Unlocking anti-fragile China: How Xi reinforces the party state for global leadership

by Nis Grünberg 

You are reading the introduction of the MERICS Paper on China "The CCP's next century: expanding economic control, digital governance and national security". Click here to go to the table of contents.

• China’s leaders are convinced that the governance model of the party state is proving itself as the superior political system. “The West is in chaos, China is in order” is the CCP’s diagnosis of current global affairs, and the leadership has announced the beginning of a “New Development Stage”. 
• The evolving party state is aware of the systemic fault lines that weaken its power. Institutional reforms initiated under Xi Jinping are meant to address governance shortcomings by employing the CCP’s ‘power tools’ of political centralization, mobilization and control. 
• Digitalization has become a crucial element in the CCP’s governance approach. It serves both better governance and public service, but also enhances the party state’s surveillance and monitoring capabilities. 
• The party leadership considers this to be the most challenging period of its rule. Potential threats to regime security lie round every corner. In response, everything is viewed through a “comprehensive national security” paradigm.  
• Under Xi, China has left behind its defensive posture. The party state is translating its more muscular posture at home into its status abroad. 
• The sustainability of Beijing’s type of authoritarianism is unclear. Despite the narrative of China’s superior model of governance, it invests growing amounts of resources into a ballooning security apparatus – desperately trying to extinguish any threat to stability. 

As the CCP celebrates its 100th anniversary, it presents itself as a political goliath brimming with pride and ambition. The CCP’s Marxist historiography always saw the party progressing towards a better future, but the increasingly confident messaging out of Zhongnanhai is more than the former rags-to-riches narrative. Looking at the past years, China’s leaders are convinced that the governance model of the party state is proving itself as the superior political system. 

After four decades of rapid economic growth and impressive social development, confidence in the party’s ability to lead China’s ‘national rejuvenation’ is not without merit. The belief in party-state governance is deepened by Beijing’s sobering view of global trends, including the state of the economic and political capabilities of China’s peers. The tumultuous impact of President Trump’s four years in power, the inability by most Western peers to curb the Covid-19 pandemic, and the unraveling of the US-led global system are seen as a new order. At the US-China meetings in Anchorage, State Councilor Yang Jiechi made it clear that China’s tolerance for what it perceives as being spoken to “… in a condescending way from a position of strength” has come to an end. China wants to be seen and treated as an equal.  

A number of analyses have viewed China’s domestic and international challenges as potential last straw moments. China is a fragile superpower, so the thinking goes, awaiting one precipitous, terminal event. Yet others see China as increasingly anti-fragile. For Xi and his fellow CCP leaders, building an anti-fragile China entails not only being able to ‘get through’ systemic shocks such as financial crises, pandemics or disruptions in tech supply chains. It requires an ability to benefit from such uncertainty and stress, emerging from crises even stronger by exploiting others’ weaknesses and eliminating vulnerabilities in the institutional setup. To the leadership in Beijing, a strong party state is the key for unlocking institutional advantages in a systemic competition. 

“The West is in chaos, China is in order” is the CCP’s diagnosis of current global affairs, and the leadership has announced the beginning of a “New Development Stage”. This new era will see China propelled to become a high-income economy by 2035 and a global economic center by mid-century. As a key part of the process, the country will gain full strategic autonomy in resources, supply chains, and technology. Xi Jinping wants to be the figure that marked the departure from Dengist reform and opening-up into a distinct Chinese modernity. With term limits abolished, and 10 years of preparing and streamlining the party apparatus around him, Xi is set to become the torch bearer for a China with a global status of wealth and power. 

“No one can defeat us or crush us! Accelerating the construction of a new development pattern will enhance our survivability, competitiveness, development and sustainability in the midst of various foreseeable and unforeseeable storms and turbulent waves and ensure that the process of the great rejuvenation of the Chinese nation will not be delayed or even interrupted.” – Xi Jinping

Much of the core politics of Xi Jinping remain centered around domestic development. The aim is to show the CCP has not forgotten its socialist roots - putting “the people as the center” of the modernization project. China’s chief economic planner Liu He identified inequality and ‘out of touch’ national governments as two key causes of the 2008 global financial crisis. The poverty alleviation program and now the rural revitalization drive are therefore crucial for the new stage of development, which must establish a broader distribution of wealth.  

The evolving party state is aware of the systemic fault lines that weaken its power. Many of the institutional reforms initiated under Xi are meant to address governance shortcomings (短板) by employing the CCP’s well known ‘power tools’ of political centralization, mobilization, and control.  

Not only has political authority been centralized around Xi as ‘core leader’, but the party center’s decisions are meant to serve as ‘top-level design’ – governance blueprints for the entire system. Fragmented bureaucracy and selective local implementation of central-level policy are targeted. More centralized decision-making and strong messaging reminds officials to strive towards centrally defined objectives.  

Political mobilization has always been part of the CCP’s toolbox, but under Xi Jinping it is being normalized as a governance tool throughout society and economy. The handling of the Covid-19 crisis has shown how effective mass mobilization can be. Deep integration and institutionalization of CCP within social services, public administration and security was taken to new levels. Technological advances in governance and policing are aiding both public service and government efficiency. Sprawling surveillance networks are increasingly putting citizens private lives under the microscope. 

Since control is better than trust, sustained rounds of audits, and frequent discipline and anti-corruption inspection teams paying visits to local governments and administrative branches add an incentive to toe the central party line. Xi wants to make sure the vast party state is stable and disciplined enough to pull into one centrally concerted direction, attempting to end centuries of central-local disparities in policy making. Non-compliance with Xi’s political priorities has often been the focus of anti-corruption investigations, and it remains to be seen how effective a sustained discipline pressure on officials is for pushing governance to become more uniform across China. 

The unprecedented institutionalization of party rule under Xi is not simply about personal power. It represents a carefully concerted long-term effort to cement the party state as a governance system. The CCP is attempting to build a resilient and adaptive state – an anti-fragile China – that is capable of taking the global lead over the next decades. It aims to do this by building on the development experience of past decades, banking on the economic power of China’s large economy, and mobilizing a network of party organizations, a disciplined administration, and a vast security apparatus. To the leadership in Beijing, a strong party state is the key for unlocking institutional advantages in a systemic competition. 

To steer the forces of economic liberalization, globalization, and marketization, the CCP is turning China’s decentralized state capitalism into an organic “party-state capitalist” model. Here, the CCP’s authority remains the key driver and veto power in strategic economic decision making - at both government and corporate levels.  

The goal is to forge an economy generally operating like a market economy, but in which main flows of capital can be steered and economic activity is disciplined by a common set of politically defined development objectives. For this task the public sector, i.e., state-owned enterprises (SOEs), maintains a vital function. The deeper integration of state-controlled capital into the economy has two functions. Firstly, it will allow for increased macro steering of economic development. Secondly it will inject more market discipline into SOEs, making them leaner and less wasteful.  

Systemic shocks such as the global financial crisis have also convinced the leadership that more political oversight is necessary. This is especially the case in finance (including the platform economy), which, if left unfettered, is seen as a source of imbalances and systemic risks. Finally, the CCP-led national project of modernization is increasingly expected to be part of the corporate mission among industry leaders, and the CCP is calling for patriotic sentiments and support in the private sector.

To remain at the vanguard of (and not just responding to) social and political development, CCP leaders are advancing digitalization forcefully throughout the system. Digitalization has become a crucial element in the CCP’s governance approach. It serves both better governance and public service, but also enhances the party state’s surveillance and monitoring capabilities.  

The deployment of digital technology to handle the Covid-19 pandemic is seen as a successful test of the capabilities of digital tools. On one hand, digitalization generates citizen support through better services. On the other, it is creating an unprecedented surveillance state that enforces its norms via the digital space. Digitalization also fuels China’s drive for more self-reliance, as it remains dependent on foreign technology. The prospects of technological breakthroughs are driving vast state-driven development programs intended to break the dependence on imports from non-Chinese industry leaders.

The party leadership considers this to be the most challenging period of its rule. Potential threats to regime security lie round every corner. In response, everything is viewed through a “comprehensive national security” paradigm. This now covers a disparate range of issues, from education, media, the environment, to supply-chains, resource politics and foreign actors. This tendency to view virtually everything through a lens of national security makes China more confrontational in its presence and interactions with the world. Under Xi Jinping, China has left behind its defensive posture. 

In dealing with what are viewed as domestic issues, the party is increasingly assertive. This can be seen in the more aggressive policies towards Hong Kong, Taiwan, and Xinjiang. Within Mainland China, securitization continues to grow, preemptively policing citizens’ physical and digital lives even more than before. 

China’s foreign relations are also becoming more proactive. Government policy aims to shape global standards according to its preferences. It also responds more confrontationally when acting on behalf of overseas Chinese interests. Where there are perceived threats to Chinese interests, reaction comes with less restraint. This happens whether those interests be economic, political, or in global narratives. The party state is translating its more muscular posture at home into its status abroad. This more direct imposition of Chinese interests internationally is part of the securitization of international behavior, to foster a safer environment for China’s rise.  

The leadership in Beijing believes China is engaged in systemic competition, and that it is winning. They see the relative performance and stability of the party state as confirmation of its viability and legitimacy as a system. In foreign relations, they exude increasing confidence. At home, China is doubling down - strengthening its party-state capitalist model by enforcing discipline and central control.  

Beijing wants to bolster its defenses against what it views as Western containment of its rise. More effective legal and regulatory tools are being developed in response. Extraterritorial application of Chinese law and pre-emptive action will become more frequent. The rapid retaliation to European sanctions against Chinese officials exemplifies China’s new strategy.  

The CCP’s organic integration with the political system ties the party’s political program and China’s national interest ever closer. Nowhere is this more starkly exemplified than in its “comprehensive national security” concept. This will increasingly spill over to international arenas - creating more friction when Chinese, or the CCP’s, interests are perceived under threat. For public actors this means less compromise and a more offensive stance on a broad array of Chinese interests in international relations. For foreign firms this means that boycotts and souring business ties over political sensitivities will become more frequent. 

China’s digitalization drive has turned the country into a laboratory for new solutions and approaches to business and governance unseen elsewhere. These include new markets and industries, but also a politically controlled surveillance apparatus more capable than ever. China’s wish to be a shaping actor in the global digital economy will be increasingly challenging to navigate for external stakeholders. 

Despite calls for more self-reliance and a more proactive defense of national interests, China will need to remain an open economy, albeit more on its own terms than before. Home advantages and state support for priority sectors will remain in place, and a level playing field is further out of reach as both US and EU governments consider how to create protective regimes of their own.

Reliance on foreign technology and vital resources make decoupling impossible at this point. But the inward-looking economic development model will cause greater issues. China’s partners in trade and businesses, hoping to grow their markets in China, will increasingly find this being linked to political concessions and strategic commitments to the Chinese market Normative and legal considerations will make collaboration on technological development and trade in high-tech more difficult. Already, overseas firms are struggling to keep supply chains clear of potential issues concerning human rights, labor, and environmental standards. This challenge will only grow. 

The party state under Xi Jinping is geared towards stability and security more than ever. It is deploying its favored power tools, centralization, mobilization, and control. The sustainability of this type of authoritarianism is unclear. Despite Beijing’s narrative of China’s superior model of governance, it invests vast and growing amounts of resources into a ballooning security apparatus – desperately trying to extinguish any threat to stability.  

The increasingly politicized business environment is making Sino-foreign joint ventures more difficult. The low threshold for sudden political issues with foreign partners, when, e.g., hit by boycotts over statements made outside China, will lead Chinese actors to stay away from cooperation. 

Despite this, all signs point to a continuation of the trends outlined above. Europe should expect Xi Jinping to stay in power unchallenged for at least one more 5-year term. He has rallied key allies around him and eliminated leadership contenders. In doing so, he is driving the systemic remake of the party state. Recent years have seen both central administration and provincial leadership posts staffed by Xi loyalists. There are no indications a successor to Xi will emerge before the next CCP Congress in 2022. Only a truly unpredicted, existential crisis – precisely the black swan events the party state is getting better at handling - threatens this trajectory. His increasingly marginalized adversaries will watch on – mostly in hope, likely in vain. 

You were reading the introduction of the MERICS Paper on China "The CCP's next century: expanding economic control, digital governance and national security". Continue with chapter 1 "Party-state capitalism under Xi: integrating political control and economic efficiency" here.