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4. Enter Xi Jinping. The reformer?

February 16, 2018
Bill Overholt
AsiaStrat

China's Crisis of Success—4

'Second, they realized that these reforms are painful, and so there's going to be a lot of pushback from all the important power groups of Chinese society. So, they used the Anti-Corruption Campaign as a hammer to push aside these groups who were resisting reform.

Hu Jintao, Xi Jinping's predecessor, presided over China from 2002 to 2012 or, what some call, China's 'Lost Decade.'

'Under Hu, China's top decision making body, the then nine-person Standing Committee of the Politburo worked a little bit like the U.S. Supreme Court - one man, one vote,' says Bill Overholt.

  • 'It wasn't even like the U.S. Federal Reserve, where the Chairman of the Federal Reserve really has tremendous power to drive the outcomes.'
  • 'So, reform just wasn't happening, and China's leaders (those with power, whether in or out of office) decided they needed to centralize power to a much greater degree.'

First, 'the leaders chose a much more charismatic, forceful top leader than Hu - Xi Jinping. And, they:

  • 'Reduced the Standing Committee to seven members from nine.'
  • 'Lobbed off the more extreme political views in order to have an easier consensus. For example, they jailed Bo Xilai, who represented one part of the end of the spectrum.'
  • 'Put the, so-called, extreme reformers in a second tier, in the Politburo, not in the top Standing Committee.' And,
  • 'Created all these small "Leading Groups," as they're called, to handle the most important problems, with Xi Jinping in charge of them all.'
  • 'A tremendous centralization in order to get reform going. That's one part of that consensus decision.'

'Second, they realized that these reforms are painful, and so there's going to be a lot of pushback from all the important power groups of Chinese society. So, they used the Anti-Corruption Campaign as a hammer to push aside these groups who were resisting reform.'

  • 'The most dramatic and the first was going after Politburo Standing Committee member Zhou Yongkang who also ran something called the Petroleum Faction. The Petroleum Faction oversaw controlled energy prices and therefore, hundreds of billions of dollars, which they could extract a share of for themselves.'

'The final piece was Xi Jinping himself. 'Xi had a fairly limited personal political base. He's been very concerned that doing painful reforms in the face of tremendous opposition would not work, or maybe not work and get him unseated.'

  • 'So, he's spent the first five years using his more centralized powers to eliminate all possible rivals and to try to get all the interest groups as much under control as possible.'
  • 'The story has been that the first 5-year term, which just finished recently, is about consolidating power, and the second five years is about implementing the reform process successfully.'
  • 'We’ll have to see.'
Bill Overholt

Bill Overholt

Senior Fellow at Harvard Asia Center
AsiaStrat
  • 21 years' experience running Asia research teams for Nomura, Bank Boston, and Bankers Trust
  • Former Asia Policy Distinguished Research Chair and Director of the Asia Policy Center at RAND

Channels

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Trivium China
Gao Feng
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AsiaStrat

5. Has Xi gone too far?

5. Has Xi gone too far?

China's Crisis of Success—5

Bill Overholt believes 'Xi Jinping may have gone well beyond what the consensus originally intended, and the politicization of the reform may not be exactly what some of the designers of the reform intended.

4. Enter Xi Jinping. The reformer?

4. Enter Xi Jinping. The reformer?

China's Crisis of Success—4

'Second, they realized that these reforms are painful, and so there's going to be a lot of pushback from all the important power groups of Chinese society. So, they used the Anti-Corruption Campaign as a hammer to push aside these groups who were resisting reform.

3. The slower the reforms, the bigger the debt

3. The slower the reforms, the bigger the debt

China's Crisis of Success—3

'What the Chinese have effectively chosen is much slower reform in order to keep the economic growth rate up around 6.7%.'

2. China 2030: 'It's hard to find a more impressive economic plan anywhere else in economic history.'

2. China 2030: 'It's hard to find a more impressive economic plan anywhere else in economic history.'

China's Crisis of Success—2

'Simple economies and politics have been replaced with immensely complex ones. And you gradually get to a point of complexity, where there is an economic and political crisis of some kind.'

1. 'A sense of terrible crisis was a prerequisite for an Asian economic take off'

1. 'A sense of terrible crisis was a prerequisite for an Asian economic take off'

China's Crisis of Success—1

'Why is this sense of terrible crisis a prerequisite for an Asian economic take off? Because it creates a certain political environment.'...'The counterpart, on the economic side, is an economic simplicity.' says Bill Overholt.

China's Crisis of Success

China's Crisis of Success

Bill Overholt and I recently had a discussion about the points he makes in his new book, China's Crisis of Success. Here are five key points, each corresponding to a section below.

The Rise of China: How Economic Reform Is Creating a New Superpower by Bill Overholt, published in 1993, was called 'nonsense' and 'too optimistic.' How did that work out for the reviewers? 

Now, almost three decades after The Rise of China, Bill believes that China's future has become 'much more uncertain.' And, he addresses his concerns in a new book, China's Crisis of Success.

Bill outlined some the key points from his book recently in an interview with me. And, I have conveyed these below. As you will see, I have let Bill speak for himself. 

Bill was right in 1993. 

Is The U.S. Ceding Global Leadership To China?

Is The U.S. Ceding Global Leadership To China?

Hard on President Trump's 'American First' inaugural address, Xi Jinping gave a rousing paean to globalism at the World Economic Forum. And, immediately the hot question became: 'Is the U.S. ceding global leadership to China?'

Yes and no, says Bill Overholt of the Harvard Asia Center. Yes, the U.S. is ceding global leadership. No, China won’t replace the U.S.

What will replace the U.S. is ‘G-Zero’, a world with no single global leader. Not China, not the U.S.

So, can his critics lay this outcome at President Trump’s feet?

Why A Trump–Kim Jeong Eun Summit Could Work

Why A Trump–Kim Jeong Eun Summit Could Work

'What President Trump has done is to signal we are willing to move away from this formula that the North Koreans have to give up everything in their nuclear program before negotiations - only then we'll talk with them. I admire our U.S. negotiators, but that formula is simply absurd.'

Bill Overholt

Bill Overholt

Senior Fellow at Harvard Asia Center
AsiaStrat
  • 21 years' experience running Asia research teams for Nomura, Bank Boston, and Bankers Trust
  • Former Asia Policy Distinguished Research Chair and Director of the Asia Policy Center at RAND
AsiaStrat

AsiaStrat

Channels

AsiaStrat
Granite Peak Advisory
Track Research
Trivium China
Gao Feng
Real Estate Foresight
China Beige Book