Since 23 September evening, the world has been intrigued by the tweet of TFI Global on a reported coup in China and placing President Xi Jinping under house arrest.
Media has further reported that the Shanghai Cooperation Organisation, a brainchild of China, had a lustreless President Xi Jinping who did not give the keynote address and had no bilateral meetings on the side-lines with Russian President Putin and his erstwhile friend, Prime Minister Modi. As per reports, he missed the SCO banquet and hurried back to Beijing. Absence from dinner was attributed to as a part of the Covid protocol.
While all these happenings are abnormal, let’s try and understand what could be the possible reasons. Several questions come to mind, and I will attempt a reasonable assessment on what could be the possible reasons.
- Is there a power struggle in China? If so, why did President Xi Jinping travel and be exposed to this vulnerability three weeks before the CCP Congress meeting on 16th October 2022, in which he was seeking his third term? The economic conditions in China, hit by a drought and covid, the imposition of strict lockdowns and frequent covid testing may have created general unrest amongst the population.
- Is it a Western-driven Info Warfare to destabilise President Xi Jinping and build a world opinion against Chinese influence?
- With widespread unrest? is China going the USSR way of imploding into several countries?
- Is the rumour of a coup being spread by President Xi Jinping to arrest his dissenters?
- Will China focus on containing the US in particular and NATO in general by exploiting the ongoing war in Ukraine?
- Does this change affect Indo-China bilateral relations and the boundary dispute?
Power Struggle in China – Fear of a Coup
President Xi Jinping had not travelled abroad since 17-18 January 2020, when he travelled to Myanmar. There are reports of an intensifying power struggle within the Chinese Communist Party.
The reason is being attributed to the changes made in March 2018, wherein the National People’s Congress, the country’s Parliament, voted to remove the two-term limit for the post of President. The move meant that President Xi Jinping could remain in power for life instead of retiring in 2023.
As the Chairman of the CCP, President Xi has reformed the Politburo Standing Committee (PSC), consisting of senior Communist Party leaders, and reduced their strength from nine to seven members. Premier Li Keqiang and Politburo Standing Committee member Wang Yang are the only opposition to President Xi.
In 2017, seven high-ranking officials of the Communist Party were arrested for allegedly plotting to “usurp the party’s leadership and seize state power”. The list included “former security chief Zhou Yongkang, prominent politician Bo Xilai, and Sun Zhengcai, a member of the decision-making Politburo body”.
Economic vulnerabilities
Pollution. Pollution is a significant problem, as many cities are industrialised and there is increased ownership of cars and two-wheeler. Pollution is further worsened by limited pollution regulation, thereby leading to the discharge of untreated smoke and sewage into the environment.
Shortage of Power. Power shortage has led to the creation of projects like the Three Gorges Dam. Environmentalists fear that the dam will severely impact the natural habitats of many species.
Growing Income Inequality. Economic growth in China has benefited the Southern and Eastern regions. However, the growing disparity between North and South, Western and Eastern areas, led to the migration of workers from North to South; China will continue to struggle with this regional inequality. Nevertheless, there has been a marked decrease in absolute poverty as solid economic growth has lifted people out of the very low-income bracket.
Property Boom. There are fears that China is caught in its speculative property bubble, the demand and supply equation. With high maintenance costs, the government has resorted to a controlled implosion of these buildings, and the property bubble burst has created negative equity.
Inefficient Banking Sector. In particular, the Chinese banking sector has a bad reputation for bad debt. As a result, many loans are not recovered, as influential Communist leaders intervene. Moreover, banks often give loans to government businesses with little regard to return on investment market principles. As a result, genuine start-ups do not get sufficient capital funding.
Unemployment. While the Chinese economy has been growing at 8%, unemployment remains a problem in many inefficient state-owned enterprises. In privatisation and modernisation, many workers are being made redundant.
Undervaluation of Yuan. Economists suggest the Yuan is undervalued by 15% to 40%, though it is hard to conclude accurately. The People’s Bank of China currently holds $3.2 trillion in foreign-exchange reserves. So how does China keep the Yuan weak? By buying US currency and treasury notes on the open market, China keeps demand for the US dollar high. The impact of an undervaluation of the Yuan is that:
· Increase inflationary pressure in the Chinese economy.
· Makes it expensive for the Chinese to buy foreign goods.
· Gives an artificial advantage to Chinese manufacturers.
Overheating Economy. Because the Chinese economy is proliferating across all sectors, there are concerns that this could easily lead to inflationary pressures. Reasons for it could be:-
- Relatively loose monetary policy
- Growth in consumer debt.
- Undervalued exchange rate
- Property Boom.
- Inflation is currently at 2.9%.
Drought and Covid. Covid has had a major impact on the local population, frequent lockdowns, and repeated testing for Covid, so much so that entry into your flat is restricted if protocols are not followed. Inter-city travel is highly restricted. International travellers have to undergo mandatory quarantine for a fortnight. This has impacted businesses leading to high costs and general unrest amongst the population. Government enterprises have continued to manufacture, private manufacturing has been adversely affected.
The drought will impact food production, China will remain dependent on huge imports.
Huge Balance of Payments Surplus. Maybe not such a serious problem for China. The US sees it as creating a great disequilibrium. The US, if not anyone else, would like to see China use its balance of payments surplus elsewhere.
Western information warfare-Implosion of China
China has been supporting Russia in its campaign in Ukraine. In the recent past, President Joe Biden and President Macron have made statements on the war in Ukraine. This power struggle is between Russia vis a vis the US and NATO. However, Chinese support for Russia has been most visible. The US-led West would be keen to de-throne President Xi Jinping before he gets elected for his third term.
Is there a reach out to the opponents of President Xi Jinping?
It is too early to comment. However, keeping the Western interests in mind of encouraging democracy of regional differences in China, will they orchestrate an implosion of China is something to be watched very closely
Arrest of disasters
On Friday senior former Chinese security official accused of challenging President Xi Jinping’s authority was given a life sentence, weeks ahead of a key Communist Party Leadership Congress. Sun Lijun, Vice Minister of Public Security, was sentenced to death with a two-year reprieve.
The court said the sentence might be commuted to life in prison without any reduction or parole. Mr Sun was accused of massive corruption of close to $100 million in bribes over two decades, as well as the more serious charge of “endangering political security”, a reference to challenging President Xi Jinping.
China-Containing the US
It would be fair to assess that China will continue to follow its expansionist policy with its neighbours and keep it below the threshold of a conventional conflict.
The coming decade post the CCP meeting in October would be to de-throne the US and become the Primary Superpower of the world. While this may be the ambition that the Politburo of the CCP may set for itself, it will remain to be seen how much it will be able to achieve, considering the large number of domestic challenges China has.
In this attempt, while China may continue to use its diplomacy and economic might of trade surplus dollars, the countries globally, especially in Africa, are very suspicious of doing business with China, and there is a growing hatred towards the Chinese.
Ramifications of India-China bilateral relations
Whether the regime change takes place or not will have a minimalistic impact on our bilateral ties, as the Chinese policy towards India has had no change from the early Fifties to date. Their claim to Indian territory has been constant, and the vast gap between India and China, the trade deficit, and our dependency on the Chinese raw materials for manufacturing leave little room for manoeuvre bilaterally.
However, when it comes to the global arena, this equation changes and puts India on a pedestal, if not equal but, in my view, higher. To quote Brig Arun Sahgal, a lead strategic thinker with the Delhi Policy Group, “India as an important middle power is major regional balancer in Indo – Pacific, in terms of Quad and I2U2. It is a messiah of the Global South abandoned by West and exploited by China and even Russia.
With its membership of diverse groups straddling the two blocks i.e., West and Sino – Russia it is the only global player with influence. So, India’s recent moves and statements on Russia is not a shift but a voice of reason by an important global actor.”
While the trend has been global by prominent world leaders to consolidate power in one party and one leader, this may be an early indicator of a reverse in such power consolidation. While countries like China, Russia and North Korea are totalitarian regimes, democratic countries have been witnessing this differently, wherein the state machinery has to be used to bring under control the constitutional appointments of law enforcement, judiciary and election commissions. The Chinese Communist Party is the Supreme in China, and all institutions, PLA, police and even businesses grow or collapse under its diktats, which is an attempt to mirror globally.
Power hegemony is challenged, and absolute power under one party and one leader we have experienced has been disastrous, be it Hitler, Mao/Xi Jinping, Putin, Kim Jong-un, Imran Khan, Donald Trump or our own BJP party in power.
Nature has its checks and balances, s and this, too, would balance out in the long run. Who wins and who loses will not matter if tyranny has to rule by its unjust ways.
“At times the world may seem an unfriendly and sinister place, but believe that there is much good in it than bad. All you have to do is look hard enough. and what might seem to be a series of unfortunate events may in fact be the first steps of a journey.” ― Lemony Snicket
