China: A Great Economic Game looms in 2019

Year 2019 will be a crucial year for China. Following the 1911 Revolution in China, the Manchu (Qing) dynasty disintegrated, triggering the fall of imperial rule. Eight years later, the May Fourth Movement took place in the Chinese capital; students started protesting against the nationalist government’s weak response to the Treaty of Versailles, allowing Japan to control the territories surrendered by Germany in Shandong.

On the morning of May 4, 1919, student representatives from 13 different local universities met in Beijing and drafted five resolutions, in particular, to oppose the granting of Shandong to the Japanese and the creation of a Beijing student union. Later in the afternoon, some 3,000 students of Beijing University marched to Tiananmen Square shouting slogans such as “Struggle for the sovereignty externally, get rid of the national traitors at home” or “Don’t sign the Versailles Treaty”.

In 2019, the Communist Party of China (CPC) will celebrate a century of this turning point which “empowered” the masses.

2019 will also mark the 70th anniversary of the foundation of the People’s Republic, “a pivotal year for securing a decisive victory in finishing the building of a moderately prosperous society in all respects,” said a statement of China’s State Council.

This raises a crucial question: What is in stock for China in the coming year?

One can perhaps find the beginning of an answer in a speech that President Xi Jinping gave on the occasion of the 40th anniversary of China’s Reform and Opening Up.

Mr Xi took the occasion to reassert the CPC’s rule as the only key to weathering “unimaginable” perils and dangers.

There are a number of signs that everything is not fine in the Middle Kingdom; the South China Morning Post admitted that President Xi’s speech “shed little light on future reforms, to the chagrin of those wanting economic liberalisation, and doesn’t mention the US trade war or a slowing economy”.

During his one-and-a-half-hour address, the Chinese President stressed time and again the party’s leadership, which for him had been the key to China’s rise: “Xi spent much of his speech lauding accomplishments in China’s economic and social development in the past four decades since Deng Xiaoping, the former paramount leader, started the country’s embrace of market reforms,” noted the SCMP.

Mr Xi told the 3,000 officials assembled in the Great Hall of the People: “Every step in reform and opening up will not be easy, and we will face all kinds of risks and challenges in the future and we may even encounter unimaginable terrifying tidal waves and horrifying storms. …Only by improving the party’s leadership and governance … can we ensure the ship of reform and opening up will sail forward.”

The President mentioned the word “party” 128 times, compared with just 87 times for “reform” and 67 times for “opening up”, while affirming that “there are no textbooks containing golden rules or arrogant teachers who can order the Chinese people about on what to do”.

Remember that 40 years ago, when 18 villagers of Xiaogang in Anhui Province decided to disobey the orders of China’s government and privatised the village’s land; they decided to farm individually instead of collectively. The movement turned out to be a huge success; but today while China celebrates the Xiaogang pioneers and the transformation of China into a market-based economy, no real “reforms” are undertaken.

In recent months, the situation of the Middle Kingdom has deteriorated.

Bloomberg noted: “The anniversary comes at an awkward time. China’s trade war with the US is throwing a searchlight on the industrial and political ambitions of President Xi Jinping’s increasingly authoritarian government.”

Though Xiaogang has become an official patriotic education, “with the villagers championed for their courage in subverting a collectivist system still reeling from the excesses of the Mao era,” who is ready to challenge the party today in China?

Of course Beijing promotes examples of transformation (if not reforms) such the Alibaba Group’s work on its campus in Hangzhou’; according to Bloomberg: “…The company, which accounts for about three quarters of the nation’s online retail sales, has by now a semi-official role — displayed through their use of technology to manage Hangzhou’s city traffic and other functions.” But all is not rosy, far from it; the economy remains shaky.

On December 14, Mr Xi presided over a meeting of the CPC’s politburo to study “the economic work for 2019 and plans for building good conduct and political integrity within the CPC as well as fighting corruption”.

Xinhua reported: “In 2018, China maintained sustained, healthy development of its economy and stability in the social order amid a complicated international environment and the arduous tasks involved with domestic reform, development, and stability.”

A statement of the State Council further noted: “Next year, the country should uphold the underlying principle of pursuing progress while ensuring stability, adhere to the new development philosophy and push forward high-quality development.”

It spoke of the Three Tough Battles, namely of controlling risks, reducing poverty and tackling pollution.

The communiqué added that the anti-corruption fight “remains grave and complex, and the strict governance over the party remains a long and arduous task.” The politburo stressed that the changes in the international environment and domestic conditions should be looked at “dialectically”; it urged the party to be prepared for potential adversities.

There is no doubt, that with his unpredictability, President Donald Trump has changed the rules of the game. He acts wildly …like China has been doing for years and Beijing is not accustomed to this.

Whether Beijing accepts or not, Mr Trump will be at the centre of China’s fate in the coming year.

Jeffrey Sachs in Project Syndicate asserted: “The Trump administration’s conflict with China has little to do with US external imbalances, closed Chinese markets, or even China’s alleged theft of intellectual property. It has everything to do with containing China by limiting its access to foreign markets, advanced technologies, global banking services, and perhaps even US universities.”

Take the case of Meng Wanzhou, the daughter of Ren Zhengfei, Huawei’s founder. She was the heir apparent of the Chinese telecoms giant; she was arrested by the Canadian authorities at the request of the American government on suspicion of fraud related to Washington’s sanctions on Iran. It probably marks the beginning of more bloody battles for economic supremacy.

2019 is bound to witness many such cases which deeply destabilise China; the current “trade war” is here to stay and can only intensify during the coming year.

Meanwhile, US President Donald Trump’s statement that he was willing to intervene in Meng’s case, if it helped achieve “the largest trade deal ever made” proves that the Huawei heir is a “diplomacy hostag” in the new Great Economic Game to unfold in 2019. And if tomorrow, the Chinese would decide to again disobey the government and take their future into their own hands, instead of leaving it to the party, just watch out!