In the second part of our series examining China’s leadership and the issues they face, we delve into President Xi Jinping’s unprecedented third term. Having received unanimous support from the national legislature after abolishing term limits, Xi stands at a crossroads of domestic and international challenges that could define his legacy.
A Balancing Act on the Global Stage
Five months into his term, Xi faces mounting complications, both at home and abroad. On the international front, the U.S.-China rivalry spans trade, technology, and security. Developed economies are also advocating for de-risking supply chains, challenging China’s ambition to become a dominant global tech power.
“Xi’s challenges are multifaceted and interconnected,” says Yeling Tan, a Chinese politics professor at the University of Oregon. The U.S. has been imposing tech and economic sanctions, citing national security concerns. Recently, President Joe Biden limited American investments in certain Chinese tech sectors, furthering a list of Washington’s initiatives to contain China.
The State of Domestic Economy
China’s domestic economic landscape is also troubled. “The development model doesn’t work anymore,” says George Magnus, an economist at Oxford University. Structural problems like local government debt, lack of social security net, and uneven access to healthcare and education services have become glaring issues.
Alfredo Montufar-Helu, head of the China Centre for Economics and Business at The Conference Board, notes that striking a balance between tackling these structural imbalances and stimulating the economy is challenging. Financial difficulties for local governments and the potential instability in the state-owned banking system add to this complexity.
Technological Aspirations
Xi, hailed as the “helmsman” by state media, seeks to position China as a scientific and technological leader. Despite state funding, China’s tech sector still lags behind the U.S., making technological self-reliance a crucial part of Xi’s agenda. During an annual meeting in Hebei, Xi met with 57 scientists at the forefront of technology to discuss contributions to China’s tech independence.
However, Richard McGregor of the Lowy Institute states that a failure to achieve robust economic growth, necessary to finance technological ambitions, could damage Xi’s standing.
Future Outlook
Despite economic headwinds, China remains optimistic. The government’s focus has shifted towards systemic resilience and a drive for an “internal cycle” in the economic plan up to 2025. Even as international banks downgrade China’s economic growth projections, authorities maintain that the long-term positive outlook hasn’t changed.
Xi’s vision is founded on two pillars: unification with Taiwan and a strong economy to equal the U.S. However, if China doesn’t adopt significant reforms, the path ahead will likely be challenging. George Magnus at Oxford University points out that economic aspiration is crucial for social stability, especially in a system where citizens cannot influence governance.
“In essence, Xi faces a choice between security-focused policies and open markets,” says Neil Thomas of the Asia Society Policy Institute. Lee Jong-hyuk at Nanyang Technological University adds that for Xi, tightening control seems necessary, as national security directly affects his leadership survival.
Implications for China’s Global Standing
China’s geopolitical rivalry with the U.S. is unlikely to diminish. While projections have suggested China could surpass the U.S. economy by 2030, a weak recovery raises questions about this timeline. The uncertainty also compares unfavorably with the U.S.’s economic resilience.
Xi may not be in a crisis mode yet, but a long-term lack of reform could severely undermine China’s global status and domestic stability. As Magnus puts it, “China’s economy faces a challenging and most likely disappointing period ahead, undercutting its global status.”
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