It’s Not About Trump, It’s About Xi

Each is the president of a military and economic superpower. One of them is a supporter of free trade and has said that it is a mistake to blame all the ills of mankind on globalization. The other leader holds that international trade is harmful to his country and has announced that he is going to impose import taxes. The former, the defender of globalization and trade, is the secretary-general of the biggest Communist Party in history (80 million members). He is also the president of China, the planet’s second economic power. The latter, the protectionist who denounces trade every time he gets a chance, is Donald Trump, the leader of the biggest capitalist economy ever known.

In this unusual world turned upside down, the decisions of these two presidents, and what happens to their countries, will affect us all. Of the two, the one who is grabbing the attention these days is the new president of the United States, who every day breaks some rule, insults someone, attacks some institution, country or group of people. But concentrating attention on Trump is distracting us from following more closely what is happening in Xi Jinping’s China. China could be entering a period of powerful economic and political convulsions, with resulting international repercussions even more serious than Trump’s unpredictable behavior.

The growth of the Chinese economy has slowed and, therefore, so has job creation. Indebtedness is crippling, there is capital flight, and, in general, China is suffering from imbalances that the government will have to take very unpopular measures to correct. The country must move from an economy based on exports and massive investment in infrastructure to a more sustainable model driven by domestic consumption, in which there is more discipline in public spending, investment and borrowing.

On this, there is consensus. But what is not clear is if the necessary reforms can be completed as quickly and efficiently as required. And neither is it clear whether this major economic transition can happen without creating social and political conflicts so serious they could destabilize the regime, or even attack the permanence of the power of the Communist Party of China.

Professor Minxin Pei, one of the world’s most respected sinologists, just published a book about this, titled “China’s Crony Capitalism,” which would translate into Spanish as something similar to “The Capitalism of Buddies in China” (“El capitalismo de amiguetes en China”). This kind of capitalism is based on collusion between business people and politicians. The cronies of the politicians — and often their family members — accumulate great wealth with the help of the government, while the politicians get and keep power thanks to the money and influence of their businessman friends. This kind of corrupt capitalism has always been around, and has existed in many countries, according to Pei. In China, it has acquired a magnitude as enormous as the country itself. Pei’s opinion is that the omnipresence of crony capitalism is putting the survival of the regime in danger, and that the hegemony of the CPC will come to an end. This vision of what is coming in China is not unique to Pei; it is shared by an increasing number of experts.

Pei begins this remarkable book with a quote from President Xi Jinping: “The abuse of the executive power, the exchange of power for power, power for money and power for sex is common; collusion between officials and businessmen and collusion between superiors and subordinates have become intermingled. The ways of transferring benefits among them are quite varied and always hidden.”

Pei documents the widespread presence and debilitating consequences of this kind of systemic corruption, and shows how the power structure that has been imposed is at the same time unsustainable and resistant to change. This is an unfortunate combination. The size and complexity of a country of more than 1.3 billion people, whose economy has grown tenfold and whose median income is 13 times greater than in 1990, and where internal decentralization and international integration are deeply rooted, makes it very difficult to centralize power. But this is exactly what President Xi is trying to do. Paradoxically, the Chinese president is taking advantage of the required campaign against corruption that he initiated to eliminate rivals and consolidate his power.

Pei doesn’t think that this strategy will work. According to him, the power structure in China today has many of the characteristics of a Leninist regime in an advanced state of decomposition. And regimes of this type find it very hard to change and adapt.

If Pei is right and China is being destabilized, the presence of Trump in the White House becomes all the more ominous.