China Watch: What to Expect in Xi’s Third Term

Download China Watch PDF

Xi is expected to win a precedent-breaking third term at the Communist Party Congress, which starts on 16 October and will last for about a week.  The Congress will set the Party’s policy direction for the next five years and elect new leaders.  Despite China’s poor economic performance and international criticism of its human rights record, military aggression, and support of Russia, there are no visible indications that Xi has lost ground politically.  Instead, recent personnel appointments and signals in official media indicate that Xi has further consolidated power.     

  • A few months ago, Xi strengthened his control over the internal security apparatus by installing long-time loyalist Wang Xiaohong as Minister of Public Security and positioning another loyalist (Chen Yixin) to take over as the most senior official overseeing the law-and-order portfolio.  Xi has spent the past 10 years purging senior security officials who were part of former President Jiang Zemin’s network.  
  • Xi’s former chief of staff Li Shulei is poised to take over as the head of the Party’s Propaganda Department, which oversees ideology, media, culture, and parts of the education system.  Xi also has firm control over the military, having reshuffled the command structure and the senior leadership.   
  • Several younger Xi loyalists are likely to enter the Politburo and the Politburo Standing Committee, China’s most important decision-making bodies.  However, Xi is likely to avoid declaring a clear successor because he wants to be leader for life.  State media’s praise for Xi has kicked into high gear lately, urging loyalty to him and highlighting his achievements as leader.  Some senior provincial leaders recently used an honorific term for “leader” that was previously only used for Mao Zedong.  
  • China watchers expect either Politburo Standing Committee member Wang Yang or Vice Premier Hu Chunhua to replace Li Keqiang as Premier, who oversees the economy.  Both Wang and Hu were close to former president Hu Jintao, but they have the requisite experience and are politically astute enough to defer to Xi on major decisions.  Xi has spent the past decade strengthening his personal control over the economy, resulting in reduced influence for the Premier.        

Implications on Key Issues 

Xi’s political dominance has essentially ended the collective decision-making model under his two predecessors.  Although Xi’s supporters claim that he has broken the cycle of policy paralysis and factional infighting under his predecessors, Xi’s third term will be rife with policy incoherence and rigidity because Xi is pursuing contradictory goals and officials are afraid to deviate from his directives.  Domestically, Xi wants to continue China’s decades-long economic reforms, yet he stands in contrast to his predecessors in his unwillingness to tolerate any loosening of the Party’s economic, political, and social controls.  Externally, Xi wants access to Western capital and markets but is aggressively challenging the US-led world order, bullying its neighbors, and promoting economic nationalism.

1) Specifically, we are likely to see the following developments on eight key issues: Sino-US Relations.  Despite tensions in the aftermath of Speaker Pelosi’s visit to Taiwan, China has signaled that it wants stable relations with the US, especially on trade.  Recent statements from Xi and official media commentary have emphasized that China remains committed to foreign trade and investment.  Chinese and US officials are working quietly to arrange a Xi-Biden meeting during the G-20 summit in November, according to US press reports.  In August 2022, Beijing reached an agreement with the SEC’s Public Company Accounting Oversight Board to allow inspectors to audit Chinese companies to prevent a delisting of all Chinese companies trading on US stock exchanges.  

Vice Premier Liu He, a Xi confidant who was the main interlocutor with the US on trade, is expected to retire soon.  If Xi appoints another close ally as the chief economic interlocuter with the US, it would indicate the importance he places on the bilateral economic relationship.  A potential candidate is Xi ally He Lifeng, current Minister of the National Development and Reform Commission, who may be promoted to the Politburo and Vice Premier at the Party Congress.  

2) Belt and Road Initiative (BRI).  As Xi tries to stabilize US-China relations, he will pursue a concurrent strategy to weaken US global influence.  BRI is Xi’s flagship foreign policy initiative, but in his third term, he is likely to shift BRI away from lending and infrastructure projects to building alliances to counter US influence.  China’s infrastructure projects overseas slowed because of COVID restrictions, and its lending practices have led to defaults and increasing international criticism.                 

Xi unveiled his Global Security Initiative (GSI) in April 2022, which is intended to offer an alternative to US-led alliances based on democratic values and universal standards on human rights.  China is likely to pursue more security agreements similar to the one it struck with the Solomon Islands, which could allow China to establish permanent military bases. 

3) Russia.  Beijing is strengthening its diplomatic support of Russia despite international criticism.  At the same time, China is careful to avoid military-related support to Russia lest it triggers sanctions.  Xi met with Putin on 15 September on the sidelines of the Shanghai Cooperation Organization (SCO) summit in Uzbekistan, and he pledged to work with Russia to “strongly support each other’s core interests.”  Xi’s current trip to Kazakhstan and Uzbekistan is his first foreign visit since the outbreak of COVID in early 2020.  Li Zhanshu, the head of China’s legislature, visited Russia earlier this month and met with Putin.

4) “Zero COVID.”  China will be reluctant to relax its “zero-COVID” policy because it is closely tied to Xi, despite the severe damages that lockdowns have had on the Chinese economy.  A former Party-affiliated academic recently wrote in Foreign Affairs that when the Omicron variant surged in Shanghai in February 2022, national and local health officials recommended against lockdowns.  However, Xi disagreed, and a massive lockdown in Shanghai followed.  China has begun a new round of lockdowns; since August, more than 70 Chinese cities have been put on partial or full lockdowns, according to US media reports.  

China may begin to relax its policy once it has a domestically produced mRNA vaccine that is effective against the new variants.  Currently, China has two such vaccines in various stages of clinical trial.  China has rejected Western vaccines, most likely out of national pride.    

5) “Common Prosperity.”  Xi has promoted contradictory policies in supporting economic reforms on the one hand and cracking down on the private sector on the other, under his signature “common prosperity” policy.  Official Chinese media has stated that “common prosperity” will be one of the Party’s key objectives in the next five years.  The policy is ostensibly aimed at reducing China’s wealth gap but has been used to justify punitive actions against China’s billionaires and celebrities, as well as the crackdowns on big technology companies such as Alibaba, Tencent, and Didi.  

6) “Ecological Civilization.”  Xi’s apparent commitment to renewable energy and ecological preservation provides potential opportunities for foreign businesses.  Xi repeatedly uses the phrase “ecological civilization” to emphasize Beijing’s commitment to slowing climate change and promoting sustainable development.  The term has been officially designated as part of “Xi Jinping Thought.”   

7) Technological Self-Sufficiency.  Xi has shown keen interest in China’s technological competition with the US and the West, and he favors a state-led approach to technological innovation.  As the West tightens export controls on advanced technology, Xi is likely to intensify his top-down approach to press Chinese state-owned companies to achieve self-sufficiency in critical technologies, such as semiconductors.  Industrial espionage and intellectual property theft are likely to increase as pressure builds to catch up to or even surpass the West in key technologies.   

8) Taiwan.  Despite Western media’s portrayal of Xi as a hawk on Taiwan, Xi’s statements in official Chinese media have been no tougher than his predecessors.  He has not commented publicly on Taiwan since the Pelosi visit, and statements attributed to him a few days before the visit emphasized peaceful means to achieve unification.  In major policy speeches on Taiwan, Xi has consistently said that peaceful unification is the preferred option.  Xi is the only Chinese leader since 1949 who has met with the president of Taiwan (in November 2015), and he likely is confident that dialogue could resume if the pro-China Nationalist Party in Taiwan returns to power in the future.  Xi has stated that China is willing to be patient and has not specified a timeline for unification.  

At the same time, he will push the PLA to learn from Russia’s mistakes in Ukraine and prepare military options for taking Taiwan, if Taipei formally declares independence or if Beijing deems that peaceful unification is no longer possible.