Written by Rita Lobo and Ulrich Jochheim.
Following the 20th Congress of China’s Communist party, which announced President Xi Jinping’s third 5‑year term as its General Secretary, EPRS held an online roundtable on Xi Jinping’s third mandate and what is next for China on 27 October 2022. The discussion focused on analysing China’s foreign and economic policy priorities.
Wolfgang Hiller, Director for Impact Assessment and European Added Value at EPRS, welcomed the participants and the audience. Following his introductory remarks René Repasi, (S&D, Germany), Vice-Chair of the Delegation for relations with the People’s Republic of China highlighted the importance of the Party Congress in identifying in which direction China is heading, particularly with regard to its foreign policy. The decision to allow Xi Jinping a third mandate as General Secretary – unseen since the times of Mao Zedong – was expected in the West. René Repasi suggested that the removal of Hu Jintao (Xi Jinping’s predecessor) from the Party Congress was staged deliberately, to set the tone for Xi Jinping’s third mandate. He added that there is a clear loyalty to Xi Jinping among those appointed to the Politburo Standing Committee. He pointed to the fact that Beijing has decided to shift from using GDP as a central measure of China’s global success towards the notion of national strength. Furthermore, he drew attention to expert estimates that China’s economic growth will not reach the 2022 target of 5.5 %, reaching only 3 % instead.
René Repasi emphasised that there was no reference to the future of the zero-coronavirus strategy during the Party Congress, and expects that it will not be lifted any time soon. With regard to the EU-China relationship, he raised concerns about the EU’s powerlessness to impose the same sanctions that it has on Russia vis-à-vis China, if the latter were to invade Taiwan. More specifically, he argued that the EU’s economic dependence on China makes the consequences of imposing sanctions even more challenging for the EU. As such, he stressed the need for the EU to diversify and to identify any dependencies, as well as to invest in the proposed corporate sustainability and due diligence directives. Lastly, in relation to Taiwan, René Repasi warned that Beijing has made clear that any attempt to recognise Taiwan’s independence by foreign states would be met with force.
Elena Lazarou, acting Head of the External Policies Unit of EPRS, presented the panel members: Jacob Funk Kirkegaard, Senior Fellow, Peterson Institute for International Economics and German Marshall Fund of the United States; Yu Jie, Senior Research Fellow on China, Asia-Pacific Programme, Chatham House; Alice Ekman, Senior Analyst in charge of Asia, European Institute for Security Studies (EUISS) and Ulrich Jochheim, Policy Analyst, External Policies Unit, Members’ Research Service, EPRS.
On energy, Elena Lazarou pointed out that China is the world’s biggest energy importer, in terms of both oil and gas, and asked how that would impact Europe’s energy challenge once the zero-coronavirus strategy is relaxed. René Repasi argued that, due to the current tensions between the European Parliament and China, particularly the sanctions against certain Members, he is not optimistic that the ratification of the Comprehensive Agreement on Investment would begin soon. He added that the decision to promote Li Qiang, who was responsible for the tough stance on the zero-coronavirus policy in Shanghai, signals that the strategy will remain.
Jacob Funk Kirkegaard focused on the key economic takeaways from the Party Congress. More specifically, the officials that Xi Jinping has appointed are not reformists and are primarily loyal to Xi Jinping, with no signal that the Chinese economy will reopen. He noted that China will not be able to reopen its economy until they have a vaccine that can protect their elderly population, likely not before the end of 2023. Although this benefits the EU in the short term, as China imports less liquid natural gas (LNG), in the longer term, it will have critical economic consequences for everyone. He also stressed China’s dramatic demographic transition and housing market collapse, which will slow economic growth. Jacob Funk Kirkegaard argued that China’s economic model is heavily dependent on investment and unless the country fundamentally changes its economic growth model, indebtedness will continue to rise, potentially leading to large-scale financial crisis. Stimulating Chinese public infrastructure investment will contribute to this indebtedness and will prove unsustainable. He warned that the EU should prepare for China potentially devaluing its currency. He added that should Russia lose its war (likely to happen in the next six months, in his opinion), this would be considered as a political setback for Xi Jinping but would not affect China’s economy. Lastly, he agreed that the Comprehensive Agreement on Investment is dead, politically.
Yu Jie began by highlighting a new section (five) of the Party Congress’ work report, referring to the need for China to improve its home-grown talents. While Xi Jinping had previously focused on finance and capital, the importance was placed on high-end manufacturing during this conference. According to Yu Jie, this strategy can only work if there is fair competition in the private and state sector. She also stressed that the newly appointed politburo members, mainly hold PhDs in nuclear science and physics, signifying a clear shift from appointing economic planners. On China-United States relations, she noted that Xi Jinping did not refer to the ‘strategic opportunity for China’, a term that advocated for a stable relationship with the West. The party no longer has an incentive to develop this to advance its economy. In her view, China is returning to a solely domestic focus.
Alice Ekman emphasised that China’s priorities have shifted from the economy to security. Moreover, she stressed that Xi Jinping’s speech was particularly ideological, with clear references to Marxism. This shift will have consequences for China’s interaction with the US and EU. She anticipates that Beijing will introduce further controls on the economy, including within the technology and private education sector. Increased surveillance of the Chinese population should also be expected, with Xi Jinping continuously warning against ‘hedonism, worship and egocentricity’. According to Ekman, this ideology was developed against the backdrop of the West’s sanctions against Russia and thus the need to become independent and self-reliant. On China-US relations, she emphasised that Xi Jinping referred to ‘gross provocation in respect to Taiwan’, alluding to foreign interference. She noted that China continues to reach out to countries that it considers ‘friends’ while simultaneously maintaining its ‘wolf warrior’ diplomacy to countries it considers hostile. Lastly, she highlighted Xi Jinping’s comments that he will support ‘patriots’ in Taiwan while fighting against separatist forces and foreign interference and stressed that China may attempt to promote its strategic objectives through lawfare, as it did in Hong Kong.
Ulrich Jochheim agreed that Xi Jinping’s speech was ideological and indicative that China has decided to turn inwards. He argued that China would turn to the concept of hybrid warfare to deal with Taiwan, using all means except classical warfare to manipulate Taiwan and improve its own geostrategic position. However, the composition of the Central Military Commission indicates that Xi is also planning to increasingly use military means to intimidate Taiwan. While Taiwan seems well-prepared to face disinformation campaigns, Jochheim anticipates that Xi Jinping will focus on manipulating the 2024 presidential elections in Taiwan. He concluded that China is becoming increasingly communist and stressed scepticism regarding the innovation and technology strategy. Several questions were raised during the Q&A session related to a potential Chinese invasion of Taiwan. According to Alice Ekman, China’s aggressive and ambitious foreign policy will persist; as such, she predicts that the ultimate deadline for the invasion of Taiwan is 2049. She also described the types of lawfare tactics that China could deploy against Taiwan, namely, the extradition treaty to repatriate ‘Taiwanese criminals’ from foreign countries; adapting the Anti-Secession law making it more specific and turning it into a unilateral unification law; adding further institutions to its ‘black list’. However, Yu Jie noted that the current economic situation means there is very little that Xi Jinping can do, as he is not a risk-taker and the Chinese public would not be willing to exchange its standard of life for running Taiwan. Yu Jie also highlighted that China would struggle to consolidate power should it take Taiwan, with Kierkegaard also questioning China’s ability to finance an invasion of Taiwan. He also pointed out that sanctions following a Chinese invasion would not have the same effect as they do on Russia. Ulrich Jochheim anticipated that the EU will have no choice but to impose sanctions on China if it invades Taiwan. He also highlights that Republic of Korea and Japanese support for the EU on the Russian war in Ukraine is linked to their expectation of support should a war occur in their region. Kierkegaard responded that Russia and China complement each other economically, although historically they are not ‘natural allies’; and express similar anti-American sentiment. This convergence, for Alice Ekman, is greater than has been described and has materialised through stronger coordination. She believes that China is advocating for Russia to attend the G20 and is attempting to shape the agenda so that the war in Ukraine does not dominate. For Yu Jie, China is apprehensive of an unstable Russia on its borders. Ulrich Jochheim highlighted that the chief of Vietnam’s ruling Communist Party will be the first foreign leader to visit China after the Party Congress – a symbolic event that aligns with the Party Congress’s ideological strategy. He concluded by arguing that China wants ‘to have its cake and eat it’ – e.g. to have good relations with Russia while simultaneously attempting to have a neutral position on Ukraine.