From Afghanistan to Africa, Covid-19 to the climate crisis, China is set to play an ever-greater role. Global Insight assesses China’s direction of travel – and the responses of its rivals.

The countdown to the 20th National Congress of the Chinese Communist Party (CCP) is underway. The agenda is clear. First, it will determine who leads China for the next five to ten years. Second, it will reveal how much power and influence is held by Chinese President Xi Jinping. And third, the Congress will outline the country’s policy trajectory for the next five years.

Xi was supposed to step down this year. But his intention to continue became evident at the 19th CCP Congress in 2017, when he defied the Party tradition of designating an heir-apparent to be appointed to China’s top decision-making body, the Politburo Standing Committee (PSC).

Xi’s name and political ideology were later enshrined in the Party charter and constitution, elevating his status to that of Party founder, Chairman Mao.

But while Xi remaining as undisputed leader is the most likely outcome from the Congress, it’s not guaranteed. Xi derives his power from the consent of the broader Party leadership, which is earned through a combination of performance, manoeuvring and compromise.

While he has enjoyed considerable success in building consensus around his policy platform and placing allies in key leadership positions, his second term has been characterised by a deteriorating relationship with the West and by the Covid-19 pandemic.

Andrew Gilholm, Principal and Director of Analysis for Greater China and North Asia at the global risk consultancy Control Risks, who is based in Seoul, says that some people in the leadership believe that China’s zero-Covid policy – which aims to eradicate all outbreaks at just about any cost – is proving too damaging for the economy. ‘They think that the economic costs of maintaining [zero-Covid] outweigh the risk of exiting’, says Gilholm. ‘So, that has maybe given some momentum to people within the Party who are concerned that Xi is too dominant, and they perhaps want to push back on that.’

Gilholm says the assumption should be that Xi will remain in power. ‘To the extent that there is discontent with Xi among the senior ranks of the Party – and there have been some credible rumours, as well as less credible – those people would have to be so careful about voicing it that you wouldn’t see it coming anyway’, he says.

Questions around China’s leadership will only be fully resolved on the Congress’ last day, when the seven men who will make up the 20th PSC walk out on stage in order of rank. ‘There won’t be any open opposition to Xi but certain policy issues will be contentious, such as those around [Covid-19], the economy and relations with the US and the world’, says Gilholm. He adds that a factional challenge to Xi’s actual position is unlikely, however.

Policy trajectory

During the Congress, Xi will deliver the Party’s key policy priorities through a work report – the most authoritative statement of the Party’s priorities up to 2027, though only consisting of broad guidelines. The report’s focus is expected to distil China’s ‘2035 vision’ into more specific priority areas. While this vision includes few specific targets, it assumes that China will continue its growth trajectory to become the world’s largest economy. And that such enhanced economic power will generate greater ‘soft power’, helping China to exert influence abroad.

The World Bank currently categorises China as an ‘upper middle-income’ economy. In 2020, Xi articulated the goal of doubling China’s $14.3bn economy by 2035, with the country reaching ‘high-income’ status by 2025. Doubling gross domestic product would mean an annual growth rate of nearly 4.7 per cent.

China’s current five-year economic plan, which runs from 2021 to 2025, includes promoting yuan internationalisation in a ‘steady and prudent’ manner; boosting ‘strategic technologies’ such as artificial intelligence (AI), quantum computing and semiconductor manufacturing; and strengthening domestic oil and gas production while also promoting clean energy.

Yuka Kobayashi, Professor of China and International Politics at the School of Oriental and African Studies at the University of London, believes these goals will be difficult to achieve in a global economy reeling from the pandemic as well as a geopolitical environment that’s become more hostile to China’s ambitions. ‘There are not a lot of surprises in the five-year economic plan, and it might have seemed achievable under normal circumstances’, she says. ‘But the key difficulty for China now in achieving these stated goals is its very rigid zero-Covid strategy and, specifically, how they are implementing it. And this is happening at a time when we’re seeing, geopolitically-speaking, a decoupling with China by the West.’

Domestic repression

July marks the fourth anniversary of the tit-for-tat trade war between China and the US, with US President Joe Biden reportedly under pressure to deal with his predecessor’s legacy: whether and how to remove punitive tariffs on China for the sake of the US economy. But while a tariff review is legally mandated, any removal is likely to be partial and exclude products that are strategically important for the US.

The US continues to pressure China on trade and technology, leading Beijing to double down on its pursuit of indigenous development of key technologies. And relations between the world’s two-largest economies haven’t improved in recent months. In addition to urging Beijing to follow international rules for fair trade, the US has condemned China’s actions in Hong Kong, the South China Sea and its treatment of the Uyghur Muslims in Xinjiang.

In China’s economic capital Shanghai, meanwhile, spring saw a 65-day city-wide Covid-19 lockdown. The city’s residents were subjected to draconian measures that kept many sealed inside their homes and struggling to reliably access food and medical care. This led to some of the strongest anti-government sentiment in years – Beijing’s biggest fear.

While China’s no-tolerance Covid-19 policy was initially viewed as a success story of the early pandemic, the BA.5 variant is spreading rapidly worldwide and is seen as a grave threat by Chinese authorities. Kobayashi says that the CCP has staked its political legitimacy on its approach to Covid-19. ‘This is where the test is going to be with Xi’s leadership. How pragmatic will he be given the very ideologically charged statements that he’s made throughout his tenure?’

She adds that the Party’s legitimacy is a very sensitive topic for China due to there being so many unique conditions around Xi’s leadership. ‘Xi is going for an unprecedented third term, you see very severe restrictive measures under [Covid-19], and the US trade dispute is causing a very hostile environment for China’, she says. ‘This has morphed into some kind of world-order dispute between democratic nations and authoritarian regimes.’

As special administrative regions (SARs) of China, Hong Kong and Macau have had to adhere strictly to the zero-Covid policy. In Macau, a small number of locally transmitted cases in July saw the territory go into a full lockdown. The more densely populated Hong Kong’s worst outbreak came in December. Since then, thousands of unvaccinated seniors have died and researchers estimate that well over half of the population will eventually contract the virus.

With Xi expressing his dissatisfaction with Hong Kong’s handling of the outbreak, there was hope that its new Chief Executive, John Lee, may initiate a change in fortune. Lee has vowed to strengthen the city’s standing as a key international financial hub. But news that Hong Kong will introduce a China-style electronic health code system – via mandated tracking bracelets – has fuelled criticism, as Beijing uses the data collected to control freedoms. Hong Kong’s Health Secretary described the technology as ensuring that ‘home isolation is more precise while being humane’.

Kobayashi says that Beijing’s approach to Covid-19 has significantly undermined Hong Kong’s ability to remain a global financial hub. ‘How do you have consistency in “one country, two systems” when you’re trying to implement very strict measures towards Covid that are more about the legitimacy of the CCP?’ she says.

In response, the US enacted the Uyghur Forced Labor Prevention Act in December 2021, with the goal of ensuring that US entities are not funding forced labour among ethnic minorities in the region.

Finally, Xi has railed against the ‘disorderly expansion of capital’ by driving regulatory crackdowns in sectors such as real estate and technology. This followed volatility in Chinese stocks and shares, the threat of financial disruption from tech tycoons and concerns that offshore listings could breach data security.

But Gilholm says there’s huge misunderstanding about the nature of the tech ‘crackdown’. ‘There are multiple regulators going at multiple issues in different sectors under different regulations’, he says. ‘And they’ve been doing this for years.’

Gilholm says it’s no different from many of the antitrust concerns visible around big tech in the West, though they may be pursued differently. ‘The regulators are getting more resources and mandates to enforce the regulations, some of which are quite new and some of which involve new regulators’, he explains.

Foreign aggression

There’s speculation that this year’s work report will include more on foreign policy, given the intensified geopolitical opposition to China.

Mainstream global views of China have deteriorated during Xi’s second term, and China’s aggressive diplomatic style has only exacerbated the problem. Today’s assessment by Xi and the CCP is that the Party is now strong enough to demonstrate its strength abroad through so-called ‘wolf warrior’ diplomacy.

This has manifested itself through China’s expansion in the South China Sea, which houses an abundance of oil and natural gas resources and through which more than $5tn in trade passes annually. Here, China has initiated various land reclamation projects as well as constructed artificial islands in the Spratly Islands archipelago.

Other flashpoints include with India in the Himalayas, and Japan near a small group of islands in the East China Sea.

‘It’s very clear this was targeted towards China’, says Kobayashi. ‘It sent a clear message that there is this unity in the Indo-Pacific tilt in sectors where the economy is very much entangled with defence, signalling a decoupling from China.’

In a similar vein, in June G7 leaders announced the Partnership for Global Infrastructure and Investment, which will mobilise $600bn in funding for the developing world as an alternative to China’s Belt and Road initiative.

Tension continues between the US and China over Taiwan, which regards itself as a sovereign state. Beijing sees the island as part of China, with an official articulating in early July that ‘reunification’ is the ‘main goal’ of Beijing’s Taiwan strategy, contributing to fears of an invasion. The US supplies arms to Taiwan but insists there should be no change to the status quo.

The ongoing Russia-Ukraine war may be affecting China’s calculations over Taiwan. Bonnie S Glaser, Director of the Asia Program at the German Marshall Fund in Washington, DC, says China will be studying the conflict from many different perspectives. ‘The fact that Europe has become more united, and NATO has been strengthened, obviously doesn’t bode well for China in the event that it invades Taiwan’, she says.

‘Europe’s interest is far deeper in Ukraine than it is in Taiwan’, she adds, ‘and there’s still a question mark as to whether the large part of the international community that has imposed sanctions on Russia would be willing to impose those kinds of sanctions on China.’

Ultimately, Glaser believes that China doesn’t want to have a major deterioration in its relations with the West, particularly the US and Europe, because it still needs access to technology, ‘which it cannot get if it has a truly hostile relationship with the West’.

To that end, China needs to continue to have students trained abroad. And it wants to continue to purchase some Western companies and have Western investment in China, Glaser adds. ‘All of this is essential for Xi Jinping’s ambition to put the country on a path toward national rejuvenation by the middle of the century’, she says.

China is unlikely to substantially change course following the forthcoming 20th National Congress. Xi has staked his future, and the legitimacy of the CCP, on continuing to play an ever-growing role in the world. And while China’s world view is equally unlikely to revert to its pre-2018 position, this is simply the cost of what one prominent Chinese scholar has described as the ‘rise dilemma’: the stronger China becomes on the world stage, the more likely it’ll face determined opposition from the international community.

Stephen Mulrenan is a freelance writer and can be contacted at smulrenan@lextelpartners.com

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