13 February 2020

Xi risks losing the Mandate of Heaven


Banishing Mao

Following the madness of Mao’s Cultural Revolution, China’s new Paramount Leader Deng Xiaoping—the most important person of the late 20th century who most Westerners know absolutely nothing about—heroically managed, against the odds, to stabilise Communist Party rule, pulling the country back from the precipice of anarchy.

Realising things simply could not go on as they were, Deng, in one of history’s great ideological sleights of hand, transferred his party’s claim to the ‘Mandate of Heaven’, the traditional Chinese justification for each successive dynasty’s right to rule, from radical Communism to capitalism and nationalism. The Communist Party would no longer base its political legitimacy on ideological fervour, but on the organic Chinese cultural traits of mercantile prowess and national pride.

Ideologically, while lip-service to Mao’s memory remained (and remains) obligatory, Deng’s inspired conjuring managed to banish a monster whose economic illiteracy was increasingly becoming a threat to the party’s very existence.

With Deng’s opening up of the Chinese economy in December 1978 and the economic miracle that followed, the transfer of the Mandate of Heaven was complete. Following the 1989 crackdown, three decades of remarkable capitalist-fuelled economic growth and a hugely enhanced, self-confident role on the global stage seemingly put the Party’s legitimacy beyond question.

The pillars wobble

That is, until now. Even before the coronavirus — a true Black Swan if ever there was one — burst onto the scene in January, both the capitalist and nationalist pillars undergirding the Communist Party’s Mandate of Heaven had come under pronounced strain.

First, economic growth has slowed significantly, with 2019’s figure of 6.1% the worst yearly performance since 1990. To some extent slower growth is the inevitable result of a maturing economy, but it does signal that the days of easy double-digit catch-up growth are over.

Secondly, and more worryingly, has been the shift under Xi Jinping towards China’s damnably inefficient state sector – a trend which could over time undermine much of the progress the country has made.

Take the big banks, all of which are state-owned and obediently follow the government’s directives on lending. In 2013, only 35% of banking credit to non-financial services went to state companies, while 57% was directed to the private sector. Just three years later, after much prodding from Xi, that picture had dramatically reversed. By 2016, 83% of banking credit was heading for the state-controlled corporations, versus just 11% to private firms.

Nonetheless, the efficient private sector continues to be the motor powering the economy. According to state statistics, in 2018 the lending-starved private sector still somehow manged to account for 50% of China’s tax revenue, 60% of GDP, 80% of urban employment and 90% of all new jobs. China’s biggest economic problem, then, is the Communist Party’s self-harming ideology, which is stymieing the very economic growth necessary for its own long-term health.

Even worse is the demographic catastrophe awaiting the country thanks to the one-child policy. Simply put, China is going to grow old before it grows rich. The state will have to pay for a vast elderly population without the resources available to developed countries facing similar challenges.

The statistics paint a stark picture: the birth rate in 2019 fell to its lowest level since the modern state’s founding in 1949 —  a year in which there were only 10.48 live births per 1,000 people. By 2050, it is estimated that the over 60s will account for a staggering one-third of the population. It is this self-inflicted demographic wound that may prove the biggest brake on China’s rise to dominance.

If China’s economic prowess is under increasing threat, its assertive nationalism is also proving to be increasingly counter-productive. The jailing of fully 1 million Uighurs in the west of the country is a public relations disaster as well as a human rights abomination. Hong Kong is in open revolt, with Xi’s intractable line neither proving harsh enough to quell the regular demonstrations nor conciliatory enough to make the crisis go away. Sizing up the situation, the people of Taiwan have decided in recent elections that they do not want more of the same and overwhelmingly voted for leaders who want the island to remain entirely separate from Beijing’s stifling embrace.

And in the broader Asian region, Xi’s assertiveness has done nothing but push China’s nervous neighbours into America’s arms. Old allies Japan and Australia are closer to the US than they have been in memory, as is (of all places) Vietnam. Further, a rising India —alarmed by China’s aggressive outreach into the Indian Ocean Rim — is increasingly siding with Washington and serving as a regional counterweight to China’s over-sized ambitions.

In all these cases, China’s heavy-handedness has given America a huge strategic advantage. These Asian alliances, old and new, threaten to contain China regionally, leaving the US as the dominant power, even in Beijing’s own backyard.

Underlying these setbacks is the growing, nagging fear that perhaps, just perhaps, the Party under Xi is not as competent as its supporters proclaim or its enemies fear. Given its blood-soaked history, it is safe to say that few people actively love the Chinese Communist Party; rather, it is tolerated only as long at it brings home the bacon, both in terms of continued economic growth, securing Tibet and the western province of Xinjiang, and pacifying Hong Kong. If this narrative of competence is challenged, if the pillars of the Mandate of Heaven begin to seriously wobble, the Party will have nowhere to hide.

Enter the Coronavirus

While much is shrouded in mystery, there is a good deal we do know about the Coronavirus. The virus originated from animals, with the Hunan seafood market in Wuhan being the possible source. The Coronavirus causes viral pneumonia, making the elderly and the already-sick particularly susceptible. Antibiotics are no use in treating it, nor has a vaccine been developed to keep it at bay, with recovery primarily depending on the strength of the sufferer’s immune system.

The virus can be transmitted by human-to-human contact, with the mortality rate being less than 2%. The crucial issue now is how easily transferable it is between people. What is clear is that this has the potential to be a pandemic.

What is also clear is that, at least initially, the Communist Party bungled its response to the outbreak to a degree that can only be characterised as criminally incompetent.  In early December 2019, when the now martyred Dr. Li Wenliang and his colleagues first raised the alarm about the Coronavirus, the Party —in typical autocratic mode— censored the emerging fact and repressed the whistle-blowers, forcing them to ‘confess’ to anti-social behaviour. In doing so they lost a precious seven weeks when they could have alerted the world to the impending danger.

Public health emergencies typically require timely, transparent, and accurate information from the relevant government to maximise the response; but then, these are qualities more associated with supposedly inferior democracies than a secretive autocracy. For perhaps the greatest factor explaining the bungling of Xi’s regime is the most obvious: It is an autocracy. And it seems, most damningly, not a particular competent one.

Conclusion: The Chernobyl Moment

Having just finished the wonderful, shattering series Chernobyl, it is easy to see how, in retrospect, that disaster—indeed any disaster—quickly becomes a political test for whatever ruling party must face it. In their ideological inflexibility, their pig-headed stubbornness to conceal any weakness from the outside world, the late-era Soviet Union undoubtedly flunked that test. After Chernobyl, even the veneer of Soviet competence had been eviscerated, and with it the Politburo’s own Mandate of Heaven.

There are telling signs that this is the fate the Coronavirus might also bestow on Xi Jinping. Already, there has been vocal anguish and outrage following Dr. Li’s death, while stories of local party officials selfishly hoarding desperately-scarce masks and protective clothing at the expense of brave frontline health care officials have provoked condemnation. The economic consequences will also be severe, at a time when the Chinese economy is already slowing and a trade war with the US endures.

Beyond the immediate fallout, there may well be one more casualty of the Coronavirus: the Party’s claim to competence. And if the Pillars of Heaven begin to wobble, we may yet look back on this moment as the beginning of the end for yet another Chinese imperial dynasty.

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Dr. John C. Hulsman is Chairman of the global political risk consultancy John C. Hulsman Enterprises, and author of 'To Dare More Boldly; The Audacious Story of Political Risk'