Author: Ryan Manuel, Official China Ltd.

In Zhongnanhai, the Beijing compound where China’s Communist Party leaders reside and conduct business, 2019 was a bad year. The trade war with the United States dragged on — an accountability issue for President Xi Jinping who’s responsible above all for foreign policy. Despite common perceptions that he’s an autocrat with a totalitarian’s attitude to power and a bureaucrat’s attention to detail, Xi couldn’t easily get his cabinet to sign off on the US–China trade deal. The proposed text fell apart amid bitter debate about whether it was sufficiently nationalist.

Xi’s strategy of using others to negotiate issues while personally staying above the fray failed. For months, China’s lead trade negotiator was a vice minister of commerce. Meanwhile, back in Beijing, everyone deflected responsibility in order not to be blamed for the constant ups and downs of dealing with US President Donald Trump.

While this shows that China is less dictatorial than outsiders may think, it also reflects Xi’s 2020 dilemma. He wants a deal done but cannot be seen as weak. He wants to make China more self-sufficient but needs access to foreign technologies to make that happen. The unusual events of the past few years, which saw China become the primary proponent of an international order it didn’t establish, are therefore likely to continue into 2020.

Xi is a realist and he and his fellow leaders have already presented themselves as facing a ‘difficult international environment’ in their assessment of the year — led by foreign reactions to Chinese domestic political events. There is increasing international outrage over China’s policies in Xinjiang where it was estimated that over one million Uyghurs were detained. The leak of documents on Xinjiang to The New York Times by a ‘concerned official’ was the most authoritative such release in decades. There’s likely to be increased pressure on Xi from international bodies, although much of the outrage that comes through modern social media is filtered by China’s Great Firewall.

There has been the flood of stories about Chinese influence overseas — especially activities involving the nebulous United Front. Expect these too to increase in the year ahead. The case of Chinese telecommunications giant Huawei sent shivers through overseas business communities. The arrest of a Huawei senior executive in Canada on an American warrant was followed by the detention of two Canadian citizens in China.

The ongoing protests in Hong Kong remain a weeping sore that Beijing is unlikely easily to be able to salve. Hong Kong remains essential to Beijing’s future plans, acting as both an international arbitration centre and the prize regional stock exchange.

The ‘difficult international environment’ makes it is easy to miss the changes taking place in China’s domestic politics.

Xi’s signature anti-corruption drive continued its sweep, adding rules that make it easier to remove officials for perceived incompetence and lack of obedience to ideological norms rather than just for graft. This is Xi’s way: he changes rules within the Chinese Communist Party and then uses China’s legal system to ensure that the public service — 80 per cent of whom are Party members — is also bound by Party rules.

A central preoccupation is Xi’s fear that local leaders do not follow central command and, therefore, that he should centralise power and put his own name and face onto reforms. He has changed how leaders are held accountable, adding a system of personal accountability to the previously inviolable rule of collective decision making. Rather than the public not knowing who made a decision and passing the blame onto a committee, Xi is making individuals responsible for decisions.

He has also extended the Party’s reach over grassroots local politics — shrinking the scope of local leaders to run their own affairs. His annual meeting of Party leaders, the Fourth Plenum of the 19th Congress of the Party Central Committee offered few new reforms as almost all of the heavy lifting had already been done through Xi’s rule changes.

The Chinese economy remains a source of worry. Domestic debate rages over whether China should accept a lower and more sustainable growth rate or whether it should push on for the targeted 6 per cent GDP growth. Last year saw the pork crisis and fears of rapidly rising food prices. The direction of fiscal policy is confused as local governments deal with conflicting messages about whether they should turn the credit taps on or off.

Reflecting the priority of the trade war, most of the reform measures have focused on foreign capital and know-how. The widely-touted new foreign investment law comes into force in January, aimed at boosting the confidence of overseas companies who feel that China’s business environment has become more difficult.

But what comes next?

Xi won’t find 2020 an easy year. China enters the year attempting to reduce the damage from Trump’s trade war. Xi has also kept a close eye on Taiwan’s recent elections, won by a woman seen as anathema to Beijing, the dogged Tsai Ing-wen. The United States is unlikely to stop pushing back on Chinese technological upgrading, academic and cultural exchanges and even business, trade and investment relations with China.

Xi’s position at the top remains secure. Within the Chinese elite, few would be brave enough to take him on. His powers are such that he has managed to remake and at the same time shrink China’s stubborn armed forces. Abroad, he continues to promote a globalist, internationalist foreign policy, to support regional and global institutions and to seek better ties with neighbours Korea, India and even Japan.

Dr Ryan Manuel is Managing Director of Official China Ltd., a Hong Kong-based research firm.

This article is part of an EAF special feature series on 2019 in review and the year ahead.