Interpreting China’s policy directions beyond the CCP’s rhetoric

Author: Fengming Lu, ANU

The Chinese Communist Party (CCP)’s congresses often represent important historical milestones, yet they are highly performative. The Party’s General Secretary and Chinese President Xi Jinping’s political report on 16 October 2022 comes nowhere near to clearly identifying policy direction like a party manifesto would in a liberal democracy. But other hints shed light on where China’s policies are headed after the 20th CCP Congress.

Personnel appointments are one good indicator. Xi’s control of the new Politburo and its Standing Committee is unprecedented and beyond any observer’s prediction before October. An executive team of proteges and loyal technocrats ensures that Xi can double down on his policy agenda with little resistance at the central level.

Local implementation will continue to be a problem as long as Xi relies on a multi-level hierarchy of agents who are better informed and whose interests are not necessarily aligned with his. Self-interested local officials will still be incentivised to shirk responsibilities, slack off on duties or selectively implement policies. But Xi will carry out his usual prescriptions of political mobilisation and campaigns against local agents, often at the expense of administrative efficiency.

Xi’s policy agenda over the past few years also points to China’s future policies. Though they are not directly stated in a policy manifesto like in Western political parties, subtle changes and new concepts in both Xi’s and the party’s rhetoric — particularly the 20th CCP Congress political report — are clear.

An overarching tenet in Xi’s agenda is ‘balancing development and security’. Beijing mouthpieces repeatedly assert that economic development remains a top priority for Xi and the Chinese government. But Xi’s definition of security is very broad as it covers political, economic, ideological, technological and even biological risks that may destabilise the party’s rule.

These include the private sector’s grasp of big data and potential consequences of both ditching and maintaining COVID-19 restrictions. With such an all-encompassing definition of security and the deliberate downplaying of economic development in the political report, more cases of security trumping economic efficiency and productivity are expected.

Another catchphrase in Xi’s newspeak is the ‘domestic–international dual circulation’. Optimists and defenders of Beijing’s policies claim that this does not represent China’s closing to international investors, but an effort to strengthen self-reliance, responding to the COVID-19 pandemic by tapping into domestic consumption.

This is partially true, but the past few years lend little to support this optimism. Chinese access to the US capital market has been one of the most critical anchors in the bilateral relationship. Yet Chinese firms — especially IT companies — have been constantly discouraged by Chinese regulators from listing on the NASDAQ and New York Stock Exchange.

Foreign investment in China has hit the headwinds of US–China tensions and zero-COVID policies. Outbound and inbound travel restrictions have suppressed person-to-person exchanges between China and the world to their lowest in almost three decades. Even with the relaxation of COVID-zero policies, it is unlikely that China’s openness will soon return to the pre-Xi level.

Another key policy is Xi’s vaguely defined call for ‘common prosperity’, which aims to narrow the income gap that has been a serious problem for China since the 1990s. Though it will probably be a defining feature of Xi’s Chinese-style modernisation — after the CCP’s monopoly of power — signs of concrete common prosperity policies are rare.

Many fear that common prosperity entails the expropriation of private properties, but this has been constantly refuted by advocates of Beijing’s policies. There are indeed more possible moderate policy instruments, such as imposing property taxes, reforming the hukou system, improving rural property rights and providing better family welfare and childcare.

But the rigid zero-COVID policy, declining economic growth, collapsing real estate market, the financial distress of local governments and the imminent demographic crisis indicate that the CCP may have already missed the best timing to launch these policies. Xi spent most of the past ten years consolidating his power and responding to ‘security threats’ while China’s economic growth has gradually declined.

In the near future, some moderate common prosperity measures may still be introduced amid the stalling economy. They will face stronger headwinds because in a stagnating economy, as local governments have fewer resources to implement new policies and reforms will create more losers. Meanwhile, expropriation may still remain a major concern for the private sector.

As many have sensed, the bellwether of policy direction in Xi’s third term is the zero-COVID policy, which was the epitome of Xi’s balancing act between development and security since his second term. Since 2020, China has attempted to curb the spread of COVID-19 at the expense of everything else. Since the Omicron wave, the costs are increasingly unbearable. The government’s only hope was a miraculous disappearance of COVID-19.

More optimism on China’s policy direction looks more plausible as key zero-COVID restrictions were dramatically lifted recently in the past week. But, this emotional and reactive relaxation has not yet been accompanied by other constructive moves such as systematic efforts in building up the ICU capacity, another vaccination drive, particularly among the elderly, an improvement in the supply of COVID-19 antiviral drugs and the introduction of more effective mRNA vaccines.

These will signal that Xi’s appreciation of a vibrant economy and openness to the outside world are more than just empty slogans. Otherwise, there is little ground to believe that China’s policy will return to a pro-economy, pro-openness and more certain track.

Fengming Lu is Assistant Professor at the Coral Bell School of Asia Pacific Affairs at the Australian National University.

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