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Will China’s President Xi’s big bet pay off?


Chinese President Xi Jinping is making the most audacious geopolitical bet of the 21st century.

An array of disparate actions over the last months have added up to a generational bet that Xi could become the dominant force in the future. This includes doubling his state-controlled economy and party-disciplined societies, as well as his nationalistic propaganda and wide-reaching global influence campaign.

Each week, Xi escalates the stakes, from limiting the freedoms of teenagers to play online games or karaoke, to reducing the time allowed for them to do so to the impact on multi-million dollar investors from China’s top technology companies.  

It is only in the context of Xi’s increased repressions at home and expanded ambitions abroad that one can fully understand Australian Prime Minister Scott Morrison’s decision this week to enter a new defense pact, which he called “a forever agreement,” with the United States and the United Kingdom.

Much of the news focus was either on the eight nuclear-powered submarines that Australia would deploy or the spiraling French outrage that their own deal to sell diesel submarines to Australia was undermined by what French officials called a “betrayal” and a “stab in the back” from close allies. France went so far as to recall its ambassador to the United States for the first time in the history of the NATO alliance.

The more important message contained in the groundbreaking agreement should be heard despite all the noise. Prime Minister Morrison saw more strategic advantage and military capability from the U.S.-U.K. alignment in a rapidly shifting Indo-Pacific atmosphere, replacing his previous stance of trying to balance U.S. and Chinese interests.

“The relatively benign environment we’ve enjoyed for many decades in our region is behind us,” Morrison said on Thursday. The new era brings with it challenges for Australia as well as our international partners.

For China, that new era has many faces: a rapid rollback of economic liberalization, a crackdown on individual freedoms, an escalation of global influence efforts and military buildup, all in advance of the 20th national party congress in October 2022, where Xi hopes to seal his place in history and his continued rule.

Former Australian Prime Minister Kevin Rudd, one of the world’s leading China experts, points to Xi’s “bewildering array” of economic policy decisions in a recent speech as president of the Asia Society.

They started last October with the shocking suspension of Alibaba financial affiliate Ant Group’s planned initial public offering in Hong Kong and Shanghai, clearly aimed at Alibaba co-founder Jack Ma. Then in AprilChinese regulators fined Alibaba $3 billion for “monopolistic behaviour”.

In July, China’s cyber regulator removed ride-hailing giant Didi from app stores, while an investigative unit launched an examination of the company’s compliance with Chinese data-security laws.

Then this month, China’s Transport Ministry regulators summoned senior executives from Didi, Meituan and nine other ride-hailing companies, ordering them to “rectify” their digital misconduct. Chinese state took an equity share in ByteDance (the owner of TikTok) and Weibo (the micro-blogging platform).

Xi was ready to accept the estimated $1.1 trillion cost in shareholder value wiped from China’s top six technology stocks alone between February and August. That doesn’t factor in further losses among the education, transportation, food delivery, entertainment and video gaming industries.

Less noticed have been a dizzying array of regulatory actions and policy moves whose sum purpose appears to be strengthening state control over, well, just about everything. 

“The best way to summarize it,” says Rudd, “is that Xi Jinping has decided that, in the overall balance between the roles of the state and the market in China, it is in the interests of the Party to pivot toward the state.” Xi intends to turn modern China into a worldwide great power “but a great force in which the Chinese Communist Party still retains total control.”

This will also mean increasing controls over the rights of China’s 1.4 billion citizens.

Xi took action to limit videogaming by children in school to only three hours per week. He also banned tutoring from private individuals. Chinese regulators have ordered broadcasters to encourage masculinity and remove “sissy men,” or niang pao, from the airwaves. Regulators banned “American Idol”-style competitions and removed from the internet any mention of one of China’s wealthiest actresses, Zhao Wei.

“The orders have been sudden, dramatic and often baffling,” wrote Lily Kuo in the Washington Post. Jude Blanchette from the Center for Strategic and International Studies states, “This isn’t a sector-by–sector rectification. This is an entire economic and industry rectification.”

At the same time, President Xi has launched a push to share the virtues and successes of the Chinese authoritarian model with the rest of the world. 

“Beijing seeks less to impose a Marxist-Leninist ideology on foreign societies than to legitimate and promote its own authoritarian system,” Charles Edel and David Shullman, the recently appointed director of the Atlantic Council’s new China Global Hub, wrote in “Foreign Affairs.” The CCP does not seek ideology conformity, but power, security and global influence both for China and itself.

The authors detail China’s global efforts to not remake the world in its image, but rather “to make the world friendlier to its interests — and more welcoming to the rise of authoritarianism in general.”

Edel and Shullman explain that these measures are “spreading propagandism, increasing information operations, consolidating financial influence and meddling with foreign political systems”, all in the pursuit of “hollowing up democratic institutions within and between nations.”

The bold prediction of President Xi contains two potential opportunities for the U.S., its partners and allies.

The first one is that Xi by his overreaching at home will stop China from achieving the kind of economic and societal freedom it needs. The world’s democracies like Australia are becoming more open to finding a common cause for Beijing.

However, Xi’s coordinated moves will require a similarly concerted response by the democracies around the globe. This week’s French-U.S. defense agreement was just one instance of the difficulty that this will prove to be.