate GDP figures.
This year they are being forced to make huge budget cuts, including wage cuts of 30 to 40 percent for some government employees. Local governments have been hammered by the 31.4 percent drop in land sales compared to 2021, an inevitable result of the collapsing property market.
Land sales to property developers have been the single biggest source of local government revenue for more than a decade. Data from the Ministry of Finance shows the combined budget shortfall for all levels of government in the first half of this year was 5.1 trillion yuan (US$758 billion) compared to 718 billion yuan at the same point in 2021, an increase of 600 percent.
The economic crisis is fuelling unprecedented levels of social and political discontent. The shock effect cannot be overstated in a society that has in general since the 1980s only experienced rapid economic growth until the abrupt slowdown of recent years.
Not surprisingly, the full scale of today’s economic crisis is being suppressed by state media. But it is hugely underestimated even by global capitalism. Most overseas economic analysis focuses on the self-inflicted pain of Xi’s zero-Covid policy, seeing this as the main cause of China’s economic ills. These commentators believe, mistakenly in our opinion, that when zero-Covid is eventually lifted (and most signals indicate that will not be any time soon), this will unleash a powerful economic rebound. But, while paralyzing lockdowns and disruption have aggravated China’s economic situation, the crisis has deeper causes.
The bubble has burst
If the Covid-19 pandemic was a once-in-a-century event that first broke out in Wuhan, and was criminally mishandled by Xi’s acolytes in the first crucial weeks, then the bursting of China’s property bubble is its economic equivalent. Its impact will leave no part of the global capitalist economy untouched.
Due to its exceptional scale – twice the size of the US property market by value – and the extent of overinvestment, overconstruction and overspeculation in China, there has never been a collapsed investment bubble that comes close to this. “The Chinese property bubble is not just any property bubble – it is the largest single phase of accumulation of wealth in economic history,” said the economic historian Adam Tooze (The Guardian, 23 September).
At the CCP’s 19th Congress in 2017, Xi delivered a speech saying houses “are for living in not for speculation”. The paramount leader stating the obvious in this way gave a hint of how massively the world’s biggest housing market has been hi-jacked by financial speculators, among them a large cohort of CCP officials.
The Economist (12 September) pointed out that 70 percent of all houses sold since 2018 (an incredible 50 million units) were sold to people who already owned a home. Clearly, despite his official but inaccurate status as the “most powerful leader” since Mao, Xi has been powerless to prevent this speculation, which failed to get homes to those who need them and has now crashed the whole economy.
The collapse of the housing bubble, which chinaworker.info and ISA predicted, has begun to suck down other gigantic sectors like steel and cement – also far and away the biggest in the world. Almost one-in-three Chinese steel companies could go bankrupt according to Li Ganpo, chairman of Hebei Jingye Steel Group. It is a similar story with cement. Global cement output is down 8 percent in the first six months of 2022, the biggest fall in 20 years. The main cause is a 15 percent drop in China’s cement output.
Most seriously, the next link in the chain of crisis could be the banking sector. The precarious state of local governments, charged by Beijing with bailing out the collapsed property market, means they themselves will almost certainly need a bailout in the next period. From a financial crisis in China’s local governments there is only a short distance to a banking crisis.
Under Xi, China has become ultra-repressive as Hong Kong and especially Xinjiang testify. The dictatorship bans all independent political activity, but even top CCP leaders, especially potential rivals to Xi, are constantly monitored by the CCP’s security agencies and warned not to criticise Xi’s policies.
In September, two senior former officials Sun Lijiun and Fu Zhenghua were sentenced to death, to be commuted to life imprisonment, following corruption trials that were clearly staged as a warning to Xi’s factional opponents not to take their opposition too far. Sun amassed a fortune from bribes but also stands accused of building an anti-Xi “political clique”. He was a vice minister of public security and his ally Fu was Justice Minister. The police chiefs of three major regions, Shanghai, Chongqing, and Shanxi, were also each sentenced to more than a decade in prison, accused of being part of the same oppositional “clique” as Sun and Fu.
The 20th Congress may enshrine Xi’s rambling pseudo-ideology in the CCP’s constitution as “Xi Jinping Thought”. Only Mao, of all China’s previous autocrats, enjoys a similar distinction. Xi’s “theory” was enshrined into the constitution five years ago, but under the less catchy moniker “Xi Jinping Thought on Socialism with Chinese Characteristics in a New Era.” The abbreviated version would confer a higher status on a par with “Mao Zedong Thought”. In a parallel development, Xi may also be anointed “lingxiu”, which means “people’s leader”. Again, the rationale behind such rituals is to suggest historical parity with Mao.
As the economy crashes and millions are locked down in their homes, the main focus of the “most powerful leader” is to aurify his official titles. The symbolism plays a role, for the reason that ten years into his rule Xi is still engaged in a fierce power struggle against rival CCP factions and “cliques”. An increased level of conflict between Beijing and regional CCP elites as a consequence of the economic crisis will sharpen the power struggle in coming years. Xi still feels the need to raise himself further above the state and society, Bonapartist style, in order to subdue resistance.
The size of the new Politburo Standing Committee will offer clues over the extent to which compromises have been forced upon Xi. If the current seven-man PSC is widened to nine, that could suggest Xi has been forced to concede places to opposition factions and needs a bigger body to include his own appointees. A smaller body of five seats, as mooted in some media reports, would conversely suggest Xi’s position has been strengthened.
An important question will be who takes over from Li Keqiang, now the most recognised anti-Xi figure, as China’s next premier. Wang Yang and especially Hu Chunhua are associated with Li’s tuanpai faction, and should one of them become premier this would indicate a concession from Xi.
The anti-Xi layers, who are not strong but enjoy backing from sections of the capitalist class, the princelings, and international capital, would hope to use the premier’s position as a check on Xi, an attempt to pressure him over economic policy in particular. In a few days’ time we will know. Whatever the outcome it will not fundamentally change the perspectives for the CCP regime, which is heading into the greatest of all storms.
“New Tank Man” protest gets huge response
The following is a statement issued by chinaworker.info.
Three days before the CCP’s 20th Congress, huge banners were displayed on the Sitong bridge in the central Haidian district of Beijing, including a call for a “strike against the dictator and national traitor Xi Jinping”. After hanging the banners, the demonstrators burned tyres and repeatedly broadcast slogans over loudspeakers, attracting the attention of many people passing by and taking photographs. The news was swiftly purged from the domestic media and internet, with over 1.4 million user accounts reportedly permanently cancelled as a result.
The protest on the Sitong bridge has had an electrifying effect at home and internationally, with many sharing and expressing support for the slogans against autocracy and for the personal heroism of the protesters.
Marxists understand why there is widespread admiration for this bold individual act of protest. It is a not just about one incident, but actually a spotlight onto the real situation in China, where mass suffering and economic agony is hidden by the fake “reality” of the censorship machine.
Very many people will agree with the banner slogans on the need to end the lockdowns, end censorship, overthrow dictatorship, institute democratic rights. Marxists also recognise these as legitimate demands, with the only difference that we believe deeper discussion is needed on how to acheive this and what demands are needed to show a way forward.
The huge outpouring of support for this act of protest shows how China under Xi Jinping has become a vast lake full of gasoline that just one spark could ignite. Many are saying this, which is why Mao’s phrase “a single spark can start a prairie fire” has been shared widely on social media.
Marxists can identify with this mood: it shows a huge thirst for change and an end to Xi’s tyranny. At the same time we realise that politically, just as in Hong Kong in 2019, more is needed. A clearer understanding of capitalism, of what the CCP has become, of why we need democracy – yes we do – but not capitalism’s fake and superficial democracy in which real power is still held by the same big capitalist interest groups. We need working class democracy and socialism.
The Sitong bridge protest has shaken China. It was a desperate cry for change in the middle of the deepest social and political crisis for 30 years. The bold slogans on the banner, while not a complete or adequate program for successful struggle, have registered with broad layers. This shows how China has moved closer to a condition of instability and political revolt.
Eleven years ago, the attempt to start a “Jasmine Revolution” in the aftermath of the Arab uprisings, was suppressed without great difficulty by Hu Jintao’s regime because China was not the same country as it is today. The crisis of CCP rule is immeasurably more serious now.
Many will discuss the slogans of the “new tank man”, and this can have a positive outcome. Especially the call for strikes and student protests points in the right direction because these are mass, collective methods of struggle. And these are the only methods that can win against a dictatorship.
But to strike and protest also requires clear aims and demands. Marxists stress the call for building independent trade unions and workers’ organisations as these are the key to building a force that can change society in the interests of the exploited, the low paid, the overworked, the unemployed, women who are doubly oppressed and national minorties who suffer racism and discrimination.
We must recognise that no wing of the CCP stands for democratic rights. Their political differences are between hardline repression and one-man rule a la Xi Jinping or a slightly lighter form of dictatorship with some relaxation of censorship but where the masses remain slaves.
Therefore for struggle to succeed it must understand the aim is not to make the dictatorship “listen” or “reform”; a dictatorship by its nature must be replaced. With what? By a democratic and genuinely socialist society.