Willy Lam is one of the best China watchers I know of. He spoke to Goldman.
Jenny Grimberg: What’s the significance of the imminent Party Congress, and how would you compare the importance of this Congress to past Congresses?
Willy Lam: Every five years the CCP hosts a Party Congress comprised of around 2,400 delegates from the 95 million Party members. These delegates come to Beijing to endorse the leadership of the three most important decision-making bodies in the Party. They elect the 200-odd members of the Central Committee, who choose from amongst themselves the 25 members of the Politburo, who in turn choose the seven-person Politburo Standing Committee (PSC) that runs the country on a day-today basis.
This year’s Congress is particularly significant because it will likely mark a major change to the Party Constitution, as well as to Party conventions and tradition, as President Xi Jinping— who has already been in power for two terms—seeks to revise the Constitution to enable himself to become the “people’s leader for life”. This implies that Xi would rule not only for an unprecedented third term, but also a fourth term, until the 22nd Party Congress in 2032 when he will be 79 years old, after which, health permitting, he might remain the power behind the throne even after he relinquishes his formal titles. Not since the era of Mao Zedong—who was considered a demigod and allowed to rule until his death in 1976—has this happened.
In the early 1980s, the “chief architect of reform”, Deng Xiaoping, having lived through the chaos and ravages of Mao’s Cultural Revolution, laid down very clear rules that no leader should be allowed to build up a cult of personality, imposing term limits of two terms of five years each, and establishing the institution of collective leadership, with power largely shared among PSC members and the General Secretary merely being the “first among equals”. However, over his decade in power, Xi Jinping has successfully concentrated all decision making powers into his own hands, to the point where he now
towers over the other six members of the PSC. And the hold of Xi and his faction—who already dominated the 19th Party Congress five years ago—over the Central Committee, the Politburo, and the PSC will only be enhanced after this year’s Party Congress. So, what we’re about to witness goes against decades of tradition, as Xi continues in his role as the “Mao Zedong of the 21st century”.
Jenny Grimberg: How has Xi been able to consolidate his power to such an extent?
Willy Lam: Xi does not seem to have expertise on finance, foreign trade, or global economics, and he speaks no foreign languages. But he is a master in power play, a Machiavellian type of leader who has effectively used the anti-corruption card since he came to power in 2012 to tame and intimidate his political enemies. Xi is also an expert in “palace politics”, catapulting the Xi Jinping faction from virtual nonexistence to dominance over the CCP in just the span of a decade.
That’s not to say that there’s no opposition. The Communist Youth League Faction (CYLF) led by Premier Li Keqiang, as well as some Party elders, have voiced opposition to Xi Jinping’s efforts to undermine Deng Xiaoping’s reforms. Indeed, Song Ping—who, at 105 years old, is the Party elder of the Party elders—recently issued a thinly-veiled public warning that the only way forward for the Party and for China is to continue with Deng Xiaoping’s reforms, not the resuscitation of quasi-Maoist policies that Xi embraces. But Xi’s anti-corruption campaign has successfully silenced potential political rivals, many of whom have skeletons in the closet that are easily exploited. The opposition is also divided amongst themselves and have therefore been unsuccessful in uniting against Xi, which has given him a golden opportunity to monopolize decision-making, both on the personnel and policy fronts.
Jenny Grimberg: What does that mean for the composition of the new PSC? What are you watching closely?
Willy Lam: While retiring members of the PSC traditionally have the power to choose their successors, and Party elders also have a say, my informed speculation is that four out of the seven seats on the PSC will go to Xi Jinping and his loyalists—a solid majority. Of the three remaining seats, two will likely be filled by the CYLF, and one by a relatively independent senior cadre with no obvious factional affiliation.
Importantly, Li Keqiang, one of the two CYLF members currently on the PSC who represents the liberal wing of the Party, has now served two terms in the influential role of Premier—the administrative head of the central government. So, according to Party regulations, he must leave the position.
With the credit he’s earned over the past few months for handling difficult problems in the economy, Li may remain within the Standing Committee, but in a different capacity as Head of the National People’s Congress—a position which doesn’t carry much power on its own. So, all eyes are on his successor.
Vice Premier Hu Chunhua is the odds-on favorite to be promoted to Premier and succeed Li. While he also belongs to the CYLF and is believed to share Li’s pro-market and proreform inclinations, he is no Li Keqiang—Hu spent 20 years in Tibet building up his credentials as a loyal and pliable cadre, he doesn’t speak English, and he hasn’t traveled to the US or Europe much. So, he likely won’t be as effective as Li in keeping a lid on Xi Jinping’s restitution of Maoist values.
Moreover, Xi’s influence is also likely to dominate the personnel appointments of the larger 25-member Politburo and 200 odd-member Central Committee. All this is reminiscent of the Mao era, when the “Great Helmsman” ruled with nearly absolute authority.
Jenny Grimberg: So, you don’t expect any meaningful shifts in policy after the Party Congress?
Willy Lam: No; a mixed approach to the economy will likely continue. Given Xi’s embrace of Mao’s statist, conservative policies, I expect a continued restitution of Maoist values, such as common prosperity, focusing the nation’s resources on state-owned enterprises to the detriment of private enterprises, and keeping China “red”, which means a China following the edicts of Marx, Lenin, and Mao. Xi has railed against the “color revolutions” he believes the US and other Western powers instigated to turn former Soviet states into capitalist ones and has warned that China must avoid such a fiasco.
At the same time, Xi has no choice but to continue with at least some of Li Keqiang’s pro-market and pro-reform policies considering the country’s difficult economic situation— unemployment has risen sharply to as high as almost 20% for the 16-24 aged population, formerly-successful high-tech firms are struggling to merely survive, and the real estate sector and banks are in crisis. These issues have led many forecasters to mark down their projected growth rates for China for this year.
Jenny Grimberg: Given these challenges, is a shift in the dynamic zero-Covid policy (ZCP) after the Congress likely?
Willy Lam: Some minor moderation of the policy is possible, such as restricting national lockdowns to just one province and one major city at a time. But I expect the main elements of the policy to remain in place until at least early next year, for both political and economic reasons. On the political front, Xi has used the policy as a litmus test for loyalty; going along with strict lockdowns has been a way for regional officials to demonstrate their loyalty to Xi, and those that don’t may be demoted or fired. And on the economic front, the Chinese medical system has made billions from the strict quarantine measures, testing, and manufacturing of vaccines, which won’t be easily given up.
Jenny Grimberg: What about on the foreign policy front? Is China’s approach to the US most likely to become more or less friendly after the Party Congress?
Willy Lam: I don’t see any signs that a meaningful détente between the US and China is ahead; on the contrary, relations could worsen. Xi probably realizes that China has to seek some kind of compromise with the US and its allies given the pain that’s been inflicted on China’s economy by Western efforts to decouple from China—including imposing boycotts on the supply of microchips and other components necessary for China’s advanced tech sector. But the resumption of meaningful cooperation is unlikely given Xi’s belief that “the East is rising, and the West is declining,” and that those countries that effectively support Chinese-style socialism will end up on the right side of history. Xi is convinced that in the struggle between anti-Western, autocratic countries—China, Russia, and other members of the Shanghai Cooperation Organization (SCO)—and a US-led coalition, the anti-Western camp that is now centered around China will prevail, even though relations among SCO members are becoming increasingly fraught due to growing rivalries. China is also unhappy with the security pacts between the US, Japan, Australia, and India (the Quad) and between the US, Australia, and the UK (AUKUS). And the US has challenged China’s territorial ambitions in the South China Sea—90% of which Beijing claims—by supporting ASEAN countries with competing claims. This all argues against even a temporary thaw in ChinaUS relations anytime soon.
Jenny Grimberg: How is the sensitive issue of Taiwan most likely to evolve from here?
Willy Lam: Some observers have argued that because the
Chinese economy and military—which put on a show of force that was perceived domestically as relatively weak following US Speaker of the House Nancy Pelosi’s visit to Taiwan—still aren’t able to challenge the US, Xi Jinping may have serious hesitations about using force to support the liberation of Taiwan. But two arguments run counter to this view. One, during WWII, Germany and Japan attacked much stronger countries, not because they believed they necessarily possessed an advantage on the battlefield, but precisely because they thought the window to victory and world domination was closing as their best days in terms of military equipment and economic resources were coming to an end.
Two, and this is not well-known, Xi Jinping has apparently justified his bid to become ruler for life by arguing that he is the only cadre with the expertise and knowledge to successfully liberate Taiwan, a feat which Mao himself failed to accomplish.
While I don’t expect any military action to this end during Xi’s third term, in his fourth term he may think the window of opportunity is closing as the US-led alliance provides Taiwan with more potent means to fend off aggression from Mainland China. So, going forward, there’s a real chance that Mainland China may adopt more aggressive and hawkish policies towards Taiwan, as well as the East and South China Seas.
Jenny Grimberg: If the Party Congress doesn’t go as you expect what would that signal?
Willy Lam: I’m quite confident that Xi’s faction can secure at least four seats among the seven member PSC, but if not, it would be a huge surprise and extremely telling. It would indicate that long retired but still highly respected Party elders and anti-Xi forces had managed to form a united front against Xi, which would probably signal the beginning of the end of Xi’s dynasty. And it would mean that, despite the Party Constitution being revised to enshrine Xi as the “people’s leader for life”, cracks have emerged in his empire’s armor, which would be a bad sign for Xi Jinping.
