Has China reached the peak of its powers?

EVEN IN HIS moment of triumph, Xi Jinping admitted that dark clouds hang over China. At the Communist Party’s five-yearly congress in October 2022, Mr Xi secured a precedent-trampling third term as party chief. Speaking before some 2,300 party delegates in Beijing, the “helmsman”, as he is now called in state media (with worrying echoes of the worship of Mao Zedong more than half a century ago), described a decade of mostly smooth sailing under his rule. Extreme poverty has been eliminated and his “zero-covid” policy saved lives, he said. The party had “effectively contained ethnic separatists, religious extremists and violent terrorists”, he boasted, using rather loose definitions of each. But he also warned party leaders to “be ready to withstand high winds, choppy waters and even dangerous storms”.

Mr Xi believes foreign powers, led by America, want to contain China. And not without reason. Many Western countries find China’s rise alarming. President Joe Biden’s administration has sought to hobble the Chinese technology industry with sanctions and export controls. Mr Xi wants to reshape the world order in a way that would please autocrats. He presents China’s authoritarian model as a plausible alternative to the West. And he has more resources at his disposal than any despot in history.

Yet China is also weaker than it might otherwise be, thanks to Mr Xi’s own choices. Problems at home are mounting. The helmsman will find them difficult to navigate in 2023.

China is weaker than it might otherwise be, thanks to Mr Xi’s own choices

Among the most pressing challenges is covid-19. Mr Xi has painted China into a corner with his zero-covid policy, which relies on local lockdowns and draconian restrictions to stem outbreaks. He is right that it has saved many lives. But now it is choking the economy and frustrating citizens, who live under the constant threat of quarantine. China shows few signs of loosening up. Much of the population has not received enough doses of a homegrown vaccine to greatly reduce the risk of severe illness and death; the state has not pushed jabs, preferring lockdowns. Nor, for political reasons, will it import more effective Western mRNA vaccines. The health system is weak. That leaves China ill-prepared to live with the virus. Models suggest that exiting the zero-covid policy would result in packed hospitals and hundreds of thousands of deaths.

The disorder this could unleash worries the party. So does the sagging economy. Growth was slower than expected in 2022 and will be again in 2023 if the government continues on its current track. Young people, including college graduates, are struggling to find jobs. The property market, which underpins a big chunk of GDP, is in crisis. Lockdowns and travel curbs, which disrupt supply chains and sap confidence, are only part of the problem. Mr Xi has sketched out a more socialist, state-controlled economy. He believes the party should have more of a say in how businesses are run. He has slowed the pace of innovation and dimmed private-sector dynamism by imposing harsh regulation on tech firms and cutting China off from the world.

Demographics are also working against China. In the 1980s its leaders enforced a one-child policy. The belief then was that the population was growing too rapidly. Now leaders fear the opposite. In 2023 China’s population, currently about 1.4bn, will probably start to shrink, and India will surpass it as the world’s most populous country. For years the share of old people in China has been rising, while the workforce contracts. That, too, has cut into economic growth and put a huge burden on the young. In 2015 China switched to a two-child policy. In 2021 it allowed three. But young people don’t seem to want big families. The average number of births per woman is well below that needed to keep the population stable, let alone growing.

Some experts look at these problems, as well as China’s heavy debt burden, and argue that it has reached the peak of its powers. Mr Xi, who will be re-confirmed as president at the annual session of the legislature in March 2023, is unwilling to change course. What might this mean? A slower-growing China will have fewer resources with which to challenge the West. But a weak China, fearing economic strangulation by America, could be more dangerous. If it is anticipating a decline and still wants to reshape the world—or seize Taiwan—some observers fear China will act soon, while it can.

Westerners must be careful not to predict an outcome—the Communist Party’s collapse—just because it would be to their liking. Even a weaker Chinese economy will be among the world’s largest. The state can mobilise vast resources in strategic areas, such as producing semiconductors or weapons. Other countries, including America, will face their own demographic challenges in the years ahead. China’s continued ascent is not inevitable, but neither is its decline.■

Roger McShane: China Editor, The Economist

This article appeared in the Leaders section of the print edition of The World Ahead 2023 under the headline “Cloudy with a chance of pain”