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Breakingviews: Xi’s contract with China needs more signatures

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Breakingviews: Xi’s contract with China needs more signatures

HONG KONG, Oct 23 (Reuters Breakingviews) – Xi Jinping has effectively secured a third presidential term at the just-concluded Chinese Communist Party conclave. His prize: a $16 trillion economy in a vulnerable state, dependent on American technology and facing a demographic crisis. Xi also faces popular resentment for the economic pain his draconian policies have caused ordinary citizens. China’s so-called chairman of everything has the power to relieve his people, but it’s unclear whether he has the will.

Xi’s third term as head of the government is all but a formality, after he was confirmed as the ruling party’s general secretary on Sunday, with loyalists taking key roles on the seven-man Politburo Standing Committee. Term limits for the presidency were eliminated in 2018. The next term, which would officially begin in March 2023, should bring more freedom to act on his goals of delivering “common prosperity” and “the Chinese Dream.”

That could be harder than it looks. Over his decade in charge, China ended extreme poverty and has nearly doubled gross national income – which hit $11,890 per capita in 2021, just shy of the World Bank’s high-income definition of roughly $13,000. Yet the middle class appears oddly underwhelmed. A “lie flat” movement analogous to the US-centered slacker phenomenon of the 1990s is gaining popularity. The United Nations-backed World Happiness Index 2022 report puts the People’s Republic in 72nd place: the saddest place in East Asia.

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An inflexible “zero Covid” policy has not helped, turning cities from Shanghai to Chengdu into giant holding cells. Attempting to insulate 1.4 billion people from exposure to Covid-19 has taken a wrecking ball to commerce; one in five young workers are unemployed, the highest on record. Xi has cracked down hard on technology entrepreneurs, and his campaign to bring down debt levels in the real estate sector is depressing the price of homes where most Chinese households park most of their savings.

More tactful approaches in these areas – especially halting harsh lockdowns – could yield quick results. There are other low-hanging fruit that could be harvested with a bit more political force: bolstering the social safety net, for example; redistributing wealth by reconfiguring the clunky tax system; and refurbishing vocational schools and universities to better serve business demand.

Xi could also conclusively wind down the “hukou” regime that locks migrant workers out of healthcare and education. The government owns big stakes in companies like $218 billion Industrial and Commercial Bank of China (601398.SS), the world’s largest lender by assets, and its state enterprises sat on 260 trillion yuan ($36 trillion) of assets at the end of 2021. This wealth could be transferred to private hands via injection into underfunded pension schemes or other methods.

Until now, however, Xi has seemed more focused on ensuring loyalty, suppressing dissent, and fighting off Western influence than redistributing wealth. His pandemic stimulus package has been notably stingy compared to peers, as has spending on healthcare. The focus on weaning China from foreign software and semiconductors entails a solid duplication of effort. That means Chinese people may get intelligent drones before they get decent unemployment insurance. That won’t make them happier or wealthier, and might not make Xi more secure in the end.

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China’s Communist Party has elected President Xi Jinping as general secretary on Oct. 23, his third five-year term, according to Chinese state media.

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

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Editing by John Foley and Katrina Hamlin

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

Pete Sweeney

Thomson Reuters

Asia Economics Editor Pete Sweeney joined Reuters Breakingviews in Hong Kong in September 2016. Previously he served as Reuters’ chief correspondent for China Economy and Markets, running teams in Shanghai and Beijing; before that he was editor of China Economic Review, a monthly magazine focused on providing news and analysis on the mainland economy. Sweeney came to China as a Fulbright scholar in 2008, and in that role conducted research on the Chinese aviation industry and outbound M&A. In prior incarnations he helped resettle refugees in Atlanta, covered the European Union out of Brussels, and took a poorly timed swing at craft-beer entrepreneurship in Quito even as the Ecuadorean currency collapsed (not his fault). He speaks Mandarin Chinese, at the expense of his Spanish.

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