The elites atop the Chinese Communist Party know that something has gone very wrong. COVID-19 has exposed fundamental, deep-rooted weaknesses in the Party’s governance model. Economic problems and social stability concerns loom ever larger as the fallout from the pandemic progresses. With Xi Jinping’s leadership being called into question, his impulse is to crack down at home and lash out abroad. This will only intensify the debate within the CCP, and as the stakes rise, Xi will find it more and more difficult to back down or concede to those arguing for an alternative course. For the foreseeable future, U.S. policymakers should brace for a much more confrontational Beijing. Meeting this offensive with counter-pressure offers the best hope of encouraging a shift in power and a dampening of PRC aggression.
In internal conversations, party elites worry about how they will sustain employment now that supply chains have been disrupted and the world is in recession, contracting demand. They express concern about how the PRC will secure access to the raw materials it requires, from food to energy, as the pandemic compels tightening of borders globally. Compounding these vulnerabilities, CCP experts acknowledge, albeit obliquely, the limits of their administration at home. They have failed to spur indigenous innovation, and their delayed response to the outbreak exposes their inability to react nimbly to an emergency. Yet this is a feature, not a bug, of a regime determined to exert centralized authority over the whole mainland. Xi is thus left to intensify domestic population control efforts while lashing out abroad. Contrarians carefully point out that these moves are likely to exacerbate the above problems. Their input is not welcome, and pressure continues to build up within the system.
The range of experts and scholars sounding alarms indicates anxiety at the party’s highest echelons. Yu Yongding, a prominent economist from the Chinese Academy of Social Sciences, published a column in the Chinese equivalent of Bloomberg on April 13 explaining the damage to the PRC’s productive capacity wrought by the virus: “Due to the high degree of division of labor and distribution of labor, most industries in China have formed long supply chains across regions.” Therefore, even if some factories in less affected areas were able to maintain normal operations during the lockdown, “if only one of the links fails, the entire industrial chain will not work.” Dr. Yu is hardly a typical naysayer. He is a former PRC central bank advisor and member of the Chinese Academy of Social Sciences who proclaimed on his country’s behalf after the 2008 financial crisis, “We are not going to return to the good old days of 2006. We are going to promote the creation of a new world order.” Now, his brashness and boldness are gone.
Yu’s new cautionary sentiment is echoed by normally bullish voices on the high-tech end of the Chinese spectrum. The South China Morning Post, owned by CCP member and Alibaba co-founder Jack Ma, recently editorialized that the PRC economy remained “under huge pressure” even after loosening counter-virus restrictions in March. “Even as factories reopen, headwinds are still severely buffeting the economy,” and “the scale of pandemic related unemployment alone in the United States . . . points to an uphill slog to rebuild sales.” Further, “key euro zone economies such as Germany and France are already in recession, with the whole bloc set to experience a painful contraction.” Meanwhile, Japan and the United States are incentivizing their firms to re-locate supply chains out of the mainland. Tokyo and Washington are also part of an international coalition preparing to sue Beijing for damages arising from its incomplete and misleading information at the outset of the pandemic.
Chen Wenling, another prominent Chinese economist, said on China’s CCTV that the “partition” of the world as a result of the pandemic was unprecedented in human history. She confessed that she had been worried about economic, scientific, and technological decoupling before the coronavirus appeared. Now she says that it appears to be exploding like a “fuse.” Still, her advice has been consistently to focus on internal actions to restore the circulation of industry and stabilize employment. After all, it’s not just external headwinds that the country faces. Domestic demand is also depressed. Chinese residents are proving cautious about re-opening their wallets amid a sense that the virus could return at any time. Official unemployment figures showed nearly 6 percent out of work, a twenty percent jump from last year, and that doesn’t even count the millions of migrants who toil in PRC cities where they are not authorized to live and whose jobs were the first to be cut when factories stopped operating.
The situation has Chinese Academy of Social Sciences scholar Yang Bin warning of “real economic chaos and a threat to the survival of businesses and people.” Unlike Chen, he advocates “fighting back” to prevent further losses: “For countries such as the United States, India, Australia, the United Kingdom, and Sweden that threaten to sue for compensation, China must prohibit the withdrawal of assets” and require that these countries “sign relevant agreements when purchasing Chinese medical materials.”
The aforementioned Yu Yongding is similarly worried about “the problem of survival.” “Do we have enough basic strategic materials, such as food and oil, to ensure that we can continue to survive in the case of a long period of halt in production, and can social organizations still function normally?” he asks, and then answers:
The Ministry of Commerce has recently stated that China has enough food, which is good news. But we are still a little worried. We have heard many stories about the fraud of grain depots in the past. Can a major national grain depot survey be conducted now? Another example is that China imported about 500 million tons of oil in 2019. Once the oil supply is interrupted, how long can the oil in our reserve stockpile support us?
Yu concludes that “because modern urban life is so fragile,” in light of COVID-19 Beijing’s investment priorities must shift from new, high-tech areas such as 5G, electric vehicles, big data, and artificial intelligence to more old-fashioned infrastructure and the restoration of industrial supply chains.
Again, he is not alone in urging the regime to get back to basics. Cheng Guoqiang, a distinguished professor at Tongji University, warned in a late-March interview with the PRC’s Economic Daily that a “global food crisis triggered by the epidemic may be a high probability event” if the pandemic is not quickly controlled. When Western media started reporting last month that Kazakhstan, Vietnam, and other countries from which the PRC imports food were suspending agricultural exports, Chinese outlets rushed to publish expert opinions that the disruptions would not provoke a crisis in the PRC. Every interview sounded the same note of reassurance – “there is no shortage in China,” but “what we need to guard against is the consequences of panic.” The recurrence of similar phrases indicates that these articles are a product of “public opinion guidance” from the CCP’s propaganda bureau. Accustomed to such shaping efforts, Chinese elites will see through the rhetoric and wonder whether Xi’s administration is protesting too much.
Since February Xi himself has stressed the importance of ensuring that the PRC’s spring planting season is not disrupted by the virus. When he visited Wuhan, the epicenter of the virus, in Hubei province in early March, his public remarks included an injunction to “coordinate the work of spring farming” across Hubei. His more recent retrospectives on how the party prevailed against the contagion note that avoiding agricultural disruptions was part of the story but remains a priority. But as Yu’s interview suggests, boasts from on high that everything is fine can elicit skepticism.
Reading between the lines of Xi’s recent addresses highlights that even he knows the party has underperformed relative to its own goals, from sparking domestic innovation to improving emergency response mechanisms. Despite Beijing’s claims to be a global leader in fighting the virus, the PRC medical establishment is behind, not ahead, in the battle against the contagion. Xi said as much in a March 2 speech at the Academy of Military Medical Sciences in Beijing. After exhorting the assembled researchers to “speed up processes for drug development . . . [and] accelerate the development of vaccines,” he instructed them on how: by “closely monitoring the progress of foreign research and development, strengthening cooperation, and striving to promote clinical trials and marketing of vaccines as soon as possible.” Xi doesn’t believe that Chinese researchers can make advances on their own. They must therefore follow and try to join foreign efforts. Appropriating foreign technology and then applying the CCP’s “systemic advantage” of central coordination, of which the official People’s Daily recently boasted, is the PRC’s best hope for positioning itself as a world leader.
How can we be sure this formula is what Xi had in mind? Ten days before his speech, the CCP moved to radically change the way Chinese scientists are rewarded and promoted. After 20 years of relying on the Science Citation Index (SCI) of peer-reviewed English-language publications, the PRC Ministries of Education and of Science and Technology announced that they are seeking new criteria “to reverse the phenomenon of one-sided, excessive, and distorted use of SCI paper-related indicators.” Describing the development as potentially the party’s “biggest shake-up of research and development policy in decades,” the South China Morning Post traced it to the “sluggish response of the scientific community to the Covid-19 outbreak.” PRC Ministry of Finance alum and prominent economic pundit Jia Kang agrees: “The biggest warning to us from the two outbreaks of SARS and the novel coronavirus is that our R&D achievements in epidemic prevention technology are obviously insufficient.”
Not only is the PRC incapable of addressing the health problems it has unleashed, it is likely to be the source of future contagions. The propaganda line is that Beijing “bought the world time” to prepare for the coronavirus with its draconian, but effective, lockdown of Wuhan. In Chinese, party elites admit that their response was ineffective and counterproductive. Again, Xi alluded to this in his March 2 speech, acknowledging a need to “improve the early warning and forecasting mechanism for epidemic prevention and control, capture information in a timely and effective manner, and take timely response measures.” He would not have needed to tell cadres to “study and establish a command, action, and support system for scientific research, . . . prepare emergency action guides during ordinary times, and start quickly in emergency situations” if the regime had reacted well.
This gap is not for lack of effort. In the wake of the SARS contagion 17 years ago, the Party established a nationwide network of cells tasked with reporting on any outbreaks at the local level. Nonetheless, COVID-19 was clearly not detected and then suppressed with early action, and this catastrophe is only going to exacerbate the regime’s problems with timely coordination and responses. As one Chinese military strategist noted, what lower-level official will be willing to make a decision about anything in the wake of the coronavirus experience? Or, in the words of a civilian commentator, emergency response is currently a priority because of recent events, but going forward, “everyone knows that once something loses the attention and support of the main leaders of the party and government at all levels in China, it will be very difficult to handle it well.”
Where does this leave Xi? From the start of the epidemic he has linked it to the threat of political and social unrest. His first public guidance about COVID-19 in late January stressed the importance of “leading public opinion” and maintaining “the overall stability of society” in the same breath as curbing the epidemic’s spread and treating patients. In remarks to fellow elites over the next two months, Xi repeatedly mentioned the potential for “social disorder” and “psychological problems” created by the virus to endanger “social stability”—code for threatening the party’s rule. Other official sources have elaborated on the emergence of negative “rumors” about the epidemic, which compel “accurately identifying, cracking down, and daring to fight” culprits. Xi’s paeans to the upgraded neighborhood watch—or in CCP parlance “grid management”—system of domestic surveillance, ostensibly designed to monitor patients and ensure food and medicine delivery to closed residential complexes, suggest it is here to stay.
With regard to foreign policy, Xi has implicitly endorsed the “Wolf Warrior”-style diplomacy of leading PRC Ministry of Foreign Affairs officials and ambassadors. Less reported but as important is the increasing tempo of PLA forays into disputed waters and airspace, from the Taiwan Strait to the South China Sea. These overt offensives are complemented by a more insidious ploy. CCP diplomats are traveling the world extolling the efficacy of Traditional Chinese Medicine and propounding the PRC’s “Health Silk Road.” They are encouraging other countries to sign up for digital health solutions offered by the PRC tech companies Baidu, Alibaba, and Tencent (nicknamed, perhaps more aptly than we knew, “the BATs”). This is spyware, intended to support the PRC’s quest for foreign intellectual property. Tech firms on the mainland are beholden to the party and by law must share their data with it. If we accept the propaganda, the BATs have been at the forefront of virus contact tracing and treatment, but the PRC’s “Health Code” virus screening app has been so unreliable that Chinese netizens decided the whole system was just “for appearances,” The Guardian recently reported. Good luck to any countries that allow their scientists and patients to transfer their data (and open up their personal devices) to a party determined to spy its way to S&T leadership.
As with Xi’s domestic policies, the new foreign moves inspire some elites to wonder if the cure is not worse than the disease. Calls for a reversion to Deng Xiaoping’s “hiding and biding” strategy for getting along with the rest of the world are increasing. A nascent insurgency against Xi’s signature approaches is clear, but the outcome remains uncertain. Washington would be wise to prepare for draconian domestic conditions and hostile foreign policies from Beijing for some time, unless and until Xi departs the scene or the Party forces a change.