'This Time Feels Different'

Just when we thought we were getting used to Xi Jinping’s tech reforms and social-engineering regulations, the Evergrande crisis heats up.



September 27, 2021
'This Time Feels Different'

Just when we thought we were getting used to Xi Jinping’s tech reforms and social-engineering regulations, the Evergrande crisis heats up.

  • ‘Heats up’ isn’t exactly right.

Anyone paying attention to Beijing’s ‘three red lines’ to curb Chinese property developers’ leverage and to ‘nine lives’ Evergrande’s financing methods knew this was coming.

  • But just with the tech ‘crackdown,’ we outside of China were late catching on.

I had planned to go over some of the issues surrounding Evergrande (Is it China’s ‘Lehman Moment? No; does an Evergrande default signal a coming collapse of China? Again, no.)

  • But having read a number of analyses that just seemed to miss how Evergrande fits into the big picture of what’s going in China – and so came to unhelpful conclusions - I thought today I would take a step back.
  • And like a good therapist, probe the origins of our current discontent about China in the midst of Mr. Xi’s rapid-fire reforms and regulations. Then any comments about Evergrande (and whatever is coming next) would make more sense.

So next issue: Evergrande.

1 | ‘Nobody Knows Anything’

‘NOBODY KNOWS ANYTHING,’ writes The Wall Street Journal’s Jason Zweig, ‘because Chinese corporations and their investors are hostage to the whims of Xi Jinping, who is effectively the country’s president for life.’

  • ‘Executives, companies and entire industries formerly favored by Xi and the ruling Communist Party have been stripped of power and value without warning, making foreign investors look like fools.’
  • Zwieg could have added Mr. Xi’s raft of regulations aimed at social engineering.

Mr. Xi clearly has a plan for remaking China in his vision, but he’s keeping that plan to himself.

  • Those of us outside China as well as those inside China (yes, the Chinese seem to be as perplexed as the rest of us) can begin to discern the direction, the outline, and a hazy glimmer of the goals, but the breadth and the depth – and ultimate motivations - of the plan remain opaque.
  • (I’m distinguishing here Xi’s own clear statements over the years about leading China toward becoming a socialist state and the like – as I’ve written before: he means it - with just how far he intends to go in this round.)
  • Because of this - even though we do, of course, know some things - we’re not wrong in feeling, along with Mr. Zweig, that ‘Nobody Knows Anything.’

And, as if all this wasn’t making analysis difficult enough, crises [for today read: Evergrande] are emerging beyond the rolling out of Mr. Xi’s master plan.

  • Yet Mr. Xi’s new policies - not the somewhat dependable, pragmatic precedents - will guide how Beijing will manage each new crisis [so will the government bailout Evergrande?], and we just don’t know how those new policies will be applied.

Finally and most disturbing is that Mr. Xi has suddenly begun taking China down a new and very different road.

  • And no one, most of all Mr. Xi, knows if the outcome will be success or failure.

In the meantime, governments have to make policies, CEOs have to plan strategies, and investors have to invest or not.

  • In each case, however, we have to recognize that we are making decisions based mainly on speculation about what Mr. Xi will do next and what the impact of each action will be.
  • Only later will we know if those guesses were right or wrong.

2 | ‘This Time Feels Different’

‘All eyes are fixed on the dark side of China [meaning the Evergrande crisis],’ writes Stephan Roach of Yale. ‘We have been here before.’

  • ‘Starting with the Asian financial crisis of the late 1990s and continuing through the dot-com recession of the early 2000s and the global financial crisis of 2008-09, China was invariably portrayed as the next to fall.’

‘Yet time and again, the Chinese economy defied gloomy predictions with a resilience that took most observers by surprise.’

  • ‘Count me among the few who were not surprised that past alarms turned out to be false.’

‘But count me in when it comes to sensing that this time feels different.’

  • Me too.

‘The new dual thrust of Chinese policy – redistribution plus re-regulation – strikes at the heart of the market-based “reform and opening up” that have underpinned China’s growth miracle since the days of Deng Xiaoping in the 1980s.’

  • ‘The problem for China is that its new approach runs counter to the thrust of many of its most powerful economic trends of the past four decades: entrepreneurial activity, a thriving start-up culture, private-sector dynamism, and innovation.’
  • ‘A regulatory clampdown, in conjunction with a push to redistribute income and wealth, rewinds the movie of the Chinese miracle.’

So why does ‘this time feel different’?

  • In the earlier cases Roach cites, we were waiting to see if China could work its way out of some calamity.
  • In this case, Xi is not so much rewinding the movie as he is filming just the first scene of an entirely new feature using a script only he can see – that’s what feels different. (Did we feel the same way when Deng started his reforms? Did we even pay much attention?)
  • Because only he knows (we hope) what happens next, we feel as though we are watching a highly suspenseful thriller - with all the attendant anxiety that comes from not knowing what comes in the next scene or how it will end.

3 | Xi Jinping and China’s 'New Stage of Development'

Another reason why ‘this time feels different’ is the impression that Mr. Xi is motivated more by Marxist ideology than Deng Xiaoping-style pragmatism.  

‘Xi Jinping’s campaign against private enterprise, it is increasingly clear, is far more ambitious than meets the eye.’

  • ‘The Chinese President is not just trying to rein in a few big tech and other companies and show who is boss in China.’
  • ‘He is trying to roll back China’s decades-long evolution toward Western-style capitalism and put the country on a different path entirely.’

‘ “China has entered a new stage of development,” Mr. Xi declared in a speech in January.’

  • ‘The goal, he said, is to build China into a “modern socialist power.”’

4 | We've Heard It All Before

Building China into a 'modern socialist power' has been the goal of every leader of the People’s Republic of China, from Mao to Deng to Jiang to Hu, and now to Xi.

  • And every one has affirmed this.

Deng himself made this clear many times. In 1984, he said:

  • ‘It is crucial for us to adhere to Marxism and socialism.’
  • ‘We have said that socialism is the primary stage of communism and that at the advanced stage the principle of from each according to his ability and to each according to his needs will be applied.’
  • ‘This calls for highly developed productive forces and an overwhelming abundance of material wealth.’
  • ‘Poverty is not socialism, still less communism.’
  • ‘We believe that the course we have chosen, which we call building “socialism with Chinese characteristics,” is the right one.’

To attain ‘an overwhelming abundance of material wealth,’ Deng’s ‘socialism with Chinese characteristics’ incorporated elements of capitalism.

  • To our eyes – and indeed to many Chinese eyes – this looked more pragmatic than ideological, no matter how theorists tried to shoehorn it into Marxist thought.

But, as I have written before, when Deng Xiaoping introduced capitalist elements into China’s economic model, he was not abandoning the goal of China’s moving along the Marxist path to socialism. Instead he saw himself as using these tools to advance toward that goal.

  • No matter how we have tried to convince ourselves since then that China’s leaders were capitalists at heart and were just mouthing communist slogans they didn’t believe, we were wrong.

5 | More Ideology Than Pragmatism

Why Mr. Xi’s recent policies and actions seem to be driven by ideology rather than pragmatism may well be that he believes that China has achieved an overwhelming abundance of material wealth,’ and it is now time to move on, as he said and Deng predicted, to a ‘new stage of development’ toward socialism.

  • And that means that the recent policies and actions we find perplexing make perfect sense to the Marxist Xi Jinping.
  • In other words, everything seems more ideologically driven than pragmatic because, well, it is.

As Ms. Wei writes:

  • ‘Xi is trying forcefully to get China back to the vision of Mao Zedong [and all Marxists], who saw capitalism as a transitory phase on the road to socialism.’
  • ‘Underpinning Mr. Xi’s actions is an ideological preference rooted in Mao’s development theories, which call state capitalism a temporary phase that can help China’s economy catch up to the West before being replaced by socialism.’
  • ‘An ardent follower of Mao, Xi has preached to party members that the hybrid model has passed its use-by date.’

‘A 2018 article in the party’s main theoretical journal, Qiushi, or Seeking Truth, laid bare his belief:

  • ‘ “China’s practice shows that once the socialist transformation is completed, the basic socialist system with public ownership as the main body is established...[and] state capitalism, as a transitional economic form, will complete its historical mission and withdraw from the historical stage.” ’

6 | Mao's Heir?

‘When the Chinese Communist party celebrated its centenary on July 1, Mr. Xi donned a Mao suit and stood behind a podium adorned with a hammer and sickle [right above the portrait of a similarly-attired Mao Zedong just in case anyone missed the reference], pledging to stand for the people.’

  • ‘After the speech, he sang along with “The Internationale” broadcast across Tiananmen Square.’
  • ‘In China, the song, a feature of the socialist movement since the late 1800s, has long symbolized a declaration of war by the working class on capitalism.’
  • ‘Such gestures, once dismissed as political stagecraft, are being taken more seriously by China watchers as it becomes evident Mr. Xi is more ideologically driven than his immediate predecessors.’

7 | The Big Question

The big question of course is just how far and how fast Mr. Xi can go in this Mao-inflected ‘new stage of development’ before the system might begin to crack.

  • Mao, also ideologically driven, tried to skip a few steps and take China immediately to socialism or, some might argue, communism with the Great Leap Forward.
  • He failed. Tens of millions died of starvation and the economy was left in shambles.

Picking up the pieces was Deng Xiaoping and his experimental ‘socialism with, um, Chinese characteristics.’

  • And that on the whole has worked out pretty well for China and the Chinese people.

But if Deng failed - and it certainly was not a foregone conclusion he wouldn’t - and China then sank deeper into poverty, we would have shrugged.

  • Sad for the Chinese people but, with China’s economy being then isolated and relatively small, not much of a big deal for the rest of us.

If Mr. Xi fails in his radical reshaping of the Chinese economy and society – and his success is certainly not a foregone conclusion - we will not shrug.

  • Sad for the Chinese people but also catastrophic for them and us.

8 | 'Socialism with Chinese Characteristics': Xi Jinping-style

We are at the very beginning of a brand new and very uncertain ‘socialism with Chinese characteristics: Xi Jinping-style.’

  • Little wonder we are left to feel ‘nobody knows anything.’

Because this time it really is different.

  • And whatever we have to say about Evergrande – or anything else about China for quite some time - has to have this as the context and be said with great humility.



August 24, 2023
Xi Jinping: 'The East is Rising' | Yes. Rising against China
All our careful analyses of PLA capabilities, the parsing of Mr. Xi’s and Mr. Biden’s statements, the predictions as to the year of the invasion, everything – all out the window. This is one you won’t see coming – but one you have to have prepared for.
keep reading
July 23, 2023
‘The U.S. Has Tactics, But No China Strategy’ | Bill Zarit
‘The U.S. needs national review of outward investment to China, but it has to be narrow and targeted and done in conjunction with our allies and partners.’
keep reading
July 10, 2023
‘Is Xi Coup-proof?’ (after the march on Moscow, I have to ask)
What about the guys without guns? So if Mr. Xi doesn’t face a rogue army or a military coup… How about a coup by Party elites?
keep reading
August 24, 2023
Xi Jinping: 'The East is Rising' | Yes. Rising against China
All our careful analyses of PLA capabilities, the parsing of Mr. Xi’s and Mr. Biden’s statements, the predictions as to the year of the invasion, everything – all out the window. This is one you won’t see coming – but one you have to have prepared for.
keep reading
July 23, 2023
‘The U.S. Has Tactics, But No China Strategy’ | Bill Zarit
‘The U.S. needs national review of outward investment to China, but it has to be narrow and targeted and done in conjunction with our allies and partners.’
keep reading
July 10, 2023
‘Is Xi Coup-proof?’ (after the march on Moscow, I have to ask)
What about the guys without guns? So if Mr. Xi doesn’t face a rogue army or a military coup… How about a coup by Party elites?
keep reading
April 2, 2023
Xi Jinping: 'Change unseen for a 100 years is coming.'
Time went of joint in the mid-1800s when China began its ‘Century of Humiliation.’ And Mr. Xi, with a sense of destiny, seems to feel he was born to set it right. (I very much doubt that Mr. Xi would add: ‘O cursed spite’ – he seems to relish his role and the shot it gives him to go down in history as China’s greatest ruler.)
keep reading
January 2, 2023
Xi Jinping: Bad Emperor?
Some have asked me what will be the greatest risk to China in the next five years. My answer: That Xi Jinping will overstep and enact policies that Chinese people won’t accept, especially those that have a direct impact on their lives and livelihoods.
keep reading
November 22, 2022
'Strangling with an intent to kill.’
I began to have some hope of getting our act together with Mr. Biden. He worked to rebuild relations with allies who could join the U.S. in the competition. And he understood the need for America to strengthen itself for competition. Hence, the infrastructure, CHIPS, and other acts. But whether Mr. Trump or Mr. Biden, one thing nagged me beyond all the rest. Why is America strengthening our competitor? — In the instant case: Why is America giving our competitor advanced semiconductor resources to strengthen itself to compete against us?
keep reading
October 31, 2022
Xi's China: 'less reliable, less predictable, and less efficient'
‘China’s predictability is being eroded by the frequent, erratic policy shifts that have taken place in recent months, such as the unexpected disruptions to power supplies that took place in 2021, and the sudden mass lockdowns that were imposed in an attempt to contain COVID.'
keep reading
October 18, 2022
Xi Jinping: ‘Crossing a threshold to outright dictatorship?’'
The view from inside China appears to be quite different. Yes, the Chinese people may grumble about the Zero-COVID lockdowns, and just a few days a banner critical of Mr. Xi and his regime was unveiled over an overpass in Beijing.
keep reading
October 10, 2022
The 20th Party Congress with All Eyes are on Xi Jinping
The attention to Mr. Xi is in large part because he will exit the Party Congress with even greater power, no discernible opposition, and a new five-year term (with more likely to follow). And many of the constraints that may have been in place not to jeopardize his reappointment will be gone.
keep reading
September 26, 2022
China Coup: How Worried Should Xi Be?
‘Xi and the phrase #ChinaCoup trended on social media after tens of thousands of users spread unconfirmed rumors that the president was detained and overthrown by the China's People's Liberation Army.’
keep reading
September 18, 2022
'How do you spy on China?'
Many of you have asked about my own take on the issues I analyze in these pages and about my background. Today is some of both.I am honored to have been interviewed by the terrific Jeremy Goldkorn, editor-in-chief of The China Project. Below is part of that interview.
keep reading
September 5, 2022
Xi’s Dangerous Radical Secrecy
In a world of political hardball, investigative reporting, and tabloids, we know a lot (if not always accurate or unspun) about world leaders, especially those in functioning democracies. Not so with Xi Jinping.
keep reading
July 10, 2022
Building Biden's 'Great Wall' Around China
Whether you view it as an aggressive adversary or a nation asserting itself in ways commensurate with its rising status, China is creating risks – some subtle, some obvious - that, along with reactions of the U.S. and its allies, have to be factored, into every related business, investment, and policy strategy.
keep reading
July 1, 2022
A Debt Crisis of its Own Making
Ever since Xi Jinping announced ‘One Belt, One Road’ in 2013, I watched it expand China’s economic and geopolitical influence and lay the foundation for projecting its military power – and become by many accounts an exploiter of the developing world itself.
keep reading
June 22, 2022
No. Ukraine Won't Change Xi's Plans - or Timetable - for Taiwan
Ukraine won't speed up or delay Mr. Xi's timetable. (But it may cause him to work harder to strengthen China's military and insulate its economy from external pressure.)
keep reading
June 12, 2022
'The competitiveness of China is eroding.'
Understanding the drivers of China’s rise to supply chain prominence gives (me anyway) insights to help analyze the changes – or not – of ‘decoupling.’
keep reading
June 5, 2022
U.S.-China Relations: A Chinese Perspective
Wang Jisi notes that the views are his own, and certainly we don’t know how closely, if at all, they reflect the thinking of anyone in the leadership. But given his straightforward and thorough analysis, free of canned arguments and slogans, I hope they do. I also hope the Biden administration pays heed.
keep reading
May 30, 2022
Is Xi Jinping China's Biggest Problem?
And while the impact of Zero Covid may be relatively short-lived, the impact of Mr. Xi’s return to the socialist path will be felt for a very long time, both in China and the world. So the impact will no doubt be felt as long as Mr. Xi leads China.
keep reading
May 22, 2022
The Next U.S.-China Crisis: CEOs & Boards Are Not Ready
‘The bad news is that very few corporations engaged in China have contingency plans or long-term strategies to hedge against the downside risks of growing geopolitical competition.’
keep reading
May 14, 2022
China GDP: 'A very long period of Japan-style low growth.’
Here are some of the insights from ‘The Only Five Paths China’s Economy Can Follow’ by Peking University’s Michael Pettis. This excellent analysis of China’s economy is worth a careful reading.
keep reading
May 1, 2022
'Zero Covid' & the Shanghai lockdown
Joerg Wuttke is the president of the EU Chamber of Commerce in China - the 'official voice of European business in China.'
keep reading
April 17, 2022
Is China's Tech 'Crackdown' Really Over?
Today, I’m sharing with you a bit of Ms. Schaefer’s analysis of the tech ‘crackdown’ (but not of the AI and algorithm law). She explains why...
keep reading
April 17, 2022
China: 'Sleep Walking into Sanctions?'
A looming risk is Russia-like sanctions on China. The sanctions on Russia are causing plenty of disruptions. But those disruptions would be nothing compared to the catastrophe of Russia-like sanctions on China. The good news is that if China does violate the sanctions, the violations would likely be narrow and specific - even unintentional. So secondary sanctions - if they come at all - likely won't hit China’s economy and financial system deeply – or (fingers crossed) U.S.-China relations.
keep reading
April 5, 2022
Russian Sanctions' Impact on China
In the meantime, some contend, China has a payment system, the Cross-Border Interbank Payment System or CIPS, that could make it independent of SWIFT.
keep reading
March 21, 2022
Faint Cracks
For some time now we’ve taken it for granted that Xi Jinping has so consolidated his power that his will is China policy.
keep reading
March 13, 2022
Is China in a Bind?
It wants to support Russia, but also wants to support the international order from which benefits and doesn’t want to alienate the major economies its own economy is intertwined with.
keep reading
February 19, 2022
Under Construction: Two (Opposing) World Orders
Years ago, before the so-called ‘New Cold War,’ when asked what China issue interested me most, I said, ‘China and the liberal world order.’
keep reading
February 17, 2022
'A Fateful Error'
As the 1904 cartoon from Puck magazine shows, this isn’t the first time in the past 100 or so years that Russia has shattered the peace. [Or has been defeated, as it was in 1905 by the Japanese in the Russo-Japanese War.]
keep reading
February 2, 2022
Ukraine, Taiwan, & the 'Nightmare Scenario'
This in no way diminishes the calamity of a war with China. But the ability of the U.S. to wage that war would not be diminished by having to fight Russia at the same time.
keep reading
January 18, 2022
This is Mr. Xi's Big Year - and Nothing Better Spoil It
Every politician going into an election wants a strong economy. Xi Jinping is aiming to be reelected (and all indications are he will be) to a third five-year term at the National Party Congress this autumn. So Mr. Xi will ease (and stimulate ) as much as he can without creating major headaches to deal with after his reelection - all in the name of 'stability.'
keep reading
January 5, 2022
Bachelors, Mother-in-Laws, & China's Economy
‘In the long-term, demographics is one of the most important forces that will shape the growth momentum of China for the next decades. Two demographic features that are especially worth paying attention:’
keep reading
December 30, 2021
Q&A 6 | China Reverse Its Declining Birthrate?
‘A lot of people feel like the ideal, the optimum number of children is a maximum of two children. So it's not a surprise to me that the three-child policy hasn’t had a high response in the short term. But I think in the long term it will be much better.’
keep reading
December 30, 2021
Shang-jin Wei Presentation-1 | Drivers of Growth Momentum
‘In the last year and a half we saw a spate of government actions all contributed to not just falling stock prices for companies in certain sectors but a deterioration in investor sentiment more broadly. These include:...’
keep reading
December 30, 2021
Q&A 1 | How Much Does the Gender Imbalance Contribute to China’s Rising Housing Prices?
‘Gender imbalance accounts for about one-third of the increase in China’s housing prices in the last two decades or so.’
keep reading


Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. Duis cursus, mi quis viverra ornare, eros dolor interdum nulla, ut commodo diam libero vitae erat. Aenean faucibus nibh et justo cursus id rutrum lorem imperdiet. Nunc ut sem vitae risus tristique posuere.