Why Xi Jinping’s damage control in China is about avoiding a crisis

For President Xi Jinping, sending its special envoy to Europe for a three-week charm tour was just one of many high-stakes damage control acts before the 20e Chinese Communist Party Congress this fall.

Xi’s economy is slowing dangerously, funding for his Belt and Road Initiative has plummeted, his Zero Covid policy is wavingand his continued support for Russian President Vladimir Putin hangs like a cloud on its claim to be the world first champion of national sovereignty as Russia’s war on Ukraine continues.

Few observers from China to believe Xi’s grip on power faces serious challenges, but that’s hard to rule out entirely given the number of recent mistakes he’s made. So Xi is not taking any risks before one of his party’s most important gatheringsa meeting intended to ensure his continued rule and place in history.

European business leaders have understood that the context of their recent meetings with Wu Hongbo, Special Representative of the Chinese Government for European Affairs and former UN Under-Secretary General. His message was a similar one at each stop: Belgium, Cyprus, Czech Republic, France, Hungary, Germany and Italy.

“The Chinese want to change the tone of the story, to control the damage,” said a European business leader who asked to remain anonymous because of his Chinese business interests. “They understand they have gone too far.”

The businessman described Wu, with his fluent and fluent English, as one of the most fluent, outgoing and intellectually agile Chinese officials he has met. At each stop, Wu acknowledged that China had “made mistakes”, from its handling of Covid-19 to its “wolf warrior” diplomacy, to its economic mismanagement.

His trip came as concerns in China grow over “lose europefollowing Putin’s invasion of Ukraine.

The mood of the public has changed enough for Finland and Sweden knock on NATO’s doorand the European Union this week embracing the prospect of Ukraine’s application for membership. Wu’s visit was also something of a clean-up operation after a failed visit by Chinese official Huo Yuzhen to eight countries in central and eastern Europe. Poland, it was refused a meeting with government officials.

Germans and their political leaders – Europe’s biggest target for Chinese diplomats and companies – are raising new questions about everything from investment guarantees for German companies in China to specific projects like VW’s. factory in Xinjian provinceHouse of Abuse of human rights against the predominantly Muslim Uyghur population.

Although Wu only touched on Putin’s war in Ukraine indirectly, his message was aimed at reassuring Europeans that they are privileged partners, as opposed to the United States. His bottom line: China will always be China, a country of growing importance and economic opportunity for Europe.

Yet lost ground in Europe is just one of many problems President Xi faces before the party congresswhich will determine the country’s economic, foreign and domestic policy for years to come.

The party congress is likely to provide Xi with a third term, a move that follows a 2018 decision to remove term limits. What could more likely reveal the extent of Xi’s power, writing Michael Cunningham of the Heritage Foundation wonders if he can place his allies in key central bodies, primarily the Politburo and the Politburo Standing Committee, because pension standards guarantee considerable turnover.

Whatever Congress concludes, Chinese experts are increasingly wondering whether we are entering a period of “Peak Xi” or even “Peak China.” There is mounting evidence that he and the country he represents (and his approach has been to make the two inseparable) reached the pinnacle of their influence and reputation.

Nothing will determine the outcome more than how Xi handles China’s economy, which is the foundation of the country’s considerable global influence as well as the national legitimacy of the Communist Party.

Former Australian Prime Minister Kevin Rudd, one of China’s staunchest observers, sees China’s economic outlook is weakening due to a chain of factors. They include at least 10 defaults by Chinese property developers and Xi’s crackdown on China’s tech sector, which has cost him $2 trillion in market capitalization from his 10 biggest tech companies over the past year.

Additionally, Putin’s invasion of Ukraine sent energy and commodity prices skyrocketing and disrupted supply chains, “terrifying news for the world’s largest manufacturer, exporter and consumer economy. of energy in the world”, Rudd wrote recently in the Wall Street Journal. Add to that Xi’s insistence on China’s Zero Covid strategy, which has led to mass shutdowns.

Rudd concludes that this combination of factors is enough for Xi to miss his 5.5% growth target and possibly even slower growth this year than the US. “For Mr. Xi to miss the target would be politically disastrous,” Rudd writes.

Xi’s damage control on the economic front has included fiscal and monetary stimulus and infrastructure spending to boost domestic demand. A recent meeting from the Politburo also suggested coming relief from the regulatory crackdown on China’s tech sector.

Yet none of this will be enough to reverse Xi’s cardinal sin, and it was his dramatic pivot to stronger state and party control.

Writing in Foreign Affairs, Daniel H. Rosen of the Atlantic Council, which is a founding partner of Rhodium Group, argue“China cannot have both the statism of today and the high growth rates of yesterday. It will have to choose.”

Add Craig Singleton this week in Foreign Policy, “China’s bubbling economic miracle may soon undermine (the Communist Party’s) ability to wage a sustained struggle for geostrategic dominance.”

Time is running out for damage control before Xi opens his party’s Congress in the Great Hall of the People. He’s likely to get the vote he wants, but that won’t solve the larger problem. It is his leadership and decision-making that have generated China’s challenges, and he will have to correct his course if he is to restore economic growth at home, revive his international momentum and avoid “Peak Xi”.

Frederick Kempe is the President and CEO of the Atlantic Council.