China’s problem can no longer be considered primarily economic. That train has left. The economic reality is locked in and will remain in place for a long time. China is now in the throes of a political challenge. The coastal region will be growing at a much slower rate than before, if at all. People who came from the interior for jobs will have to return to the interior. A vast and impoverished region, the interior is the population heartland of China—over 60 percent of China’s population lives there. But the coast is the country’s economic heartland, and that dichotomy defines China’s political problem.
Xi must satisfy both regions, which won’t be easy. The interior wants money transferred to it for jobs, economic development, and ultimately increased consumption. The only place from which to draw this money is the coastal region, which obviously does not want to make the transfer. The coast is economically linked to the United States and Europe, not to the interior. It wants to maintain those links. But the interior is where the majority of Chinese live, and it was the foundation of the Chinese revolution and the regime. Xi is frightened that the interior will destabilize under economic pressure and that he will lose control over the coastal region, as happened in the 19th century.
These are distant fears but not irrational ones. Xi’s mission is to ensure that the Communist Party keeps China under control. His primary challenge is the inequality that the post-Mao economic surge created, not only among classes but also among regions. The Communist Party came to rule China by exploiting that inequality. If the party cannot erase the problem it has created, it must at least try to control it.
The first step toward control was to impose a dictatorship on the country in order to prevent the emergence of any organized resistance. Today, further liberalization is out of the question, and suppressing any elements that demand liberalization is essential.
Alongside this effort is a campaign to assert control over private assets. Such control is essential if money is to be used to quell unhappiness in the interior. The vast anti-corruption purge is designed to achieve this. The campaign is not so much aimed at suppressing corruption, although doing so has its uses. Rather, it is designed to intimidate all those who have accumulated wealth. This class must be brought under the control of the party, rather than being allowed to use its wealth to control the party. The mission set out by Deng Xioping was to “enrich yourself.” Now the fear is that the wealthy have gone too far. The somewhat random and unpredictable purges are intended to frighten the rich. One result is capital flight, and that is a problem. But the goal is to make wealth subordinate to political power, not the other way around. Otherwise, the par ty becomes fundamentally weak.
Wealth is part of the equation, but in the end the People’s Liberation Army is the key. It is the ultimate guarantor of the regime in two ways. First, it has the power to crush opposition, as it did in Tiananmen Square. Second, its ranks are filled with the children of peasants, who see enlistment as a path to upward mobility. Taken together, its makeup and power can guarantee the communist regime’s survival.
On the other hand, the PLA is also capable of undermining the regime. Its enormous size might enable it to subvert the party’s power throughout the country. In the past, there was a clear alignment between the party and the PLA. Now that bond is less certain. The PLA’s officer corps has gotten deeply involved in enriching themselves. In the past, the PLA was directly involved in PLA-owned enterprises. Those have been reduced, but the PLA leadership is still intertwined with Chinese business, either directly or through relatives. The PLA’s size and influence mean that its officers’ interests are torn between the party and the wealthy now under attack.
However, the PLA’s massive size is currently being reduced, which makes good military sense. It also makes political sense. This allows Xi to eliminate those involved in what is now termed corruption, to confiscate their wealth, and to intimidate others. This purge is similar to those going on in many institutional bureaucracies in China, except that the size and importance of the PLA outstrips all other institutions. A smaller and reconfigured PLA will pose less of a threat to the regime, even as its military efficiency increases.
This transition is dangerous for the party and for Xi. The writing is on the wall for many in the army who have accumulated wealth, but restructuring will take several years. The PLA will have to be tightly controlled. That is why Xi set up a Discipline Inspection Commission in January specifically for the PLA, answerable directly to the Central Military Commission. This is also why Xi has taken direct control of military operations. He or his trusted advisors will have direct access to plans and operations. The PLA will come under Xi’s direct supervision. Any broad conspiracy that includes the PLA will be readily detected. You can’t hide the kinds of troop movements that an existential threat to the regime would require.
The PLA is the center of gravity of the regime, and if Xi loses control of it, he could lose control of everything. Xi would never have appointed himself head of the Joint Operations Command Center if he hadn’t felt the move absolutely necessary. He moved to take control of the PLA’s operations to ensure that he could preserve the regime. He put a very different gloss on the action, positioning it as an expansion of his power… and it was. But it was an expansion compelled by the regime’s insecurity. At first glance, his move should succeed. But there are so many complex and competing interests involved that when Xi pushes on some, others could come loose.
George Friedman is editor of Mauldin Economics' This Week In Geopolitics.
This article was originally published at Mauldin Economics.