Political purges and economic chaos stalk China

Even the aura of competency surrounding the ruling Communist Party has been shattered

China’s tarnished global image needs more than a paint job. At home and abroad, the aura of competency surrounding the ruling Communist Party has been shattered by economic chaos and political “purges.”

Predatory practices have also fueled anger among major trading partners such as the United States, the European Union and other leading democracies. 

Flooding overseas markets with state-funded exports while refusing to open up key sectors in the world’s second-largest economy have seen tensions rise from Brussels to Washington.  

But that is only part of the picture, a snapshot of President Xi Jinping’s crisis-torn regime.

“[The] purge of Xi-appointed officials shows [a] leadership [in] disarray. China’s economy could be facing bigger challenges than even Japan did [in the 1990s, leading to the ‘lost decade’],” Dexter Roberts, the author of The Myth of Chinese Capitalism, posted in his Trade War newsletter this week.

What a mess:

  • Cracks in the Communist Party of China have started to appear.
  • Last week, media reports circulated that Foreign Minister Qin Gang was stripped of his position in July “because of an extramarital affair.” 
  • He has since vanished from public view along with high-profile figures such as Defense Minister Li Shangfu and other top brass. The mystery continues.
  • It comes amid an economic meltdown, sky-high unemployment among the young and a property sector in ruins.

Flaunting international law has been turned into an art form.

Delve deeper: In a perfect storm of its own making, Beijing is locked in a high-tech battle with Washington and has made few friends in the Asia-Pacific region with its military threats to invade democratic Taiwan.

Dangerous days: At the same time, it has been involved in naval confrontations with neighbors after claiming the entire South China Sea as territorial waters. Flaunting international law has been turned into an art form by the Party.

Big picture: Martin Wolf, the economist and writer, illustrated the challenges facing the country in the Financial Times last week, entitled We shouldn’t call ‘peak China’ just yet.

Between the lines: He concluded that its “access to world markets and technology is worsening” and “there is even a risk of war.”

Bottom line: “It will take great determination to overcome the former and wisdom to avoid the latter. So, yes, it is indeed possible that we are watching the end of China’s rise. But it is not inevitable,” Wolf wrote.

China Factor comment: Solving those problems will involve economic reforms, as well as defrosting a new Cold War that threatens to spiral out of control. The ball is in Xi’s court.