In Xi Jinping’s 3rd term, reform and opening up take backseat

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By Deepa Kaushiki

New Delhi, October 21: Chinese President Xi Jinping in his third term is making his country look inward, as the developed world is searching for ways to de-couple their economy from the supply chains dominated by Beijing. Self-sufficiency in place of reform and opening up now is at the core of the outlook unveiled by Xi at the Chinese Communist Party Congress.

In the last two tenures, the constant propagation of Xi’s personality cult has strengthened his control over the country’s political apparatus. Xi is portrayed to the Chinese people and the rest of the world as a bright theorist with an insight to bring about the renewal of the Chinese nation and find solutions to the most difficult issues the world is currently dealing with.

Whereas, towards the significance of this alleged claim, the economic growth as a policy objective for the country, Xi seems to be departing from the sustained efforts. Nonetheless, over the past three decades, observers of China have come to believe that the Chinese leadership will put economic development ahead of all other concerns. Whereas Xi has hinted that the top objective of the party might no longer be economic development and on the other hand party’s deviating path from social stability led leaders to worry about the unemployment and unrest brought on by dismal economic conditions.

Several significant repercussions are on the cards from the change for China’s trade relations with the rest of the world. This is at the core of Xi’s new slogan of “self-sufficiency” in place of the previous guiding philosophy of “reform and opening up.” Almost definitely, Xi will keep hammering homegrown alternatives to imports to lessen China’s exposure to the outside world. The realisation of a high degree of self-reliance is the essence of the new growth dynamics, according to Xi. Therefore, despite their tremendous waste of resource and lacklustre outcomes so far, Xi will continue his attempts to build Chinese innovations through state-led industrial policies that heavily subsidise domestic high-tech businesses.

However, these constant developing points directed towards two crucial forecasts for Xi’s third term’s economic policies. First, he will continue to place a higher priority on economic security than economic efficiency; in other words, he is ready to forego growth in order to further satisfy his political goals. Second, Xi’s economic policy will encourage more competition in the cutting-edge technologies, most notably semiconductors, with the other advanced economies.

Chinese authorities will continue to pursue strategies that strain economic relations with the other economies such as forced technology transfer and subsidization. In general, Xi’s economic policies will have the effect of limiting the further integration of the Chinese economy into the global economy, probably escalating trade disputes, encouraging other governments to impose restrictions on business investment and trade with China, and limiting the capacity of the Chinese government to engage in economic growth.

Another element in the debate emerges as the current miserable condition of the Chinese economy. According to the International Monetary Fund (IMF), China’s Gross Domestic Product (GDP) would only grow by 3.3 per cent in 2022. In this regard, the ‘Zero-COVID Policy’ plays a significant cause of this economic slowdown. Consumption, supply chains, and small businesses have all been stifled by its ongoing lockdowns and travel restrictions, particularly in the service industry.

Many China experts believe that Beijing will eventually need to relax the COVID rules in order to address the escalating economic issues. Once upon a time, it was believed that China will gradually move towards humanizing values by becoming more open and ethics-based nation. Instead, Beijing has become more adamant about asserting the supremacy of its own system.

Prior to Russia’s invasion of Ukraine in January, Xi unveiled a “no limits” cooperation with Russia as an overt assault to the liberal international order. This year, China’s markets have seen an unprecedented outflow of foreign wealth. The price-to-earnings ratio of Hong Kong’s Hang Seng Index, which is accessible to foreign investors and had always been dominated by Chinese companies, is at its lowest level.

It is imperative to envision reasons of why this high-risk premium is decreasing. The execution of Xiao fits into a pattern under Xi in which the Communist Party’s arbitrary use of state authority has increased frequently to the charge-in of foreign investors. The story of the fallen billionaire in China serves as a warning about a system that is adamant about following its own course.

Notably, the high-level Chinese politics is still a mystery on the inside. It is astonishing that China’s political system is still so opaque despite the country having the second-largest economy and a rising global power.

(Author is a researcher with Public Policy Research Centre)