Xi’s Expanding Power Is a Growing Risk for China’s Economy

Local officials either take orders too far or become paralyzed with fear as they strive to please China’s leader.

Even as President Xi Jinping looks set to rule indefinitely as China’s most powerful leader since Mao Zedong, that doesn’t mean he always gets what he wants.

Recent policy actions show the difficulty he faces managing a sprawling bureaucracy in the world’s second-biggest economy: Officials either take orders too far, as in the case of coal mine and power plant supervisors who worsened a national energy crisis, or they’re so paralyzed by fear they fail to take autonomous decisions — even during major crises such as unprecedented flooding or an emerging pandemic.

In many ways, Xi has himself to blame. China’s local governments had long turned a blind eye to some Beijing dictates, a dynamic captured by a saying in Sun Tzu’s “The Art of War”: “A general in the field is not bound by the orders from his sovereign.” Xi’s centralization of power, along with an anti-corruption campaign that has ensnared more than four million officials, has both raised the stakes and skewed the incentives for officials on the ground.

Chinese President Xi Jinping, right, arrives with Premier Li Keqiang, left and members of the Politburo Standing Committee for a reception at the Great Hall of the People in Beijing on the eve of China’s National Day on Sep. 30. Photographer: Greg Baker/AFP/Getty Images


The result is legions of bureaucrats struggling to understand how they can please the bosses in Beijing, and secure promotions up through the ranks of the opaque Communist Party. While that may give Xi greater control than previous Chinese leaders and helped clamp down on excessive corruption, it also risks sapping economic dynamism at a time when growth is slowing and the country faces challenges from an aging workforce, mounting domestic debt and increasingly acrimonious trade partners.

“The great irony is that in the 2020s and beyond when China needs to embrace a new development model, there would normally be a strong case for more decentralization and experimentation,” said George Magnus, research associate at Oxford University’s China Centre. “But Xi’s model calls for precisely for an inflexible and flawed opposite structure. He may rue this governance model sooner or later.”

Sweeping crackdowns in recent months across sectors from technology to entertainment have humbled China’s wealthy, wiped over a trillion dollars off both stock markets and commodity futures, and shown investors that Xi is willing and able to force through painful reforms. His hold on the Communist Party has never looked stronger as he prepares to cement his control this week at the sixth plenum with the first “historical resolution” in 40 years.

Yet having immense power and using it effectively are two different things. It’s particularly difficult in an opaque system with competing interests across more than 30 provincial-level administrations, another 3,000 prefecture- and county-level administrative regions, and at least 40,000 administrative divisions at the township level.

A case in point is the contradictory messages sent to state-run coal mine operators in early October.

Coal stored in the depository at Wenergy Hefei Electric power plant in Anhui Province, on Oct. 21. Photographer: Liu Junxi/Xinhua/Getty Images


China faced a power crunch that was shutting down factories as officials raced to meet hard targets to reduce fossil-fuel emissions. The National Development and Reform Commission in Beijing, which sets the targets, sent an “extremely urgent” messages demanding more production while also stressing the need to meet Xi’s carbon emissions targets and mine safety guarantees — the very issues that contributed to the shortfall in the first place.

The conflicting orders put coal mine employees in a tough situation, according to energy company executives, industrial officials and advisors who asked not to be named due to the sensitivity of the situation. No matter what they decided, they risked failing on one of Xi’s goals — and paying the price for it.

In the end, local governments and mining operators prioritized energy supplies to ensure millions of citizens could stay warm through the winter, as that would have the most immediate impact on public perceptions of the Communist Party. And while everyone knew the crisis was exacerbated by rigid emissions and industrial reform targets set from top leaders, it’s still impossible for officials to change course. That would be admitting the policy was flawed, one person said, and “we know the central government is never wrong.”

“Under Xi Jinping’s personalistic leadership, all officials are striving to demonstrate how loyal they are to the leader,” said Susan Shirk, a former U.S. deputy assistant secretary of state and author of “China: Fragile Superpower.” “Any hint of disloyalty could doom your career.”

Local officials are very strategic in prioritizing goals with hard targets like emissions that will allow them to claim credit, according Leng Ning, assistant professor at Georgetown University who studies political economy and cadre management in China. The root of the problem stems from the top-down control of personnel, she added.

“Sometimes the most competent will look less loyal, because it means you have the capacity to criticize policy or come up with alternatives,” she added.

‘Handle the Hot Potato’

Xi has sought to have it both ways, imposing strict loyalty tests while also expressing frustration with officials who play it safe. In 2019, he told officials the anti-corruption campaign was not “an excuse to do nothing,” urging cadres to “handle the hot potato and shoulder the heaviest tasks.” In September, he called on cadres to act more boldly, saying “Mr. Nice Guys” don’t have a place in the party.

Yet China’s top-down system, which tolerates little dissent, incentivizes officials to cover up problems and silence whistle-blowers — particularly in emergencies. When Covid-19 first began spreading in the central Chinese city of Wuhan, local police moved to silence eight doctors who sought to warn the public about the disease. The city’s mayor later said he had to wait for “authorization” before releasing information on the outbreak.

Officials were similarly slow to act during flooding in July that killed 14 people in central Henan province, when videos of people trapped in subway cars prompted outrage. Premier Li Keqiang visited the scene and pledged to hold bureaucrats responsible.

Damage following severe flooding and landslides in Henan province, on July 22.Photographer: Jade Gao/AFP/Getty Images


But a bigger problem now is overreach on policy priorities set by Beijing. In a July editorial, China’s official Xinhua News Agency said some local officials were taking “excessive actions” in their push to reach Xi’s climate goals. Several months later, Li indicated the government would rethink the pace of China’s energy transition, slamming a “one-size-fits-all” approach in shutting down energy-intensive projects or “campaign-style” carbon reduction.

Xi has shown some awareness of the problems facing bureaucrats. In July 2019, top party leaders agreed they needed to “encourage and support grassroots efforts to explore more original and differentiated reforms” and “tolerate the mistakes made while trying to innovate reforms.”

‘Keep Your Head Down’

One issue is that Xi himself isn’t quite sure of the best approach to achieve his goals. “We have a complete solution to the problem of poverty, but we still have to explore and accumulate experience on how to attain prosperity,” he said in an August speech outlining his push for “common prosperity.”

Besides dealing with confusing signals from Beijing and stiff consequences for disobedience, local officials also face a citizenry more aware of its rights and eager to make their demands heard, according to Anna Lisa Ahlers, a researcher at the Max Planck Institute for the History of Science in Berlin.

“Spontaneous innovation on the ground has become almost impossible,” said Ahlers, who wrote a book on local policy implementation in China.

While Xi may be frustrated with local officials, he also needs them to successfully implement his policies, said June Teufel Dreyer, professor in the Department of Political Science at the University of Miami. Meanwhile, officials who do everything possible to hit targets like those for economic growth know they could suffer the consequences if those measures backfire.

The “best of the bad solutions” for Chinese bureaucrats balancing competing demands, Dreyer said, amounts to this: “Keep your head down, give minimal compliance, and hope not to be noticed.”

Source: Bloomberg

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