This development has had far-reaching political consequences. It has sharpened the conflict between China and the US and has given it an entirely new dimension.

China has turned its tech platforms into national champions; the US is more hesitant to do so, because it worries about their effect on the freedom of the individual. These different attitudes shed new light on the conflict between the two systems of governance that the US and China represent.

In theory, AI is morally and ethically neutral; it can be used for good or bad. But in practice, its effect is asymmetric.

AI is particularly good at producing instruments that help repressive regimes and endanger open societies. Interestingly, the coronavirus reinforced the advantage repressive regimes enjoy by legitimizing the use of personal data for purposes of public control.

With these advantages, one might think that Xi, who collects personal data for the surveillance of his citizens more aggressively than any other ruler in history, is bound to be successful. He certainly thinks so, and many people believe him. I do not. Explaining why will require a thumbnail history of the Communist Party of China.

The first person to dominate the CPC, Mao Zedong, unleashed the Great Leap Forward, which caused the death of tens of millions of people. This was followed by the Cultural Revolution, which destroyed Chinese traditions and institutions by torturing and killing the cultural and economic elite.

After Mao’s death brought an end to this turmoil, a new leader emerged. Deng Xiaoping recognized that China was lagging woefully behind the capitalist world. Embracing the credo, “Hide your strength and bide your time,” Deng invited foreigners to invest in China, and this led to four decades of miraculous growth that continued even after Xi came to power in 2013.

Since then, Xi has done his best to dismantle Deng’s achievements. He brought the private companies established under Deng under the control of the CPC and undermined the dynamism that used to characterize them. Rather than letting private enterprise blossom, Xi introduced his own “China Dream,” which can be summed up in two words: total control. That has had disastrous consequences.

In contrast to Deng, Xi is a true believer in Communism. Mao and Vladimir Lenin are his idols. At the CPC’s centennial celebration, he was dressed like Mao while the rest of the audience wore business suits.

According to the rules of succession established by Deng, Xi’s term in power ought to expire this year. But Xi, inspired by Lenin, has gained firm control over the military and all other institutions of repression and surveillance. He has carefully choreographed the process that will elevate him to the level of Mao and Deng and make him ruler for life. To accomplish this, Xi had to reinterpret the CPC’s history to show that it logically leads to his appointment as paramount leader for at least another five-year term.

But Xi has many enemies. Although no one can oppose him publicly because he controls all the levers of power, a fight within the CPC is brewing, and it is so sharp that it has found expression in various party publications. Xi is under attack from those who are inspired by Deng and want to see a greater role for private enterprise.

Hitting A Wall
Xi himself believes that he is introducing a system of governance that is inherently superior to liberal democracy. But he rules by intimidation; nobody dares to tell him what he does not want to hear. As a result, it is difficult to challenge his views, even as the gap between his beliefs and reality has grown ever wider.

The gap is apparent in the economic crisis China is facing. Since Xi came to power, the real-estate market has been the main engine of economic growth. But the model on which the real-estate boom is based is unsustainable, because it is built entirely on credit. Local governments derive most of their revenues from selling land at ever-rising prices, and people buying apartments must start paying for them even before they are built.

Eventually, prices had to rise beyond the level that ordinary people could afford. That happened in the middle of 2021. By then, the boom had grown to an unhealthy size, accounting for nearly 30% of the economy and eating up an ever-increasing amount of credit.