Xi sticks to his vision for China’s rise even as growth slows

Even with growth faltering in China, Xi Jinping appears imperiously assured that he possesses the right road map to surpass Western rivals.

China’s economy has lurched into a slower gear. Its population is shrinking and aging. Its rival, the United States, has built up a lead in artificial intelligence. Xi’s pronouncement several years ago that the “East is rising and West is declining” — that his country was on the way up while American power shrank — now seems premature, if not outright hubristic.

The problems have brought growing talk abroad that China could peak before it fully arrives as a superpower. But Xi seems unbowed in insisting that his policies, featuring extensive party control and state-led industrial investment in new sectors like electric vehicles and semiconductors, can secure China’s rise.

In a mark of that confidence, his government announced last week that China’s economy was likely to grow about 5 per cent this year, much the same pace as last year, according to official statistics. And Xi emphasised his ambitions for a new phase of industrial growth driven by innovation, acting as if the past year or two of setbacks were an aberration.

“Faced with a technological revolution and industrial transformation, we must seize the opportunity,” he told delegates at China’s annual legislative meeting in Beijing, who were shown on television ardently applauding him.

He later told another group at the legislative session that China had to “win the battle for key core technologies,” and he told People’s Liberation Army officers to build up “strategic capabilities in emerging areas,” which, the officers indicated, included artificial intelligence, cyberoperations and space technology.

Xi’s bullishness may partly be for show: Chinese leaders are, like politicians anywhere, loath to admit mistakes. And some officials have privately conceded that the economic malaise is tamping down China’s ambitions and swagger, for now at least.

Ryan Hass, the director of the John L Thornton China Center at the Brookings Institution who visited China late last year, said he came away with a sense that “the Chinese are a bit chastened even compared to where they were a year ago. The trajectory of China’s economy overtaking America’s in coming years — that’s been pushed further out on the horizon.”

Even so, Xi’s determination to stick to his long-term ambitions seems more than a show. “Xi and his team still believe that time and momentum remain on China’s side,” said Hass, a former director for China at the US National Security Council. “With Xi in power,” he added, it’s hard to envision “any significant recalibration in the overall trajectory that China’s on.”

Since taking office in 2012, Xi has tightened the hold of the Communist Party on Chinese society. He has extended state management of the economy, expanded the security apparatus to extinguish potential challenges to party rule, and confronted Washington over technology, Taiwan and other disputes.

To Xi’s critics, his centralising, hard-line tendencies are part of China’s problems. He did not cause China’s risky dependence on the property market for growth, and he has worked to end it. But many economists argue he has been too heavy-handed, stifling business and innovation. Critics argue that Xi has also needlessly antagonized Western governments, prompting them to restrict access to technology and deepen security ties with Washington.

Since last year, the Chinese government moved to ease those strains. It has taken steps aiming to revive confidence among private businesses. Xi has also sought to dial down tensions with the United States and other countries.

Such moderating gestures point to what Xi has described as the “tactical flexibility” he expects of Chinese officials in difficult times. But in Xi’s telling, even as officials make easing steps, they must stick to his long-term objectives. He and his loyal subordinates have been defending his policies in speeches and editorials, suggesting that the doubters are shortsighted. Chinese officials and scholars have also stepped up denunciations of Western analysts who have forecast that China faces an era of decline.

Xi has stressed that economic and security priorities must work hand in hand even as China grapples with slower growth. Xi is also betting that investing in manufacturing and technology can deliver new “high quality” growth by expanding industries such as new clean energy and electric vehicles.

The Chinese leadership’s “mantra seems to be that ‘We’re not going to grow as fast as we used to, but we’re going to gain more leverage over trade partners by controlling critical parts of the global economy,’” said Michael Beckley, an associate professor at Tufts University, who has argued that China is a “peaking power,” meaning a country whose economic ascent has slowed but not yet stopped.

Some economists argue that China’s advances in these select industries will not be enough to make up for the drag caused by a fall in consumer confidence, and by developers and local governments straining under debt. China’s broader fortunes will heavily rest on whether Xi’s wager on technology can pay off.

“They see technology as the solution to every problem they’re facing — economic, environmental, demographic, social,” said Nadège Rolland, a researcher at the National Bureau of Asian Research who studies China’s strategic thinking. “If they cannot make sufficient advances in this domain, it’s going to be very difficult for them.”

Scholars in China and abroad who hope the country might take a more liberal path sometimes look to history for examples of when party leaders made bold changes to defuse domestic and international tensions.

The last time that China was caught in such a painful confluence was after the June 4, 1989, crackdown on pro-democracy protesters. The bloodshed prompted Western countries to impose sanctions on China, which deepened the economic shock. Within several years, however, Deng Xiaoping, then China’s leader, sought to repair relations with Washington and other capitals and unleashed market changes that revived growth and lured back Western investors.

Now, though, China faces much more entrenched antagonism from other major powers, Zhu Feng, a prominent foreign policy scholar at Nanjing University in east China, said in an interview. For example, China’s surging exports of electric cars — which have benefited from extensive government subsidies — could revive trade tensions, as the United States, Japan and Europe fear losing jobs and industrial muscle.

The economic and diplomatic strains are “posing the gravest challenge to China” in decades, Zhu said.

Still, Chinese leaders seem to believe that, whatever their problems, their Western rivals face worsening ones that will ultimately humble and fracture them.

Recent reports from institutes under the China’s ruling party, military and state security ministry point to the rancorous polarization in the United States ahead of the next election. Regardless of who wins, Chinese analysts argue, American power is likely to remain troubled by political dysfunction.

Chinese scholars have also focused on fault lines in the Western bloc over Russia’s war in Ukraine. Beijing’s relations with the United States and European governments were badly strained over Xi’s partnership with Russian President Vladimir Putin. But as the war stretches into its third year, the burden of supporting Ukraine is deepening rifts and “fatigue” in the United States and Europe.

“US foreign intervention cannot handle everything it is trying to juggle,” Chen Xiangyang, a researcher at the China Institutes of Contemporary International Relations in Beijing, which is under the state security ministry, wrote last year. “China can exploit the contradictions and leverage them to its own advantage.”