Outcomes from China’s 6th Plenum – Buyer Beware?


By Andre Wheeler

Much of the commentary around China’s 6th Plenum outcomes has seen Xi Jinping elevated to supreme leader for life, elevating him to a position in the history of China that is comparable to Mao and Deng. His leadership and vision are glorified as is “given” supreme authority to guide China to greatness in the new Asian Century. This narrative has been accepted by several governments and organisations, such as the EU, with a rapid realignment of the seven-member group the EU’s special committee on foreign interference mission to Taipei.

Has all this hype not just a smokescreen to hide what is happening in the geo-political background in China? Has Xi Jinping become a divisive figure within the Party noting that being a divisive figure is not new to Party machinations? There is an element of truth and certainty as the Party is a master at using deflection and obfuscation to mask issues within its ranks.

Where does this claim of a convenient smokescreen come from? It starts with the official communique. The joint statement has several key indicators that all is not as unified as the propaganda machine wants the broader public to belief. Identifying these indicators and background moves suggests that business needs to tread a very careful path, adopting a cautious “Buyer Beware” stance when engaging with China in 2022.

If Xi Jinping had been elevated to “Leader for Life” why did the communique not, simply say that. Rather it is at pains to say that Xi Jinping has won approval to have his leadership extended. Whilst extoling the positive benefits that he has brought to China, such as significantly reducing poverty, embedded in the document are indicative nuances that his position was achieved through compromise. To understand these nuances, business needs to be aware of the emerging tensions between key factions within the Party, particularly the Shanghai faction led by Jiang Zemin. This came to a head on October 2, with Xi Jinping admitting in a press briefing, that there is indeed a power struggle. The briefing went on to clearly identify that the “disruptor” was the Shanghai faction led by Jiang.

There is a significant shift in tone between October 2nd and the official communique coming out of the 6th Plenum. The language has changed, with the communique devoting a lengthy paragraph talking of the two Shanghai factions’ leaders’ contribution to the policy history and direction of the Party. Noteworthy is the apparent concession that the Party has followed Jiang and Hu strategies of injecting state funding into infrastructure and real estate to improve GDP numbers. The paragraph goes onto to praise them for assisting in implementing Deng’s economic policy of opening China to the international community. This is in stark contrast to them being as being a poisonous influence on the Party on October 2nd as well as confrontation between Zhang Gaoli and Xi Jinping on the eve of the Plenum. More detail can be found in the discussion around the Peng Shuai sexual harassment claims later in the piece.

Prior to the 6th Plenum there was a push to rewrite China and the Party’s history that would effectively write Deng’s contributions out of Chinese history. By way of example, Xi Jinping spoke of Mao being misguided with regards the Cultural Revolution as opposed to the 1978 Declaration under Deng that the Cultural Revolution was a disaster, and that truth needs to remain.  Prior to the meeting, Xi Jinping was said to be changing the narrative around Mao, challenging Deng’s pronouncements that the Cultural revolution was a disaster and replacing it with the softer narrative that Mao had merely misdirected the application of socialism.

Running in tandem was the narrative that Deng’s policy based on “trickle-down economics” was a mistake as well as revising historical texts that removed references to the dangers of one – man rule.  All of these would effectively write Deng out of China’s history.

There are several reasons why Xi Jinping wanted Deng’s influence curtailed, particularly the internal Party disquiet around claims in the Resolution that Xi Jinping had improved the country’s governance systems. Not only are Xi Jinping’s actions ignoring Deng’s dictum of “taking a low profile and never taking the lead”, but there is also a growing dissatisfaction within the politburo that China has returned to Mao style governance. The creation of a one voice chamber – one man, Xi Jinping, making all the decisions. This policy detour is understandable when you consider that he socialized within such a system, with his political precepts grounded in Leninist power politics, hence moving away from the Party’s ban on cult personality cultivation.

Dissatisfaction is such that Xi has a new nickname, “Chairman of Everything”. He is accused of not allowing broad politburo and Party consultation with fellow leaders before making key decisions. It is said that Xi Jinping has sought to re-centralize power away from Politburo consensus to decisions made by a paramount leader. Party factions are worried that world history is now on new tracks under Xi Jinping and its destination more uncertain. Examples of this trend include the side lining of Jack Ma and preventing Ant Corporation from listing. Included in this politburo realignment is the current crackdown on technology companies and associated data exchange protections.

There is understandable tension between Xi Jinping and Deng’s legacy, particularly as there is a history of conflict between the two families dating back to the clash between Xi Jinping’s father and Deng’s. This clash resulted in Xi’s father being sidelined politically, essentially ending his career in obscurity. Xi Jinping was not going to make the mistakes of his father who had failed to galvanize political support, challenging Deng individually and without a clear strategy.

Given this context, the official 6th Plenum Communique appears to have been drafted to placate the growing support for the Deng faction, led by Deng’s son. This explains why the communique reversed Xi Jinping’s wish to soften criticism of Mao and confirmed Mao’s Cultural revolution as a disaster.

Further evidence of Xi Jinping trying to placate internal dissent is his post plenum references to being a “servant of the people “and “happy to be a nobody”. This is taken as a direct attempt by him to be seen to be adhering to the Deng policy framework that a leader should show humility.

This “humility “highlights the inflection point reached within the CCP and to redress the claims made through nickname of being “Chairman of Everything”. Either Xi Jinping is using this to deflect his critics so that he can hold onto power for a longer period, or he is preparing the groundwork for a soft handover of power as seen with Hua Guofeng.

Whilst there appears to consensus that the Party is using the Beijing Olympics as cover for these internal rifts, there are two issues that may well undo these plans. Both will have a direct impact on international business within China.

The first of these is the international debate around the “disappearance” of tennis player Peng Shuai. There is still controversy as to the timing of her claims of sexual harassment against Zang, but what is emerging is that Zang is an important influencer over both the Shanghai Faction as well as Xi Jinping.

Zhang is not just a protégé of Jiang Zemin and Zeng Qinghong. He is linked to leading business figures, including Hong Kong tycoon Li Ka-shing. His daughter married the son of Lee Yin Yee, a wealthy Hong Kong businessman, closely connected to state land deals with groups including Evergrande and Fantasia. These are among China’s most heavily indebted property groups, both headquartered in Shenzhen, and now battling for survive. Whilst Zhang is not considered a rival to Xi, his broader network of relationships might now prove pivotal to his Xi’s future, particularly his loyalty to Jiang Zemin.

It has been suggested by some that Peng was promised protection from persecution when raising Zhang’s sexual impropriety, as the timing was to remove a “deal maker” for Xi, thus weaking his grip on power. Many have raised the question of why Zhang did not fall foul of Xi’s corruption crackdown, and why it was Peng that felt the consequences.

There is also the interesting narrative surrounding the Peng Shuai incident. Professor Yuan Hongbing in a recent interview with Vision Secret China has claimed that there was a fierce power struggle in play prior to the 6th Plenum. In particular, Zang Gaoli (the accused) was said to have stood up to Xi’s attempts to openly criticize Jiang Zemin’s time and policies to establish his new era of authority within the CCP. Xi is said to use the Peng Shuai affair as a warning and a means to silence Zang. What Xi failed to understand that this strategy essentially aimed at the domestic audience, would gain international attention. An important consequence of this incident has seen the CCP Police Head, Zhao Kezhi, being removed from his position. His mishandling of the “warning messages” meant that Xi and his supporters have been caught short.  They have not been able to contain the fallout outside of China. With threats of a form of boycott against the Beijing Olympics, the truce between the warring factions based on a post-Olympic timeline, may well erupt into an all-out purging of the Party.

However, the bigger issue in terms of business and China is Taiwan. The issue goes to the heart of the One China Policy and the precept that the CCP represents all Chinese people. Not only has the policy failed to “reunite” Taiwan, but it has also moved the accepted “strategic ambiguity” narrative around Taiwan to direct interference and interaction. To harness rising domestic Nationalism, Xi and the CCP has become strident in their attacks on anyone seen to be supportive of an independent Taiwan. These threats are now being commercially weaponised, with the current attacks being particularly focussed on bringing Taiwan’s economy to its knees. Business needs to be aware that if they are seen to be supporting the Taiwan President, Tsai Ing-Wen and the DPP in any way, shape or form, there will be direct punitive economic and commercial sanctions by the CCP. This could include increased tariffs or simply denied access to the wider China market. Many corporates should be assessing all their Taiwan business and develop potential contingencies to cope with any potential fallout.

At a Geo-Political level, members of the CPTTP need to assess China’s behaviour around Taiwan and whether it is consistent with the international rule of law. Based on observations and comments from member countries to the CPTTP, China’s current behaviour does not warrant them gaining acceptance. This could be a significant catalyst to leadership change in the CCP.

Initially using the Olympic games in 2022 as a watershed moment for Xi Jinping to change his current trajectory or step aside, this may all happen earlier than expected. Whilst it is difficult to predict the magnitude and kind of changes that will happen, it can be said that 2020 will be a turbulent year for China. Business needs to prepare itself for this and have scenario based contingency plans in place to navigate these turbulent waters.

About the Author

Andre wheelerAndre Wheeler is the CEO of Asia Pacific Connex with more than 20 years’ experience in international business, with a diverse network throughout the USA, Asia, SE Asia , Africa and the United Kingdom. Holding a B. Science (Hons) degree and an MBA, he is currently working towards his Doctorate on the Impact of the China One Belt One Road initiative. Andre has expertise in oil/gas, construction, marine services and mining.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.