Where is China heading? (Revised on 10/25/2022)

Right now, everybody in the free world are panicking about China. They think China will go haywire, more so than Putin's Russia. I think the reality is more complicated than that, and it warrants a careful examination.

Question 1: What was X trying to do in the last 10 years?

Two things. One is to make his name as a capable leader, so that he gets support from the public, and the other is to use various political maneuver to control the bureaucrats. Both measure serve to consolidate (absolute) power. Absolute power however isn’t the sole objective here. He is obviously attempting to become a charismatic leader and achieve great things, which is typical among political strongmen.

First, he tried to improve China’s standing in the world and show that the Chinese system is better than the western one. He carried out many different initiatives and policies, many of which are quite unconventional. One would think these measures are almost whimsical. But if we compare his policy to the other political strongman of China, Mao (and occasionally Deng), we will find striking similarities.

These policies are obviously well-intended, and cannot be dismissed as whimsical ideas. However, most of these policies failed to deliver huge success, which became a problem.

He quickly resorted to the 2^nd measure: tighten the control over bureaucrats, and he has done a much better job here. It is simple: to get rid of the enemies and promote allies/loyalists, and again Mao is THE master of this. X has done this in the past. In his first term he launched anti-corruption campaign to purge the enemies. Then he reformed the army into 5 “war zones” to promote loyalists. At the end of his 2^nd term, Covid was spreading, and X needs something to control the bureaucrats so that he can get the 3^rd term without objection. Zero Covid policy became a perfect tool for that.

Zero Covid policy gives a way to promote the officials that are loyal, and purge the ones that are not. Even though it has generated discontent in the society, the officials find a good way to advance. The best example is Li Qiang, who was the chief of Shanghai and locked down the whole city for months. His policy wasn't welcomed by the locals but he nonetheless pushed it through. It wasn't all that successful either, as Shanghai still has almost 1 million cases of Covid, not to mention innumerable cases of abnormal death caused by the policy. These don't matter. What matters is that he is loyal and now he gets the big prize of becoming the Premier in the next term.

That leads to our next...

Question 2: what will X do next?

Obviously X has secured power, all of it. So he doesn't need to purge again, at least not in mass scale. However, there is discontent in the society due to zero Covid and other policies. So it is still possible that X will suppress the society more, just as feared by people in the free world.

However, I think that possibility is a little less than its alternative, to buy over people's support by more favorable policies, for example by relaxing the zero Covid policy. First of all, he doesn't need the zero Covid policy to purge officials any more, and he knows that it is not that a popular policy in large. Now without worrying about powerful enemies who could replace him, he has more flexibilities. In his recent remark, he talked a lot about getting people's support, which makes sense. If we go back to his earlier policies, he was always trying to prove that he is capable and that his policies are better than the west. More recently he pushed “common prosperity”. Outside observers thought that is a measure to curb the private sector, which may be true in practice. But I think it had good intentions at the beginning: to rebalance the Chinese economy from investment driven to consumption driven. When we favor investment, we push labor cost low, and the income inequality goes up, and it is the opposite when we favor consumption. He is likely to introduce property tax in his 3^rd term, which is a good income redistribution measure. All in all, X would rather become a popular leader who enjoys the support from the people than turn into a fierce dictator who is feared by all. He could still choose the latter but only if he doesn't have better options.

Question 3: will there be a war against Taiwan?

It is possible. A war against Taiwan is always a way to buy over people's support. It is a very risky one though, and Putin's war in Ukraine has again proved that. Previously I thought it was highly unlikely to happen because a war against Taiwan is beneficial only to X himself (and maybe a couple of generals who think there will be a swift victory, which is unlikely from Ukraine's experience). The interest of most officials will be damaged because of counter measures that would be carried out by the west. Now things have changed. No one can counter X in the government, so the war is possible again. We all know that there is still tremendous risk, and so does X. He talks about peace in the world from time to time, so it seems he is not committed to a war at this moment. However, X has the tendency to do something that is not carefully thought through, or to put it in a better way: X is more focused on a policy's political impact than its actual consequence, and politically a war against Taiwan has its merit: to get the support of the people. The prize is also high. If victorious, this would become a historical achievement that is not even done by Mao.

Question 4: will there be a cultural revolution (CR) 2.0?

Likely not. The famous historian Qin Hui from Tsinghua University has done an excellent job analyzing the cause of CR. At the beginning of the 1960s, China had big setback from the earlier leaping forward policies, and people were dying in tens of millions. The discontent has accumulated so much that Mao had to apologize in the "7000 people meeting". The problem was: the discontent was from both the officials and the society. Previously when one side became a problem, Mao was able to purge them with the help of the other. When both turned against Mao, he launched CR and let the officials and average people fight each other.

There are striking similarities between China in early 1960s and 2020s. In both cases, the economic bubble is bursting due to reckless policy, the great leaping forward at end of 1950s and house bubble in 2010s respectively. But the difference is also evident. Now there is discontent in the society, but not nearly as high as in the 1960s. People are dying from lack of health care access and depression but obviously not in millions. At the same time, the officials are mostly happy, because the ones who are not are already out. Right now, there is absolutely no need to launch CR 2.0.

In conclusion, right now China has become more unpredictable, because there are no constraints on X's power, and it is more likely to have a war against Taiwan. However, it is also likely that X is going to introduce policies favorable to the society, at least in his own judgement.