The sudden realism of Premier Li Keqiang
Probably nothing will change in Xi Jinping's China, but Li Keqiang represents the biggest opposition to the PRC's current trajectory
Thanks to K. Goodwin for editing assistance.
Today’s article has some extensive footnotes that help explain and define certain events. They add clarification without making the main body of this text too long and confusing.
The People’s Republic of China Premier Li Keqiang (李克強) has served as a silent, sidelined member of the Chinese Communist Party (CCP) since Xi Jinping (習近平) assumed a cult-like leadership over the party and the country. At one time in the early aughts, Li appeared set to become the president. Yet, Xi overtook Li by 2008, and the CCP relegated Li to became only the second in power; highly influential, yet in a position that would demand him to walk in step with Xi. While surely two humans agreeing on everything over almost 10 years is seemingly impossible, Li has continued to support Xi’s initiatives. He was key in cultivating much of the expansion of manufacturing in China and intertwining the global supply chain to China.
In March 2022, Li confirmed that, unlike Xi who won a constitution battle in 2015 to have presidential term-limits removed, he would abide by the PRC constitution and step down in March 2023 following his second term. Instead of going quietly, Li seems to have opened a split with Xi over the past months. Seemingly troubled by the direction of the PRC’s microeconomics, Li and Xi have provided nearly impossible demands, and contradictory, orders to party cadres. And without COVID-19 (Omicron) breaking through China’s quarantine measures, this potential split would likely not occur. The crackdown on technology companies, domestic companies opening on foreign stock markets, Xi Jinping thought, and the crushing of Hong Kong1 may have all continued without any internal second-guessing of these decisions.2
Instead, the crackdown on tech companies has impeded the trajectory of tangible value in the Chinese economy as Xi opts for more pseudo-economic supply-side construction to boost the Chinese economy. Meanwhile the real estate market is propped up by sheer promises and a bit of hand-waving from foreign investments. The endless cycle of using real estate and construction to boost local and international economies has done little to boost the confidence of businesses to expand their economic activity. Local officials charged with this economic planning, however, continue to focus on instituting several levels of COVID-zero policies. Awkwardly, this has led to a split in focus, as Xi continues to push COVID-zero, while Li is pushing for local governments to implement plans now. The messaging is disjointed because the challenges have finally divided the consensus cult of thought which Xi has instituted. The situation is also more dire than what is being presented, leading to small but significant pushback from top executives, including Tencent’s Tony Ma.
The core of the problem follows the flow of inputs which emphasised construction and mass real estate to shore up the national outlook, largely at the expense of smaller banks. Yet, the centrally controlled economy never capitulated to rumours of imminent demise largely due to a stable supply chain and increased global manufacturing. Now the supply chain has proven to be one global catastrophe (COVID-19) away from breaking and nation-states have encouraged caution from intertwining with the PRC’s manufacturing for a host of reasons, including human rights violations.
Domestically, Chinese citizens favoured the 2020 lockdowns and were willing to fight COVID-19. In February 2020 COVID-19 was still very new, and being a SARs virus gave the government every reason to lockdown the country for a virus that could have a very high fatality rate.3 Though the original lockdown came at the cost of human lives and the predictability of pandemic planning. Compared to a Taiwanese or Australian plan of patient reaction, which relied on medical interventions (including masks and sanitation) instead of lockdowns, China — and Xi Jinping — locked themselves into a strict method of implementing the COVID-Zero policy. Xi doubled down on this form of COVID-Zero as this method became a propaganda piece, comparing western democracies as ‘fragile and infantile’ compared to the strength of the party’s response.4
Consequently, what the CCP would never do is admit they were wrong. Infamously, in the months leading to Omicron outpacing Delta as the dominant strain, questions surrounded how, and if, the CCP would strategically declare victory over COVID while transitioning to living with COVID, or if they would maintain a strict COVID-zero with an ever-increasing infectious variant sieging the country. And if the party decided to pursue COVID-zero, at what cost would that come with, and what cost would the citizens endure?
Since March the answer has been clear: the current CCP leadership will maintain COVID-zero at the cost of everything.
The lockdowns in China offer a few takeaways. First, the Shanghai lockdown has been unequivocally the harshest. Second, Xi seems to have the emperor syndrome of being unable to say he was wrong. Third, Xi seems to have the autocrat syndrome where his inner circle provides him bad information. Fourth, while COVID’s surge through the U.S. poked holes in the cracks of society, COVID-zero has exacerbated the symptoms of CCP’s scourge on Chinese citizens’ lives. Fifth, COVID-zero is creating an incredible divide between the ‘Guangdong-inisation’ and the ‘Chongqing-inisation’ cliques of the CCP5, with more cadres shifting towards a variant of Wang Yang’s (汪洋) Guangdong-inisation.
Each of these takeaways likely deserves a full essay. Instead, I will quickly touch on the first four and spend a longer time on the fifth, which gets back to the main point of this article - Li Keqiang. As far as Guangdong-inisation and Chongqing-inisation, read the footnote. I will write another article on Wang Yang later.
First: the Shanghai lockdown has been unequivocally the harshest. Shanghai was the first city which the Omicron variant of COVID-19 spread into at a large scale. To set an example, Shanghai authorities did two things at once; which has equalled one thing that cannot be termed anything else but immature. First, the party published a newspaper saying that Shanghai would not be going into lockdown, announcing the arrests of people who (correctly) stated Shanghai would be going into lockdown. Four days later, Shanghai began the slow crawl into lockdown. A week later, all of Shanghai would be locked down. Shanghai is the most international city in China, consequently meaning the results have been shown all over the globe. (If you have read this far, I am going to assume you are at least familiar enough, so I will not go into details). Moreover, this has angered the remaining foreigners, leading to a mass exodus of foreigners from China. This has also angered citizens, leading to signs that while government-toppling dissent is not expressed, sheer rage and distrust has been, and will continue to be displayed. Whatever subsequent moves the central government makes this year will be judged by the population with the first five months of 2022 as a backdrop. Lastly, this lockdown is a mini-exhibit of the ongoing proxy battles between Xi’s clique and Jiang Zemin’s more-internationally and ‘liberal (with CCP state security characteristics)’ minded Shanghai clique.
Second: Xi seems to have the emperor syndrome of being unable to say he was wrong. This takeaway may have the most severe consequences for the rest of the world. Regardless of what other nations do to deter Xi’s CCP leadership from an attempt to invade Taiwan or halt human rights abuses in Xinjiang and Hong Kong, ‘enough’ will never come. That sounds fairly hawkish and alarmist considering what I wrote two years ago; it probably should be. The CCP is set on their aims of rebuilding a new empire and overcoming the ‘century of humiliation’ by humiliating the rest of the world. Over the past two years, the propaganda on Taiwan has only become more violent, ugly, and genocidal. Crackdowns on Hong Kongers have become tauntingly painful to watch. Sanctions have helped Laam Chau Hong Kong6, but will not preserve or liberalise Hong Kong. Since the Russian invasion of Ukraine, ties to Russia have, despite some early caution, strengthened. Autocracy is on the rise and the CCP desires to inflame those who strive to increase it. Strong actions in the Asia-Pacific region are necessary to deter the autocratic clique.7 If COVID-zero has shown anything, it has shown the autocrat’s inability to say he was wrong. Such words are not baked into the autocracy cake; take the words of an autocrat at face-value.
Third: Xi seems to have the autocrat syndrome where his inner circle provides him bad information. Long-standing autocrats throughout history surround themselves with yes men (almost always men, which seems to be a feature and not a bug of autocracy). This is also known as the Dictator Trap. To rise to power a dictator within an autocracy must be careful to find cadres who will offer him power in return for resources and power upon taking office; in Xi’s case, there is an added ‘near-deity’ element with regards to Xi Jinping Thought. Thus, Xi’s cadres may not be revealing the true COVID situation to him; if the cadres are even aware of the true COVID situation themselves. COVID-zero may be a combination of ‘inability to say no’ and ‘bad information’ on the cost of COVID-zero. That ‘bad’ information may also be making Xi more arrogant, and thus creating a divide between those willing to tell Xi he is wrong (Li Keqiang) and those who confirm his policies. However, this point remains speculative. Certainly Li has pushed back at some point, and thus he is privy to functionally accurate information some of the time. Regardless, Xi may be so deep into Dictator Trap, that he is now inoculated against accurate information which contradicts his policies.
Fourth: while COVID’s surge through the U.S. poked holes in the cracks of society, COVID-zero has exacerbated the symptoms of the CCP’s scourge on Chinese citizens’ lives. I linked this SCMP article earlier, but the title should be stressed: China’s local governments, denied lifeline, face catch-22 scenario as businesses lose confidence. There is a strong disconnect between the realities on the ground and investment portfolios in China. The CCP will always ensure there is a promise of continued market growth, and manipulate the market accordingly. Reality, however, is easier to ignore particularly because so little international coverage focuses on the reality of restaurants, grocery stores, domestic shipping companies, and other solely domestic companies. They are nervous. They will not be receiving a lifeline. The support for the people of China remains completely uncertain, as it has always been for over a century now. No measures of local economic support packages will re-boost that lost trust. Most of those economic support packages will serve nationally focused (which receive international investment) only. The CCP’s policies focus on people only as instruments to achieve a certain end, not as people who live vibrant lives.
Fifth: COVID-zero is possibly creating an incredible divide within the CCP. The focus so far on COVID-zero policy and the history of economic planning has been a way to briefly introduce the uncertainty within China. Up to this point, Li Keqiang long worked in-step with Xi and showed little willingness to break with him. His efforts in 2014 and 2015 quietly strengthened Xi’s position, as Li focused on small business and local urban construction as well as on the strength and planning of the central government. COVID-zero, the cult of Xi, and the crackdown on tech may be changing his perception of the leeway which Xi has taken since 2019.
In mid-May, Li visited Yunan Province (雲南者), notably not wearing a mask. In addition to that subliminal message, Li spoke on two other notes. First, to implement policies to add growth by June; Second, to strengthen the position of technology companies. The second is the most noteworthy, as the CCP has cracked down on technological companies over the past year, reigning in video game producers, education, and entertainment. A push away from technology companies has limited the scope of the economy while increasing unemployment while erasing $1.5 trillion from the market. The crackdown also encourages the cultural push towards ultranationalism and the cult of Xi; providing a new wave of cultural fear lest any tech company try to expand in a way that is either not nationalistic or connects Chinese citizens beyond the firewall.
Last week, Li then held a call with party cadres across the nation, calling for them to better balance economic recovery plans with COVID-19 restrictions. Top party officials were absent from the meeting. In addition to a seeming split between Li’s traditional focused on the central government guiding the local governments and Xi’s focus on COVID-zero and a cult of personality, this is an indication of frustration within CCP leadership and local cadres, who will not receive government financial help, and are unlikely to receive the full support of top local officials focused on COVID-zero policies.
Through the noise of those hopeful that investment into China will inspire new growth, growth in China may not even reach 4% (the target was 5.5%). If local cadres feel an increasing lack of support, which Li Keqiang is likely to latch onto due to his focus on local economic data rather than national data, Xi Jinping may have a difficult time to win a third-term this fall at the national congress. A severe split could form before fall, pitting personal and national ambitions against one another, forming new cliques and shaping China’s short-term pursuits. Worse, it could encourage Xi to take drastic measures in order to cement national and local support.
Right now, Xi’s hold on power is strong enough that he is unlikely to lose his candidacy for a third presidential term. Despite the arguments I provide herein, odds are that nothing changes in the party simply because that is the way things work in the CCP. The more things change, the more they stay the same - particularly in a one-party system which has seen significant chaos and loss every time there is a severe shakeup. Party members are hyper aware of their own history.
Yet, this is a new era in the CCP with a strong, cult-like leader who continues to use his cult-like leadership to cement his own position. New paradigms are present which may send the country’s economy into a downward spiral. Li is an economist at heart and has a history of looking at underlying data — and all numbers in the Keqiang Index8 look atrocious. This may be one of the most important summers in the CCP’s history.
I specifically mention Hong Kong, and not Xinjiang, as since 1997, Hong Kong has been a neo-colony and money laundering activity which tighter controls in Mainland China do not allow. While some of this activity goes on, the NSL crackdown was a severe blow to Jiang Zemin’s Shanghainese clique’s financial activity. Further reading on this topic which I should eventually do a full essay on: Nikkei, The Atlantic, a version of my master’s thesis.
Under the hypothetical that Li Keqiang became President of China instead of Xi, it is no guarantee these things do not happen. The CCP has long planned the crushing of dissent in Hong Kong, and a wide sweeping NSL under Article 23 of the Basic Law had always been the plan (cf. 2003 and Regina Ip). However, the way it happened in 2019 and 2020 has also been targeting the Jiang Zemin clique, letting Xi tie in his own proxy war into continued party neo-colonisation efforts. Li Ke Qiang may have also halted companies becoming ‘too’ international or created his ‘own’ thought book. However, Li reads as a man willing to use the status quo to his advantage. Xi has less patience and more ‘imperial’ ambitions.
SARS-nCOV-1 (2003-2004) has a global case fatality rate of 11%, although countries such as Taiwan experienced a 21% CFR, while Hong Kong and Canada experienced over a 15% CFR. By contrast, the COVID-19 (SARS-nCOV-2) CFR is an estimated 1.2% with a global vaccine effort.
Whilst completely ignoring Taiwan’s lockdown-less response that allowed the country to experience two Christmases nearly COVID free, and likely a third focusing on transitioning to mass gatherings with endemic COVID. 加油台灣!This also ignored Vietnam, New Zealand, and Australia’s responses which fared equally as well with Taiwan until they ‘fell’ to COVID at their respective times and transitioned to using medical interventions to ‘live’ with COVID. CCP propaganda really is nationalistic, eh?
Guandong-inisation = a more socialist economic policy which emphasises allowed liberal trade with a focus on trade unions. Chongqing-inisation = a more Maoist approach, focusing on state security and cadres running economic planning. Correctly, these terms are the “Guangdong Model” and the “Chongqing Model”. However, I believe that their aims are more clear with the addition of ‘inisation’, referring to the transformation of China’s economic planning and the two different visions.
Laam Chau = if we burn, you burn with us (a motto in Hong Kong popular culture, arising at the end of the 2019-20 pro-democracy protests once it became clear a crackdown was inevitable).
For more on this theme, read The Bad Guys are Winning, The Atlantic’s December 2021 cover story by Anne Applebaum and one of my favourite essays from last year.
That is an actual term which I did not invent. According to a 2010 Economist article, Li uses railway cargo volume, electricity consumption and bank loans. How much he still relies on these numbers to make decisions is speculation; it does provide insight into his personal philosophy, however.