China’s Xi Amassing Most Power Since Deng Raises Risk for Reform

China’s Xi Amassing Most Power Since Deng Raises Risk for Reform

Xi Jinping today completes his first year as China’s leader with the greatest individual sway over his nation since Deng Xiaoping, a feat that raises the stakes on delivering on pledges for economic and social change.Unlike his predecessors Hu Jintao and Jiang Zemin, the ruling Communist Party let Xi, 60, assume the roles of general secretary, president of the country and head of the military within four months, in the aftermath of rising public discontent at corruption, inequality and damage to the environment from a debt-fueled economic model.

Centering authority on Xi marks a contrast from the collective decision-making model of China’s previous generation of leaders, and offers accelerated implementation of planned reforms from elevating the role of the private sector to reining in polluting industries. At the same time, the shift offers a target for blame should things go wrong, including in the field of foreign affairs — with China increasingly challenging Japanese forces in the East China Sea.

“The bigger the power, the bigger the risk,” said Ho Pin, a Chinese political analyst, publisher and co-author of a book on ousted Politburo member Bo Xilai. “Xi Jinping’s support is unprecedented, it is stronger within the party than Jiang Zemin or Hu Jintao had.”

Corruption Probes

In one of the biggest initiatives since taking office, Xi started an anti-corruption campaign that has reached into the military, state-owned enterprises, and the party’s central committee. Corruption probes have focused on people with links to Zhou Yongkang, the former head of the nation’s security apparatus who was a supporter of Bo, the ousted Politburo member who was sentenced to life in prison in September on charges of corruption and abuse of power.

“A mass of facts tells us that if corruption becomes increasingly serious, it will inevitably doom the party and the state,” Xi told China’s Politburo in November 2012 after becoming party secretary.

Combating systemic corruption could require more than personal power and may backfire if reforms fail to materialize, said Zheng Yongnian, director of the East Asian Institute at the National University of Singapore. It could alienate members of the party and government who Xi needs to implement reforms, he said.

“It’s good for society because society has been angry about corruption,” Zheng said. “It’s a major source of legitimacy in the eyes of society, but it also creates a lot of enemies and resistance within the party.”

Economic Shift

Xi has also overseen efforts to shift China’s economic model away from exports and investment-driven growth that were associated with environmental damage. That poses its own challenges: China estimates that growth slowed to 7.6 percent this year, which would mark a third straight annual drop in the expansion rate.

Leaders have also pledged to rein in land seizures. In November, China’s leaders promised to speed up urbanization as part of policies that represent the biggest expansion of economic freedoms since at least the 1990s.

Forcing his agenda through may prompt criticism of Xi and concerns that China is moving away from a consensus-driven government toward more authoritarian rule. Delaying actions in order to build support within the leadership may not leave China enough time to act to support economic growth.

Pushing Reforms

“Power is a double-edged sword,” Zhang Qianfan, a law professor at Peking University in Beijing, said in a phone interview. “The central government does need more authority to push forward reforms, but authority is not always equivalent to power. It is more about institutional capacity.”

Xi has moved away from the tradition of collective leadership stressed by former President Hu Jintao who was party general secretary from 2002-2012. At a congress while president, Hu said the party should improve “collective leadership with division of responsibilities among individuals” to prevent arbitrary decision-making.

Xi has harked back to the party’s tradition of strong leadership instead. This year he paid homage to the legacy of former Chairman Mao Zedong by ordering cadres to undergo self-criticism sessions, echoing party meetings from the 1940s.

Xi took control of the central military commission when he became party secretary in November 2012, giving him control of China’s armed forces. Hu had to wait until September 2004 to take over the military, two years after he assumed the top party post.

Assertive Posture

Xi’s ascension to power has coincided with a more assertive posture in territorial disputes with Japan and neighbors in the South China Sea. Last month, China created an air defense zone that covers islands disputed with Japan in the East China Sea, spurring criticism from the U.S. and Japan.

On a trip to Beijing in early December, Vice President Joe Biden met with Xi and told him the U.S. wouldn’t recognize the zone and had deep concerns, according to a senior U.S. administration official who asked not to be named because the talks weren’t public.

“President Xi was equally clear in laying out their view of the zone and of territorials disputes in the region,” the official said.

In a further step to expand his power, Xi is likely to head a new national security committee that the party decided to set up at the Third Plenum last month, according to Zhang Ming, a political science professor at Renmin University.

Military Commission

Though former President Jiang Zemin was made head of the military commission and party secretary in 1989, that happened while Deng Xiaoping continued to hold paramount control. Deng’s status as a Communist revolutionary afforded him final say over decision-making, including the order to send troops into Tiananmen Square in 1989. Jiang didn’t become president until March 1993.

“To consider whether there are risks you have to look at whether his actions can make achievements,” Renmin University’s Zhang Ming said in a telephone interview. “If there are achievements in reform, building up military strength and anti-corruption, then he can centralize power well.”

A decade of stagnation in policymaking under Hu and Premier Wen Jiabao that led to a rise in inequality, corruption and the dominance of state-owned enterprises underscored the need for a stronger leader, according to Ho.

Family Lineage

Xi can hearken back to his family lineage for authority within the party and among regular people. He is the son of a fighter in Mao’s revolution, Xi Zhongxun, who was purged in 1962 and went on to become a vice premier after his rehabilitation.

He has shown a more common touch than his predecessor. On Dec. 28, the state-run People’s Daily posted photographs on its website of Xi buying steamed pork dumplings at a restaurant in Beijing. The bill was 21 yuan ($3.46), according to the People’s Daily.

“In the Communist Party now they have a basic common understanding that if there is no strong leader, there is no way to solve many of the current crises,” Ho said.

To contact Bloomberg News staff for this story: Henry Sanderson in Beijing at hsanderson@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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