Chinese President Xi Jinping played the role of strong man, cautioning that the Chinese Communist Party must sustain its hold on power and prepare to withstand "high winds, choppy waters and even dangerous storms," as he opened a key meeting of the Chinese Communist Party (CCP), which is due to continue through Saturday.
"Modernization" and "security" are the watchwords that bubbled to the top of Xi's Sunday speech, Nomura notes in its analysis, new terms repeated multiple times in this speech. On the other hand, Xi made far fewer mentions of "reform," "economy," "market" and "innovation" than his previous address in 2017.
The conclusion to draw is that Xi is currently less keen to champion China's economy and push ahead with disruptive reforms than he is to stress that his 10 years in charge have brought stability and reinforced the command of the CCP. During that time, Xi has eliminated all rivals under the guise of chasing down corruption within the party, and has seen his Xi Jinping Thought written into the party's constitution.
The new notes indicate that Xi, as China's strongest leader since Mao Zedong, is committed to Marxist-Leninist ideals, and views those political goals as more significant than developing the free-market economy.
Xi name-checked "common prosperity for all," his Maoist campaign that at times in 2021 began to look like an assault on the private sector in general. "Marxism works," Xi asserted," particularly when it is adapted to the Chinese context and the needs of our times."
The Chinese leader was addressing 2,340 delegates to the 20th National Congress chosen by the Communist Party's 96 million members. Xi's speech was far shorter, at 1 hour 50 minutes, than his 2017 address, which took almost 3-½ hours.
With China's economy barely eking out growth, Xi had many fewer high notes to hit. Q2 growth came in at just 0.4%, way off the government's target of "around 5.5%" for this year. The government is due to release Q3 figures tomorrow, with economists polled by Reuters predicting an improved 3.4% rate but one that would see full-year growth come in at just 3.2%.
Xi again referenced "dual circulation," the concept that China should develop self-sufficiency in many industries besides serving as a production base for exports and foreign multinationals.
Technically, this was a work report to the Chinese Communist Party delivered by CCP General Secretary Xi, summarizing the achievements of the last five years and looking ahead to the next five. Xi is up for reelection to a third term in that post, as well as commander-in-chief of the armed forces. Since China is a one-party dictatorship, the party's leader becomes president.
There were some differences between the speech that Xi gave in the Great Hall of the People in Beijing and the full written report that was submitted to the party. For instance, Xi didn't repeat his prior assertion that "houses are for living in, not for speculation," but the phrase did make its way into the report. The report stressed the need for a greater number of housing suppliers and a wider selection of rental housing as well as homes for purchase.
There was no change from Xi on the two issues that are currently causing widespread uncertainty in China: the zero-Covid policy, and the deleveraging of the property-development industry. So we can assume there will be no easing up on either front at least until the "Two Sessions" of China's congress meet for their annual gathering in March.
That March meeting should complete the reshuffling of China's leadership that is now starting. The once-in-five-years National Congress happening now will settle the top posts for the Chinese Communist Party, while the March annual meeting will settle the top civil servant posts, as I explained in greater detail last Wednesday.
Another difference between Xi's speech and the text of the report is the emphasis on reforming the financial system and fighting monopolies. These got scant mention from Xi, but are emphasized in the text. Financial reform needs to increase direct financing and improve regulation, to avoid any systemic risks. On Sunday night, the six main state-owned banks committed to the push, according to state broadcaster CCTV, and echoed the phrase that "economic development should focus on the real economy." The subtext is that the "platform economy" and dot.com businesses, as digital gateways and middlemen, are not "real" in the way factories and engineering projects are.
The antimonopoly push is a new one, not mentioned in 2017, but indicates the attention that the CCP is now giving Big Tech and its big reach. In the years ahead, the CCP will push to dismantle monopolies and unfair competition, and encourage the "healthy" development of capital. That suggests the attack on Big Tech, which has taken a back seat as China's economy stalled, is still an agenda item once the CCP feels more secure about the country's economic prospects.
Xi praised the "One Country, Two Systems" model of governing Hong Kong and Macau, although the CCP has used that pretense to eliminate all political opposition, with all top Hong Kong pro-democracy figures either now in jail or in exile. Xi called One Country, Two Systems "a great innovation of socialism with Chinese characteristics." It is supposed to mean that the two former colonies should have significant autonomy following their return from British and Portuguese rule.
But since widespread pro-democracy protests began in Hong Kong in 2014, Beijing has taken a far tougher stance, imposing a much-hated National Security Law on Hong Kong without any input from Hong Kongers whatsoever. The local government is now a puppet administration with no opposition, under the guise of "patriots" running the city - although the definition of patriotism comes down to support of the CCP. Any concept that there should be an opposition party or parties has vanished, with anyone who opposes the CCP called an "anti-China element" under the influence of shady "external forces" that have never been named.
Taiwan has been offered the same system, and is very wise to refuse. In fact, Xi did not mention "One Country Two Systems" in regard to Taiwan, though the concept was mentioned in the written report, perhaps indicating that Xi sees less ground for compromise and Taiwanese autonomy.
Xi brought the topic of Taiwan up earlier in his speech than he did in 2017, and said that China will "continue to strive for peaceful reunification with the greatest sincerity and the utmost effort," but that it reserves the right to use force and "all measures necessary." He railed against "outside forces and the few separatists seeking Taiwan independence."
Taiwan is an independent nation in a practical sense, and has never been governed by the CCP. In fact, the Nationalist government that decamped to the island as it lost China's civil war was the last one to be democratically elected in China. But Beijing insists through the United Nations that countries can only recognize either mainland China or Taiwan as "China."
The greater prominence given to Taiwan, a section that was greeted by some of the loudest applause in the hall, is in part a response to U.S. President Joe Biden's assertion several times that the United States would defend Taiwan against a Chinese attack. Xi insists that "resolving the Taiwan question is a matter for the Chinese, a matter that must be resolved by the Chinese." But which Chinese?!
This 20th edition of the National Congress comes just after the centenary of the Chinese Communist Party's founding in Shanghai in 1921. By the time of the next event, the People's Liberation Army will be celebrating its founding in 1927. Interestingly, Xi stressed the need to "strengthen Party building across the board in the people's armed forces to ensure that they always obey the Party's command." Xi is also up for reelection as chairman of the Central Military Commission, the military's commander-in-chief.
Chinese shares rose on Monday, like several Asian markets, not seeing any follow-through from heavy selling on Wall Street on Friday. The CSI 300 index of the largest listings in Shanghai and Shenzhen rose 0.1%, although that leaves it down 21.8% so far this year, a modest outperformance over the 25.3% fall in the S&P 500.
Hong Kong stocks showed losses in morning trade but suddenly turned higher at the close. The Hang Seng Index finished up 0.2%. Hong Kong stocks are the worst performers in Asia so far this year, down 28.6% to date in 2022.