Inside Xi Jinping's Reform Strategy
The deft political moves that are sidelining the Chinese leader's opponents.
Chinese President Xi Jinping has set out to be a transformative leader. While he is, in his own words, no Gorbachev, he is equally committed to breaking free of the Brezhnevian stagnation that many Chinese feel characterized politics under Hu Jintao. In his speeches and in the official decisions of November’s Third Plenum (reported to have been prepared under his close guidance), he has promised to establish a “decisive” role for market forces—under the guidance of the Party. Doing so, by his own analysis, requires overcoming and controlling “vested interests” which stand in his way.
As his concept of the “China Dream” explains, Xi aspires to restore China to its rightful place among the world’s nations—and restore the Chinese Communist Party to its own rightful place as the vanguard of the nation. Like his predecessors, Xi aspires to revamp China's political economy not to weaken the Communist Party, but to strengthen it and the nation it rules by “rectifying the relationship between markets and the state.”
Debate about the Xi leadership has, until recently, focused on the question of whether or not it was serious about reform. Since coming to power in November 2012, the Xi administration has answered this question by laying out a bold agenda for economic change which would, if carried out, profoundly alter the role of the State in the Chinese economy.
This vision will not always be attractive to outsiders. It will likely mix markets with robust nationalism and a reinvigorated state-owned sector. What is now clear, however, is that it will represent a significant break with the status quo. For Xi and those around him, the easy part is over. Having laid out their agenda, they must now focus on implementing it.
Delivering effective reform won’t be easy. As Americans can testify, achieving change is difficult in any political system. In order to make ambitious changes, Xi will have to overcome an array of ideological, bureaucratic and industrial groups with stakes in maintaining the status quo. This challenge appears to be much on his mind: He has repeatedly spoken of the threat posed to reform by “vested interests,” a poorly defined but important combination of government ministries in Beijing, local governments and state-owned enterprises (SOEs).
Over the last decade, the structure of the Chinese political system has offered vested interests multiple avenues to resist change. In short, power was diffuse and interests varied wildly. Decision-making at the top levels of the Communist Party was driven by consensus, often resulting in a lowest common denominator approach to policy-making. Central ministries in Beijing amassed significant power over the economy and were not eager to give it up. Powerful local governments were frequently responsible for implementing policies and focused on short-term growth rather than long-term reform. And managers of state-owned enterprises were able to leverage political clout in both Beijing and the provinces to preserve the status quo.
In facing these challenges, Xi has some natural advantages. As the son of Xi Zhongxun, one of China’s revolutionary elders, Xi is better connected and—to some extent—enjoys more natural legitimacy in the Party system than his immediate predecessors. He also has several close allies on the Politburo Standing Committee, especially China’s top antigraft official Wang Qishan and former Shanghai Party Chief Yu Zhengsheng, many of whom share a common patron with Xi in former President Jiang Zemin, as well as ties to his native Shaanxi province. More importantly, however, after a year in office he is also proving himself to be a gifted political strategist in his own right.
As it shapes its own approach to promoting reform, the Xi leadership is drawing on strategies employed by previous generations of Chinese leaders who have succeeded in effecting change. While much has been made of Xi’s Maoist language over the last year, he has also taken tips Mao’s political playbook. This makes sense. Whatever his flaws, Mao knew a thing or two about political leadership. In less than three decades, Mao turned China’s economy, as well as its political and social structure, on its head.
In looking to undo Mao’s damage, the Deng and Jiang leaderships set themselves equally ambitious goals, and largely achieved them, in the face of strong resistance from powerful entrenched interests. They did so not by fiat, but by deploying sophisticated political strategies that weakened existing interest groups, created new ones with a stake in reform, and created opportunities for many insiders to profit by taking part in market reforms.
Below we outline seven emerging strategies for implementing reform. These strategies are still taking shape, a process made more complex by the fact that, despite Xi’s strong leadership, China’s reformers are not a cohesive bloc. They, like the “vested interests” they seek to overcome, are divided along personal, ideological and factional lines, meaning that different people favor different strategies for reform. This is also proving to be a process of trial and error, as the leadership figures out which approaches are most likely to gain traction and which are best left by the wayside.
Strategy One: Centralize power under your own leadership
The most distinctive element of Xi Jinping’s strategy for implementing reform is his move to centralize power under his own leadership and use this to drive forward his agenda. Within six months of the November 2012 leadership transition, Xi had assumed leadership of China’s top Party, military and government positions. Hu Jintao and Jiang Zemin, in contrast, spent their first years in office overshadowed or undermined by their predecessors.
After assuming these roles, Xi centralized the policy-making process in key areas by creating new top-level central bodies. He created a National Security Committee to oversee domestic and foreign threats to security and—more recently—announced the formation of a central Internet security and informatization leading group. Most importantly from an economic perspective, Xi established the new “Leading Small Group for Comprehensively Deepening Reform.” In doing so, Xi is following a well-trodden path around the power of established bureaucracies.
By creating small committees dominated by his presence, Xi has given himself platforms to issue decisions without negotiating with the State Council and its ministries—a tactic used by Mao to outmaneuver opponents of the Cultural Revolution in 1966 with the creation of the Central Leading Small Group on the Cultural Revolution, led first by Chen Boda, and then by Mao’s wife Jiang Qing.
By directing China’s provinces to establish counterpart bodies answering directly to the Central Small Group, Xi has also created a chain of command that does not run through China’s central economic planning agency, the National Development and Reform Commission (NDRC), a nerve center for heavy state intervention into the economy whose power is threatened by reforms.
Strategy Two: Use the Party to control the government
Xi has also proved effective in using his role as General Secretary of the Communist Party to overcome entrenched interests in the government. Xi consolidated his role in the Party directly following the November 2012 leadership transition, but had to wait until the March 2013 National People’s Congress to formally take over as China’s head of state. He used the interval to launch a massive anticorruption campaign designed to reestablish the legitimacy of the CPC, as well as to signal the risks of opposing his program. The campaign is being spearheaded by Wang Qishan, head of the Party’s Central Discipline Inspection Commission, the CPC’s top antigraft body which reports directly to the Party leadership and is institutionally separate from the government.
Launching a series of high-profile anticorruption cases in China’s state-dominated oil sector signaled that SOEs would not be exempt from the antigraft drive. The downfall of Liu Tienan, a Deputy Director of NDRC, also illustrated that central ministries in Beijing would not be exempt. Indeed, the crackdown reached even further. The spate of arrests in China’s state-owned oil sector led to the removal of Jiang Jiemin, head of China’s key SOE regulator, and former state-owned oil company executive, and look likely to lead ultimately to the removal of former Politburo Standing Committee member Zhou Yongkang. Zhou amassed huge power over China’s political-legal apparatus under during the Hu-Wen era, and reached a rank usually thought to be untouchable on anticorruption charges. In the eyes of Chinese officials, if Zhou is not safe, no one is safe. On March 15, Wang
Xi is not the first leader to push an anticorruption drive to push forward a reform agenda. In fact, the CDIC was created in 1979, at the outset of China’s “reform and opening” process under Deng Xiaoping. It was given the task of re-consolidating and disciplining the Party’s rank and file, which was then in organizational disarray after the Cultural Revolution, and needed to be unified behind Deng’s agenda of gradual reform and economic restructuring.
Strategy Three: Change the terms of the debate by wrapping yourself in the flag
In addition to dominating key institutions, Xi has also seized the rhetorical high ground, defining his project not in terms of reform, but in terms of the future of the Chinese nation and the Communist Party. Facing a skeptical public, Xi has the deployed the aspirational message of the “China Dream,” which describes a nation on the verge of attaining its historic destiny as a wealthy and respected world power. In his speech at the Third Plenum, he said that “the Center has repeatedly stressed that reform and opening up are crucial in deciding the destiny of contemporary China.” This message aligns Xi's agenda with the “rebirth of the Chinese nation,” a mission that has been articulated as a basic purpose of the Communist Party since Mao’s famous declaration that “The Chinese people have stood up.”