Xi’s war on economic reality
Tom Rogan
Video Embed
President Xi Jinping of China wants to boost foreign investment in his economy. He needs that investment to secure the increased GDP growth necessary to offset China’s structural economic weaknesses.
Foremost among these weaknesses is the Communist Party’s unproductive allocation of capital. High youth unemployment rates, especially for college graduates, also concern officials. Educated young people without jobs are more inclined to challenge rather than coalesce with the political establishment. This is no hypothetical concern: The public protests surrounding Xi’s now-aborted COVID-19 lockdown strategy shocked the party. China’s economy is also hamstrung by a likely unsolvable demographic crisis and wage inflation relative to low-cost goods export values.
UKRAINE’S COUNTEROFFENSIVE CHOICE BETWEEN THE BOLD AND THE VERY BOLD
Still, the key economic challenge is Xi himself.
The all-powerful Communist Party leader is obsessed with control. While visible in Xi’s increasingly hawkish foreign policy, the need for control is most pronounced at home. Political repression aside, China’s artificial intelligence development efforts prioritize absolute conformity to Communist Party doctrine above innovation. This is an AI contradiction in terms. Beijing is also trying to prevent an exodus of wealthy Chinese who lament Xi’s control. Those wealthy Chinese who remain are being coerced into avoiding the trappings of success.
Then there’s the tech factor.
While Xi prioritizes the development of China’s high-tech economy, growing U.S. restrictions on high-tech exports have put him in a very difficult position. Intellectual property theft and pressure on trade partners have become even more critical. China is making clear to nations such as Israel, South Korea, and France that unless they allow China access to their high-tech products, Beijing will cut investment in other areas.
Yet Xi has now added another arrow to his quiver of economic control. Recent days have seen raids or enforced closures at the Chinese offices of international corporations such as Capvision, Bain Capital, and the Mintz Group. These actions reflect Xi’s paranoid effort to control what information these firms have access to outside of the Communist Party’s comfort zone. Of course, such raids do little to inspire international business confidence that Beijing’s “we’re open for business” rhetoric really stands up to reality. In turn, China is doubling down on the absurd claim that these raids are actually good for business.
As a Foreign Ministry spokesman put it on Tuesday, “These are normal law enforcement actions consistent with Chinese laws that aim to promote sound and well-regulated growth of relevant sector and safeguard national security and development interests.” Asked a follow-up question, the spokesman offered the same verbatim response.
Yes, China will continue to attract investment houses such as BlackRock that care only about making a quick buck. And yes, Western governments such as France will continue to prioritize Chinese investments at the expense of once-historic alliances. But the costs for China of Xi’s need for absolute control are apparent.
Xi is going the way of a command economy, when what he really needs is a Chinese Perestroika.