Fading economy, graft vex China’s elite
President, leaders face restless public, fearful bureaucracy
HONGKONG— It was hardly an unusual start to the day for a senior Chinese leader in a country grappling with an economic slowdown. On the morning of July 24, Zhou Benshun attended a meeting to promote one of President Xi Jinping’s signature projects, a plan to boost growth by building a “supercity” that would integrate Beijing with the region around it.
But by 6:10 p.m. that day, Zhou’s career was over, and he faced years in prison.
The Communist Party’s anticorruption agency announced it was investigating him on “suspicion of serious violations of party discipline and the law,” signaling his ouster as the party chief of Hebei province, one of the nation’s most populous.
Zhou’s sudden downfall— he is the first sitting provincial party chief to be purged by Xi — underscores the uncertainty that permeates the Communist elite as they contend with two unnerving developments beyond their control: an economic slowdown that appears to be worse than officials had anticipated and that could mark the end of China’s era of fast growth, and a campaign against official corruption that has continued longer and reached higher than most had expected.
Driving decisions on both issues is Xi, who took the party’s helm nearly three years ago and has pursued an ambitious agenda fraught with political risk. Now, weeks before a summit meeting in Washington with President Barack Obama, those risks appear to be growing, and there are signs that Xi and his strong-willed leadership style face increasingly bold resistance inside the party that could limit his ability to pursue his goals. Making enemies
Xi has positioned himself as the chief architect of economic policy — usually the prime minister’s job — and has vowed to reshape the economy, exposing himself to blame if growth continues to sputter. At the same time, Xi is making enemies with an anti-corruption drive that has taken down some of the most powerful men in the country and sidelined more than 100,000 lower-ranking officials.
Senior party officials are said to be alarmed by the state of the economy, which grew at the slowest pace in a quarter- century during the first half of the year, and now seems to be decelerating further. In a sign of its anxiety, the leadership has implemented the biggest devaluation of the Chinese currency in more than two decades, sending global markets into plunges.
Xi’s reputation was also dented this summer by panicked official efforts to prop up the Chinese stock market after a sharp dive in share prices. His government had promoted the market as a good investment.
Even before these episodes, early this year a number of party elders had quietly urged Xi to focus more on reinvigorating the economy, according to an adviser to senior party and government leaders and an editor at a party media outlet, both of whom requested anonymity to describe internal discussions.
The advice was viewed not only as a sign of their dissatisfaction with Xi’s management of the economy but also as implicit criticism of his pursuit of highprofile corruption cases that had tarnished their legacies and targeted their protégés, the adviser and the editor said. “Right now, the economic situation is not good, so the core of the party’s work should be shifted more toward the economy,” the adviser said, paraphrasing the message communicated to Xi.
Xi has pledged market-oriented reforms to overhaul the Chinese economy for growth, including plans to weaken monopolies enjoyed by state enterprises, to wean the economy from its dependence on inefficient state-directed investment, and to liberalize the nation’s financial markets, with the aim of making the country’s currency, the renminbi, a strong competitor to the dollar on world markets. Little progress being made
But there has been little progress toward these goals, and as growth has begun to stall, the government has adopted measures that run counter to Xi’s call to allow market forces to play the “decisive role” in the economy, including aggressive intervention to prop up the stock market last month and policies encouraging state banks to lend money.
Behind the scramble is anxiety within the leadership about social instability if the age of growth in China ends. China’s gross domestic product grew more than 26-fold in the 37 years since the country began to open up its economy, bolstering the party’s authoritarian rule and lifting more than 600 million people out of poverty.
“Everyone understands that the economy is the biggest pillar of the Chinese government’s legitimacy to govern and win over popular sentiment,” said Chen Jieren, a well-known Beijingbased commentator on politics. “If the economy falters, the political power of the Chinese Communist Party will be confronted with more real challenges, social stability in China will be endangered tremendously, and Xi Jinping’s administration will suffer even more criticism.”
Some have asked whether the party leadership and its technocrat advisers are up to the task of managing a slowing economy after decades of experience with one that has only soared, fueled in large part by mass migration from the countryside to the cities. Even neutral observers warn that Xi may be promising too much.
“The Xi generation of leaders has lofty ambitions and resolve that are bigger and broader than their predecessors, and their objectives are even greater, so he can’t spend as much energy on specific economic issues as in the past,” said Li Daokui, director of the Center for China in the World Economy at Beijing’s Tsinghua University and a former member of the monetary policy committee for China’s central bank. “Whether such lofty ambitions and objectives can be realized remains to be seen,” he said in an interview
Xi’s campaign against corruption enjoys broad support in a nation where the widening gap between rich and poor is often blamed on the ability of a small minority to prosper by abusing government positions or using political connections. As the economy falters, though, the risks for Xi multiply, said one retired party think tank official.
“The main thing is the economy. As long as the economy continues to decline, people will have more and more objections, and there will be more and more pressure on the leadership,” said the person, who spoke on the condition of anonymity.