October 30, 2016 7:00 pm JST
Minxin Pei

Xi wins the battle but factional war continues

Chinese President Xi Jinping speaks at the sixth plenum of the Central Committee of the Chinese Communist Party in Beijing on Oct. 27. © Xinhua/AP

Power struggles in Stalin's Kremlin, according to Winston Churchill, were like two bulldogs fighting under a carpet: Spectators see a lot of movement but have no clear idea of who is winning. What the late British prime minister said about the Soviet Union is an equally apt description of elite politics in China, since the Chinese political system in many respects is a carbon copy of the Soviet version.

On rare occasions, however, even a regime shrouded in secrecy can give us just enough clues to guess who is ahead in the power game.

Such was the case with the latest development coming out of the sixth plenum of the Central Committee of the Chinese Communist Party. At the end of its meeting, held Oct. 24-27, the committee released a lengthy communique that among other things formally designated Xi Jinping, the party's general secretary, as the "core" of its leadership.

On the surface, there is little doubt that such a designation has given a huge boost to Xi's authority. His immediate predecessor, Hu Jintao, was denied this title, while all three preceding leaders of the party -- Mao Zedong, Deng Xiaoping and Jiang Zemin -- held the same designation.

Before we conclude that Xi has now won a total victory against his political rivals and stands poised to amass even more power at next year's party congress, we need to put Xi's formal designation as the "core" of Chinese political leadership in its proper context -- the tough year he has endured and the even tougher year that lies ahead.

After rising to the top of the CCP four years ago, Xi had an unbroken string of successes in consolidating power. With an unrelenting anti-corruption drive, he quickly dismantled the patronage networks of his principal rivals, sent thousands of officials (including over 200 senior officials and generals) to jail, and made himself the most powerful leader since the death of Mao.

But he began to lose momentum in mid-2015. His bold plan for reforming the economy, announced in late 2013, remains largely on paper. The anti-corruption campaign, popular with ordinary people, has alienated local officials, who were forced to give up their considerable illicit income streams and are now living in constant fear of being hauled away by Xi's anti-corruption investigators.

In retrospect, things started to go wrong for Xi in June last year when China's red-hot stock market crashed, wiping out trillions of yuan worth of paper wealth. An ill-conceived and ultimately futile effort to prop up the stock market bubble not only wasted more than two trillion yuan of public funds but also raised doubts about his government's commitment to market-oriented reforms. Before fully cleaning up the carnage on the trading floors, Beijing surprised the market with a new exchange rate policy, indicating its intention to allow faster and greater depreciation of the Chinese currency. This triggered a massive capital outflow and forced Beijing to intervene to restore confidence in the yuan. By the time the yuan was stabilized, about $1 trillion in forex reserves had left China.

In the meantime, the economic slowdown has continued unabated. Choking on a mountain of debt and overcapacity, China's once mighty growth engine has been sputtering. Growth has been maintained only with massive injections of credit, a move that will only increase the country's debt level and make the eventual cleanup more costly.

Such a lackluster record has hurt Xi's political fortunes. When some of his supporters began earlier this year to call him the "core" of the leadership, apparently without the party's approval, none of Xi's colleagues in the Politburo came out in public support, creating the impression that Xi had suffered a subtle setback.

Things got even worse in May, when the differences over economic policy between Xi and his number two, Premier Li Keqiang, spilled out into the open. An unnamed "authority figure," widely believed to be Xi's chief economic adviser, gave a lengthy interview to the People's Daily, the official newspaper, on why current economic policy was unsustainable. In response to such thinly veiled criticism, a proxy representing the State Council, which is headed by Li, quickly issued a rebuttal.

DECISIVE WIN   Just as China-watchers started to wonder whether the power play at the top had become a stalemate, Xi surprised observers with a decisive win at the sixth plenum, ending any doubts that he is going into the final stretch of his first term with a weak hand.

The question, then, is whether Xi will be able to score a second decisive victory at the 19th party congress, now scheduled for late 2017. Here, again, analysts are reduced to the same helplessness as spectators in Churchill's bulldog fight. Besides educated guesses and rumors, they have little hard evidence to work with.

This uncertainty, however, does not mean there are no clues as to what lies ahead for Xi in the coming year.

According to the Chinese political calendar, the CCP will reappoint Xi for another five-year term. In addition, five of the seven members of the Politburo Standing Committee, the party's top decision-making body, are slated to retire due to an informal age limit. Most importantly, according to a recently established tradition, the party is to anoint a successor to the top leader.

Even a casual look at the last two items of this list tells us the high stakes in the congress next year -- both for Xi and his rivals. If Xi can pack the Politburo Standing Committee with his loyalists, he will cement his political supremacy at the top. But if his rivals succeed in appointing their own proxies to the committee, Xi will not have a free hand in decision-making.

If the party anoints a successor to Xi, an outcome his rivals must be rooting for, Xi will effectively become a lame duck, with five more years on his clock. However, if Xi successfully blocks such an appointment, citing the lack of qualified candidates, he will preserve the flexibility of either serving beyond his two-term limit in 2022 or picking a trustworthy successor when he steps down.

Obviously, it is impossible to predict who will prevail in the showdown at next year's congress. Gaining the designation of the "core" of leadership certainly helps Xi. But one should not make too much of such official recognition. After all, Jiang Zemin received the same title before the 15th congress in 1997 but did not appear to have wielded extra influence in settling personnel matters a year later. Given the high stakes involved -- the party's tradition, the balance of power among rival factions, and the regime's fear of a domineering leader -- all we can say at this point is that Xi has won an important battle, but not the war.

Minxin Pei is a professor of government at Claremont McKenna College. His latest book is "China's Crony Capitalism" (Harvard 2016).

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