Xi’s Big Mistake

Selling the Rope
“Prepare for War”
Sleepwalking to Confrontation
China Problems and Big Brother
Washington DC, Maine, and Colorado

I have mixed feelings about China. On the plus side, I think the country’s massive economic transformation may be one of the most impressive events in human history. Bringing hundreds of millions from primitive rural lives into relatively prosperous cities within a few years was awe-inspiring. I greatly admire the millions of Chinese entrepreneurs worldwide who create jobs and technology. They’ve helped the entire world in countless ways.

And yet, I can’t forget that China’s leaders are devoted, ideologically centralist communists. Americans sometimes apply that term casually to our political opponents. Xi Jinping is an actual communist. His regime permits some limited market-like activity, but only to help achieve the government’s goals, which remain communist.

When the West first began engaging with China in the 1980s and then allowed it into the World Trade Organization in 2001, many hoped exposure to our ways would tug China toward capitalism. It seemed to be happening for the first few decades, too. But the hope is fading.

In a 2015 letter (When China Stopped Acting Chinese), I said this:

Beijing’s stimulus efforts created the stock market bubble; now their unsuccessful efforts to keep it from bursting are shaking my confidence in their desire to allow market forces to play a greater role in the transition from a top-down society to a consumer-driven, bottom-up society.

Still, I’ve learned not to underestimate the Chinese leadership. They make mistakes but usually recognize them and change course quickly. We’ll see what they learn from their current misadventures in stimulus and their attempts at top-down control of an essentially uncontrollable market. If they don’t learn the right lessons, China will face an even harder lesson in the future.

Six years later, it looks like Chinese leaders didn’t learn the right lessons. Xi has been trying to balance economic freedom and authoritarian control and it’s not working like it used to.

Today we’ll review some recent events that illustrate where Xi went wrong. Then we’ll think about whether the Xi government can change course, whether it wants to… and whether it will survive.