At a New Year’s Eve tea party Chinese President Xi Jinping described the forthcoming autumn 20th National Congress as a ‘major event in the political life of the party and the country.’ For some time now it has been assumed that the Congress will rubber stamp his continued role as China’s supreme leader.

Having already served as China’s leader for two five-year terms, Xi is expected to be the first Chinese leader for a generation to serve for more than two terms. His power appears absolute. In 2021, ‘a year of milestone significance’ as he called it, the four hundred members of the Central Committee passed only the third ‘Historical Resolution’ in the Chinese Communist Party’s 100-year history.

The previous two were passed by Mao in 1945 and Deng Xiaoping in 1981. The concept of ‘Xi Jinping Thought’ was highlighted as a historical equivalent to that of his two great predecessors; in other words, he is one of China’s paramount leaders to whom the 10-year rule does not apply. Xi himself has suggested that he will rule at least until 2032, by which time he expects that Taiwan, like Hong Kong, will have returned to Chinese direct rule.

However, since February however Xi has become faced with the first major crises of his time in office. Having declared that there are ‘no limits’ to Russia-China friendship when Xi met Putin before the Beijing Winter Olympics, Xi very rapidly showed that there were limits. Although China along with Belarus, Eritrea, North Korea and Syria voted against the UN resolution to denounce Russia’s invasion of Ukraine, China’s active support for Russia has been notable by its absence.

There has been no public expression of support for Putin’s ‘special military operation’. Xi himself has subsequently stated that China is ‘committed to respecting the sovereignty and territorial integrity of all countries.’ Russia has asked for aid but no answer, at least publicly, has been forthcoming. If, as one suspects, China is helping Russia, it is being done in secret. China it seems does not want to risk being involved in trade wars with the West. It is notable that Union Pay, China largest credit card company, has, like Visa and Mastercard, stopped working with Russian banks.

To many Chinese eyes Russia is now viewed like an embarrassing family relative. Xi may wish, like Putin, to end what they see as the West’s global domination, but it is difficult to see how China’s geopolitical ambitions can be burnished by its even half-hearted support for an ally whose actions are causing global inflation and, in some countries, starvation. This is not how you win friends among the ‘non-aligned’ nations.

If China’s friendship with Putin is toxic internationally, it also seems likely that this toxicity applies in some measure at home. Within China critics might question what benefits Russian alliance has brought to China? The leadership of China is opaque in terms of identification of opposition to Xi over foreign policy. However, it is highly unlikely that factions who followed the more cautious Deng Xiaoping approach to foreign affairs can be happy with the consequences of Xi’s overtly aggressive and expansionist approach.

Xi’s partnership with Russia has energised NATO and a broad spectrum of Western alliance against China; this includes AUKUS (the US, Great Britain and Australia) and The Quad, the informal security alliance of the US, Japan, India and Australia, which is clearly aimed at China containment. Rather than weakening the West, Xi’s foreign policy overreach has strengthened his perceived enemies.

The economic costs of Xi’s campaign against western values are also becoming apparent. Under the influence of the Wang Huning, the communist party’s chief ideological theorist, a member of the Politburo’s seven man Standing Committee, Xi has pursued an increasingly authoritarian attack on the stars of China’s new economy.

Technology entrepreneur Jack Mar, the charismatic founder of Alibaba, was ‘disappeared’ and his company Alibaba forcibly restructured. Social media stars such as Zhao Wei, billionaire actress, pop-singer and social media star whose online presence disappeared in August last year, have been reigned in. Androgenous cissy boy bands have been curtailed. It is doubtful whether the West’s current LGBTi+ pandemic will establish a foothold in China any time soon.

Wang, a social puritan, aims to eradicate Western style moral corruption from China. Wang believes that a ‘nihilist individualism at the heart of modern American liberalism’ has undermined the moral fabric of the US. He and Xi are determined that China will not be infected.

The long-term problem for China is that however problematic the new technologies from a social control viewpoint, these industries represent the future. Xi’s regulatory crackdown on technology companies has crashed stock prices in the sector and is bringing about a bloodbath in employment according to TechNode, a Chinese technology media company. For example, Xiaohongshu, sometimes described as China’s Instagram, has laid off 10% of its staff. According to Reuters even the major tech companies such as Alibaba and Tencent are planning large scale redundancy programmes.

Investment in start-ups, already in decline before Covid, has plummeted. Many technology entrepreneurs are even quitting mainland China and heading to more predictable regulatory locations such as Singapore or the US. As one technologist complained, the shifting regulatory environment is making life difficult; ‘We entrepreneurs shouldn’t be expected to be political scientists.’
China’s main technology and financial hub, Shanghai, has also been particularly badly affected by Xi’s doubling down on his zero-Covid strategy. Unlike other Asian authoritarian zero-Covid zealots like New Zealand Prime Minister Jacinda Adhern, who has finally given up, Xi appears determined to stay the course. Officials have been told to persevere with extreme lockdowns and ‘unswervingly adhere to the general policy of dynamic zero-Covid.’ Xi has asserted that ‘We have won the battle to defend Wuhan, and we will certainly be able to win the battle to defend Shanghai’.
Given that the rest of the world is increasing acceptant that Covid is now endemic, how is China ever going to open up its borders? Even the World Health Organisation believes that the battle for zero-Covid is lost; ‘We don’t think it is sustainable,’ says WHO director-general, Tedros Adhanom Ghebreyesus.

A perfect storm of catastrophes is now bearing down on the Chinese economy as a result of Xi’s policies. His foreign policies, particularly in relation to his threats to Taiwan and his support for Russia, are scaring off foreign investors in China. Foreign Direct Investment has fallen to just 2% of GDP compared to 6.5% in the mid 90s.

For the same reasons, the reshoring of manufacture by Western companies is now in full swing. Meanwhile Xi’s crackdown on the technology and media sectors is damaging this essential component of future growth. Continued Covid restrictions, which effectively close China to the world can only exacerbate these problems. Lastly Xi’s clampdown on property leverage following the collapse of property giant China Evergrande Group is crashing the property market and constructions sectors. Neither has Russia’s invasion of Ukraine helped China’s growth outlook.

No wonder then that global investment banks are busy slashing their growth estimates for China in 2022. Real GDP growth is now forecast to half from 8.1% in 2021 to around 4% in the current year. Even that may prove optimistic. This is not the economic background that Xi would want in the run up to the Politiburo Standing Committee elections in November. While there is no sense that things are so bad that Xi might fail in his bid to win a third term as China’s leader, there can be little doubt that his reputation is tarnished. While we should not expect a political earthquake in November neither should we rule one out, particularly if the economic outlook in China continues to deteriorate.