China changes direction as Mao is rehabilitated

China’s President Xi Jinping has now attained a similar status to Chairman Mao. He is now deemed a living historical figure and the people’s wise and trusted thought leader. But a reformer he is not.

| 7 min read

It's good news that the US and China decided that their two leaders needed a high-level conference call to understand each other better. They had jointly managed to issue a content-light agreement to jointly tackle climate change earlier in the week. On the call, they agreed to examine other areas in which they can co-operate.

It was President Biden’s task to show resolve over Chinese military expansion in the South China Sea. He had to demonstrate that the US was likely to intervene should China attack Taiwan – enough to create enough doubt in Beijing that it would make an invasion of Taiwan very unlikely. He also needed to row back on his mistake in saying the US would “definitely defend” Taiwan against attack, which broke the official US policy of studied ambiguity on the issue.

The US is not about to officially acknowledge Taiwan as an independent country.

Apparently, President Biden went along with the One China doctrine that matters to President Xi Jinping, whilst continuing to oppose conquest by force. The US is not about to officially acknowledge Taiwan as an independent country.

When China talks, the US listens

It was President Xi’s aim to show the world he is now the one leader that can command US respect – and to remind President Biden that the Chinese leader cannot accept any challenge to his rhetoric of One China. President Xi wants to regain control of Taiwan just as he has of Hong Kong, but it looks very unlikely he would seek to do it by force all the time the US responds to military provocations in the area.

We should, however, expect from here a protracted period of great power rivalry, as each country seeks to increase the number of states in its support group. There will be a continuing race for technological superiority, for control of resources and for the maintenance and expansion of military capacity.

  • 100 The Chinese Communist Party is now a century old.

Whilst COP26 was grabbing headlines in the West, a very significant meeting was taking place in China. The sixth Plenum of the 19th Central Committee of the Communist Party met in Beijing. It issued a long statement, which was a re-write of Chinese history of the last 100 years.

Its significance lay in completing the rehabilitation of the role of Chairman Mao Zedong and in emphasising the centrality of Karl Marx’s ideals. It promoted the thought of Xi Jinping, the General Party Secretary and President of the country, to the same status as the thoughts of Chairman Mao and Deng Xiaoping, the great economic reformer.

Writing Xi’s version of history

In 1945, the thoughts of Chairman Mao were endorsed by the party and this led to a range of publications and directives culminating in the Cultural Revolution. In 1981, the Deng reforms, which allowed more free enterprise and private ownership to speed-up growth were similarly embedded in personalised promulgation. Now, in 2021, President Xi has attained a similar status as a “living historical figure”, a man of great importance, the Chinese people’s thought leader. It now seems inevitable he will be granted another term in office next year.

It is true the Plenum also catalogues the thoughts of leader Jiang Zemin (General Secretary between 1989 and 2002) as the “theory of three represents”, and the thought of chairman Hu Jintao (2002 to 20012) as “the scientific outlook on development”. However, these two for leaders do not get their names attached to the thoughts in the same way as the big three in China’s communist development. Speaking again in a Mao suit, President Xi was keen to stress that Chairman Mao was right for his time. He attributes to him the skill of being able to see through the communist or people’s revolution, casting aside feudalism and foreign influence and occupation. He gives Deng credit for reforms that speeded economic growth.

Now we have President Xi’s “thoughts on socialism with Chinese characteristics for a new era”. Xi wants the party to be proud of its past, and to have a united view of all the big issues and of the historical origins of their movement. He passes over the downside of the cultural revolution, the famines and struggles of an earlier era, seeing all past leaders as facilitating a steady progression to his kind of society and economy. There have been times since Deng’s reforms where Chinese people were unsure what they were allowed to say or think of Mao. Now they know.

Xi no liberal reformer

Investors need to recognise that far from Xi Jinping being the liberal reformer who will adopt more and more capitalist elements into his idea of socialism, as well as more western-style democratic elements in his approach to government, he intends instead to be the strongman of China with plenty of state control and Chinese nationalism in his aims.

Xi is strengthening the Chinese military and giving it the capacity to operate far from home.

The Chinese leader is proud of stamping out political opposition in Hong Kong and Macao. He tells us they are now ruled by “patriots”. He stresses how Taiwan is part of One China and he will resist any independence movement and any foreign intervention. He has embarked on a strong policy of controlling the media and the political conversation in China – and is keen to retrain and educate the Muslim minority into China’s monolithic ways. He is strengthening the Chinese military and giving it the capacity to operate far from home.

The long statement was a history lesson, not a Manifesto for the new Xi thinking. The background to policy appears to be more emphasis on state ownership and state regulation of economic activities, and a combination of levelling down as well as levelling up. The rich will be expected to pay more, one way or another, for the common good.

President Xi wants to manage the relationship with the US whilst seeing it as a competitive struggle. He wants the world to take China more seriously. He talks of the west’s waning power and of the rise of the East. He sees the Chinese development model based on Marxism as one for others to follow. There will be a newly-assertive China locked in a cold war and a trade struggle with the West.

Meanwhile, China will spend more government money building a global military presence. The danger for President Xi is that, should he come to rely increasingly on nationalised ventures and his own ideas, he might miss out on some of the innovations and risks that a more free-enterprise based system can achieve.

The most the White House could say after the talks was they had “discussed the responsibility of both nations to ensure competition does not veer into conflict.” Investors in China need to understand the nature of the economy and society, where its government will intervene and control as it sees fit – whatever it has said to investors when they commit.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

China changes direction as Mao is rehabilitated

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