Misreading Xi and the Rise of Li

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Li Qiang is now China’s No 2, an appointment that shows Xi’s dedication to a high-tech-led future for China. Image: Screengrab / NDTV

The professional China commentariat and its echo chamber in the Western media were blindsided by the appointment of Shanghai party head Li Qiang as the country’s premier, the number two position to Xi Jinping.

Li is a tech-savvy supporter of high-tech entrepreneurship who believes that China’s future lies in the digital economy. Xi, the Western press insisted with near unanimity, had reverted to Maoism.

Precisely the opposite of what the commentariat expected seems to have happened and the Western press is scrambling to explain the anomaly. Here’s a sampling of Western press comment:

“Xi Jinping promotes loyal Shanghai chief” (Reuters)

“Xi Jinping promotes loyal Shanghai chief to upper echelons of power” (Financial Times)

“A loyal aide in Shanghai takes a leading role in Beijing” (New York Times)

“Xi loyalist likely to be China’s next premier” (Barron’s)

“Promotion of Shanghai chief puts loyalty over everything” (Bloomberg)

Bloomberg tried to explain why it failed to foresee Li’s rise saying, “When Li’s initial lighter-touch approach to China’s strict Covid Zero strategy was breached by the more transmissible omicron variant earlier this year, [his] ascent was cast into doubt.”

That loyalty was a factor in Li’s appointment is obvious. Political leaders, Chinese or Western, do not normally appoint deputies who are known for disloyalty.

The “loyalty” explanation is no explanation at all. A better explanation is that the Anglo-American political establishment has misread Xi from beginning to end.

Li’s appointment should be a wake-up call. The ubiquitous ideological blinders and preconceptions in the foreign policy establishment are the cause of a chronic misreading of China, leading to concomitant political reactions with dangerous implications and consequences.

Xi Jinping and his new de facto deputy Li Qiang in a file photo. Image: NDTV / Screengrab

In fact, Li’s appointment as premier-designate was foreseeable as well as foreseen. Asia Times wrote as much on October 21, forecasting that Xi would opt for retiring four out of the seven Politburo Standing Committee members, including not only Premier Li Keqiang, but also the widely touted premiership candidate Wang Yang, and would not miss the opportunity to install a new, younger and different cast of leaders.

Li is the Shanghai party chief. Few if any previous Shanghai leaders have failed to advance to the Standing Committee, Xi included. That his advance to the number two position nonetheless came as a surprise to most Western analysts merely proves how much so many have misread Xi in particular and Chinese governance in general.

Li studied business administration and holds an MBA degree from Hong Kong Polytechnic University, a top-tier Asian business and technology school funded by Hong Kong tycoon Li Ka-shing. He has supported technological entrepreneurship as the leading edge of China’s development.

Among other things, Li was one of Jack Ma’s most visible supporters in the China Communist Party leadership. He brought Elon Musk’s Tesla to Shanghai. His appointment affirms the leadership’s support for private-led high-tech industry.

Accelerated technological innovation and STEM talent development were keywords in Xi’s work report. What Western analysts (and US Secretary of State Antony Blinken) picked out instead was the reiteration of China’s longstanding policy with respect to Taiwan.

Li was chosen for his track record of economic and financial innovation in the Shanghai Free Trade Zone, for bringing in major foreign investment (up by 32% in 2021 despite Covid) and for the policy papers on economic development he wrote for Xi as his assistant in Zhejiang.

So, then, what should be made of Xi’s alleged neo-Maoist, leftist and anti-capitalist emphasis on “common prosperity?”

Throughout his career, Xi has shown himself to be a master of the most characteristic maneuver in Chinese imperial governance: Feint in one direction in order to disarm prospective opponents, while preparing to move in another.

The elements in the Party who opposed Xi in 2012 remain his antagonists, the supporters of a Fortress China that shares the poverty rather than creates the wealth. His first move in power after 2012 was to crush the group around Bo Xilai centered in Chongqing and part of China’s northeastern rust bowl, and to unleash China’s private sector.

Sent packing. China plans to lay off 500,000 heavy industry workers. Photo: AFPXi’s ‘common prosperity’ is more about internal politics than ideology. Photo: AFP

During the past two years, Xi adopted the rhetoric of income redistribution under the watchword “common prosperity,” and cracked down on China’s consumer Internet sector. In classic Chinese style, he adopted the rhetoric of the Communist Party elements he most opposed, only to move decisively in the opposite direction.

Ideologically blinded Western analysts and officials consistently miss the point. China’s state is the least ideological, most ruthlessly pragmatic entity in the world. To the extent its leaders succeed, they do so by achieving prosperity and security by whatever means necessary to meet their objectives.

Xi knows that China’s state-owned industry is too sclerotic and corrupt to lead the transition to a digital economy and that the Chinese state needs private entrepreneurs to take the lead. But he also knows that entrenched political interests linked to the state sector will not just grumble at the sudden ascendance of entrepreneurs but also make determined political moves.

“[Li] has a much closer relationship with Xi compared to [Premier] Li Keqiang. … Xi is likely going to give him much more room and power to manage the economy,” Deng Yuwen, a former deputy editor of the Study Times, the official newspaper of the Central Party School, told the South China Morning Post.

To stay in power, Xi or any other Chinese leader must placate the old guard and defuse popular envy of the newly rich while allowing entrepreneurs to lead economic transformation.

But Xi’s core agenda, repeated in the work report, is to make China a moderately prosperous economy by 2035. To do so, China needs and he must achieve a gross domestic product (GDP) growth rate of between 4% and 5% per annum.

Li has demonstrated that he has the energy and executive capability to get things done. A Brookings Institution study reports that in 2018-19 he mobilized Shanghai’s capabilities and workforce in tandem with Elon Musk to build a Tesla factory capable of making 500,000 electric cars annually.

The first Chinese-made Tesla 3 rolls off the line at the Shanghai Gigafactory, while employees of the new facility look on. Creedit: Ti Gong, Shine.com.

Amazingly, It took only ten months for this joint venture to advance from construction to full operation.

The sweeping change in China’s leadership denotes an inflection point. Deng Xiaoping’s 1979 reforms eventually moved nearly 700 million Chinese from countryside to city, replacing the rural economy of traditional China with a smokestack economy dominated by state-owned enterprises.

China’s state sector, in turn, became a political power base in its own right. Xi concluded that he needed a new broom to sweep aside the obstacles to a digitized industrial economy. With Li’s appointment as his de facto deputy, Xi’s well on his way.

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