The Decibel - The future of China’s economy

Episode Date: October 14, 2022

Next week, China’s ruling Communist Party is expected to announce an unprecedented third term for its leader, Xi Jinping. Mr. Xi has consolidated his power over the last decade, cracking down on billionaires, movie stars and businesses seen as going against party ideology.Asia correspondent James Griffiths tells us about Mr. Xi’s vision for China and what his grip on the country means for the future of their economy.

Hi, I'm Mainika Raman-Wilms, and you're listening to The Decibel, from The Globe and Mail. Every five years, the Communist Party of China announces who will run the country for the next term. That highly secretive meeting kicks off this Sunday. It is widely expected that President Xi Jinping will secure an unprecedented third term as leader. What makes this moment important is that, in theory, by the rules of the Chinese Communist Party, as we've understood them for the past 20 years, Xi should be stepping down now. James Griffiths is our Asia correspondent. The previous two leaders did two five-year terms as general secretary as head of the Communist Party.

And then they stood aside for its successor. Xi Jinping shows no signs of doing that. And, you know, potentially he could stay on for life. He'll tell us what Xi Jinping's grip on China means, his vision for the country's economy, and why that matters to the rest of the world. This is The Decibel. James, thanks for chatting with me again.

Thanks for having me. Before we jump into the power and politics of this episode, I just want to start with the man himself. Do we have any idea of what Xi Jinping is actually like as a person? The honest answer to that is no. I've heard that he can be quite personable, that he has that kind of politician's charm when he wants to turn it on. But I've also heard that he's quite stern and can be a bit remote and kind of sits there in the room and lets the room flow around him, kind of demonstrating his power. Essentially, until he became vice president, and you could even argue until he became president, he was less famous

in China than his wife, Peng Liy who is a you know very well-known opera singer you know there was this joke when Xi Jinping was a you know relatively junior official still this joke that went around that was like oh who is Xi Jinping he's Peng Liyuan's husband and so he was just he was you know essentially this non-entity until he became vice president and suddenly everyone you know both within China and outside China was struggling to find out, oh no, who is this person? Who is this person who seems to be about to be the leader of the world's largest country? Wow. He's the leader of the Communist Party of China. I guess, what kind of power has he consolidated for himself in this role? In his first term as leader, so from 2012 to 2017, he hugely consolidated power and centralized power as well. So not just in himself, but also back in the capital and off in certain industries. It had retreated from people's ordinary lives.

And China was becoming slightly more like a lot of other countries. Under Xi Jinping, that's reversed. The party has come back to the fore again. It's taken a much bigger role in businesses. It's taken a much bigger role in people's personal lives. And as part of that, Xi Jinping's also made himself as general secretary much, much more powerful. So this is, I guess, within China, that kind of gives us a sense of the power he holds. What about for someone outside of China? How powerful a figure is he for the rest of the world?

Well, at the same time as Xi Jinping, you know, centralized power in himself and consolidated power inside the party and inside China. You know, China is also kind of consolidating power as a country. China was, you know, in the last decade has gone from, you know, aspiring superpower to genuine superpower. You know, its economy is the second largest, it's the first largest by some measures, is on track potentially to overtake the US, the largest economy in the world. Its military has thoroughly modernized and been reformed by Xi Jinping. And it's been projecting power in a way that it never did in the 90s and early 2000s. And so China is a much, much more

powerful country with a much, much more powerful leader. And so the decisions that Xi Jinping takes affect everyone in the world in a way that the decisions that his predecessors Hu Jintao or Jiang Zemin didn't affect them. You know, they were obviously hugely impactful for people of China, and for, you know, certain neighboring countries as well, but they maybe didn't affect ordinary Canadians in the same way that Xi Jinping potentially could. And how will we see that power play out on the world stage? So increasingly, we're seeing that a lot of policy that's been made in China is being led directly by Xi Jinping, that these are coming from pronouncements that he makes that

various bodies are looking to him to how to make decisions. And so if there is an invasion of Taiwan, say, which is the kind of biggest and potentially worst decision he could make, that will be him deciding to do that. It will be, you know, in the way that we've seen Vladimir Putin very much seems to have decided personally to invade Ukraine, it will be Xi Jinping that decides personally that China is going to invade Taiwan. But equally, you know, it will be Xi Jinping that shapes the Chinese economy in the coming years. It will be Xi Jinping that decides how China interacts with much of the rest of the world. You know, he has such a degree of personal control over this huge country and this huge political structure and this huge economic structure that, you know,

he really is making decisions that affect millions and millions of people in a way that few other individuals do that, you know, yes, the US president is incredibly important, but they're important because of that position. And they also have to interact with Congress, with the Supreme Court, with their allies. Xi Jinping can make these decisions by himself, to a certain extent, and make decisions that reflect his own political leanings and his own kind of background and ideology. Okay, let's let's talk about what a foreseeable future with Xi Jinping looks like then. I know this is a big question, James, but what exactly is Xi Jinping's vision for China? So that's actually one of the areas that he has been relatively open and clear about,

and that we do have an idea of what he wants. Since quite early in his career, he's presented himself as a nationalist as well as an avowed member of the Communist Party. He also kind of wants to make China great again. And part of that is this idea of national rejuvenation. And so national rejuvenation would be China as global superpower. And, you know, part of that is China is definitely the regional hegemon, that, you know, Chinese people will live a kind of good middle class life, that there won't be poverty. But also, kind of the most concerning part of that goal is that national rejuvenation has always been tied to what they would call reunification with Taiwan,

which is kind of sin as the last remnant of the territory that was lost during the century of humiliation. And so, you know, that is the kind of most dangerous potential flashpoint under Xi Jinping. We'll be right back. China has seen huge growth in its economy since the late 1970s. And in our lifetime, we know we've seen it be a huge manufacturer, as you said, James, the factory of the world. How is Xi squaring capitalism and this focus on growth in the economy with the communist vision? One of the major characteristics of the Xi Jinping era has been this push for something that's called common prosperity, which is this slogan that has been around for a long time and kind of, you know, waxes and wanes within the communist party.

You know, if the pie is now reaching a certain level and it's not growing anymore, we need to change how we distribute it, right? And probably nowhere has that been more felt than within business, within the economy. You see party committees set up within all kinds of companies, within banks, within technology firms. We've seen the party seize control over certain companies. We've seen it crack down on whole sectors, on the technology sector, on the education sector. This has wiped literally billions of dollars off the value of certain companies, especially in the technology sector. And potentially, to an extent that the economy is not going to do as well as it has done previously,

because there is more party control. And there's also there's kind of less space to experiment, there's less space to innovate. And there's also, you know, when we say party control, we increasingly mean control by Xi Jinping. And, you know, Xi Jinping is many things, but he's not a professional economist. He's not, he doesn't have a huge amount of economic experience. And yet he's wrested control over the economy from the premier, Li Keqiang. And, you know, the people that do have the expertise are often looking to him. And so we've started to see this gradual slowdown of the economy, which has been hugely exacerbated by COVID. And the push for common prosperity also helps improve the Communist

Party's legitimacy, you know, they're starting to say that, hey, you know, we're gonna have tough times ahead, but don't worry, we're all gonna, you know, we're all gonna pull together and we're gonna look after you, you know, common prosperity is going to mean that everyone enjoys the benefits of this, that it won't be so difficult in future. So it sounds like Xi's kind of clamped down on the free market as part of the reason why the economy has been slowing down so much. And it has been because for the first time since the 1990s, growth in China is expected to fall below that of the rest of Asia, according to the World Bank. You also mentioned COVID though, James, how specifically did COVID

slow China's economy so dramatically? Yeah, so when we talk about China's growth slowing down dramatically in the last couple of years, and especially it falling behind the rest of Asia, that is because of COVID. The growth rate was dropping before 2020, but it has, you know, fallen precipitously in the last couple of years. And that is because of how shut off China has been from the rest of the world. China is, you know, now with actually with the rest of Asia opening up, China is, you know, pretty much the only place in the world that's still doing zero COVID, that still has, you know, wholly closed borders and doesn't let foreigners come in without quarantine, doesn't let people go out in and out easily. And so, you know, it's easy, I think it's easy for people to imagine the effect

that has on the economy, you know, constantly losing workers. You know, we've seen things like highways that have been shut by local authorities because they don't want infection coming in from the neighboring province and things like that. And this has caused huge disruption to the economy, both within China and China's kind of internationalized economy. So, you know, places like Shanghai, which is a hugely important shipping port, a hugely important financial center.

And this has had a major, major effect on the economy. To the extent that the Chinese government has been trying to alleviate that, especially in the last kind of six months, there have been various efforts to try and boost it again. But ultimately, while the country remains closed, and while it remains attached to this zero COVID approach, there's only so much damage you can undo. Does slow growth in China, does it matter to the rest of the world? Like, is this something that I guess, you know, in North America and Canada that we're going to be affected by? The Chinese economy definitely affects the rest of the world. We've already

seen the effects of that. There has been a marked effect on the global economy, on supply chains, on things like that, because of Chinese lockdowns as a result of COVID, especially Shanghai, especially a couple of the other port cities. China is a very, very globalized economy, and it is very much tied into the rest of the global economy. And so when China sneezes, the rest of the world, you know, maybe doesn't catch a cold, but it definitely, you know, definitely sniffles. Well, I'm glad you brought up the globalized economy, because this, I think, is a really interesting point when we're talking about trying to grow in this way. Because in today's economy, you know, countries do need global trade. And if Xi does invade Taiwan, which we talked about before, there's probably going to be tensions, sanctions, potentially even conflict with a lot of other Western countries. Won't some of those things actually hinder Xi's economic goals? When it comes to Taiwan and the potential costs of invading Taiwan, increasingly people are talking about a potential invasion of Taiwan at some point being inevitable.

And it's more about trying to make that deterrence high enough that it isn't, rather than this idea that China will kind of change course on its own. And that's because of how much importance leaders like Xi Jinping, but also his predecessors, you know, basically the Communist Party since its foundation, how much importance they've put on taking Taiwan and of quote unquote, unifying China. And so for them to back down from that would be very difficult, even in the face of, you know, huge economic costs, this would create, you know, and huge economic costs would be the face of huge economic costs. And huge economic costs would be the least bad option, let's say, of a war in Taiwan.

Huge economic costs, but potential global configuration, potential war between nuclear superpowers. This is a potentially devastating thing that there is not really any good result from, but that doesn't necessarily mean they're going to slow down in pursuing it. James, thank you so much for taking the time to speak with me today. Thank you.

That's it for today. I'm Mainika Raman-Wilms. Our producers are Madeline White, Cheryl Sutherland, and Rachel Levy-McLaughlin. David Crosby edits the show. Kasia Mihailovic is our senior producer, and I'll talk to you next week.