Oct 15, 2022 - World

What China looks like after a decade of Xi Jinping's rule

GDP of the  <span style="color: white; background-color: #168AA2; padding: 0px 4px; display: inline-block; margin: 5px 0px 0px; white-space: nowrap; font-weight: 900;">U.S.</span> and <span style="color: white; background-color:#DA352F; padding: 0px 4px; display: inline-block; margin: 5px 0px 0px; white-space: nowrap; font-weight: 900;">China</span>
Data: World Bank; Chart: Tory Lysik/Axios

Over his 10-year tenure, Chinese President Xi Jinping has turned the world's second-largest economy into a tool to project geopolitical power.

Why it matters: By making foreign access to the massive Chinese economy contingent upon toeing Chinese Communist Party lines, Xi has pressured companies and governments around the world to support Beijing's domestic and international political goals, while the Chinese government continues to commit human rights abuses.

  • Beginning on Sunday, China's political elites will come together for the 20th party congress, a gathering that takes place every five years, and select Xi for a precedent-defying third term — meaning China's current trajectory is likely to continue.

The big picture: Some Western observers believed global trade would help spread liberal democratic values to China, but Xi's rise has demonstrated that authoritarianism can also spread through economic ties.

By the numbers: Since Xi first assumed power in late 2012, China's economy has more than doubled, from $8.5 trillion to $17.7 trillion in 2021.

  • During the same period, the U.S. economy grew about 41%, from $16.3 trillion in 2012 to $23 trillion in 2021.
  • Though the U.S. economy is still larger than China's overall, China's GDP overtook the U.S. in 2017 based on purchasing power parity.

What happened: Xi strengthened state control over foreign access at every level of the Chinese economy by using trade and global supply chains as political leverage, and he swayed Chinese consumers' decisions to align with state goals.

  • Chinese state media and nationalist social media accounts helped fan consumer and celebrity boycotts against numerous foreign fashion retailers that stated they no longer source Xinjiang cotton, which is linked to Uyghur forced labor. Many of the companies have since avoided talking about Xinjiang publicly.
  • Beijing told multinational companies to stop sourcing products from Lithuania after the Baltic nation strengthened ties with Taiwan. Affected companies then urged Lithuania to concede to China's demands.

Such gatekeeping has at times also increased China's ability to set international standards, which can give Chinese companies a leg up in global markets.

  • For years, Chinese foreign investment regulations effectively forced many international companies to hand over their proprietary technology in exchange for market access — a practice that greatly benefitted local firms at the expense of foreign companies.

At home, Xi last year declared the end of extreme poverty in China, saying that over an eight-year period, nearly 100 million people had been lifted out of poverty, fulfilling a key initiative of his tenure.

  • Between the lines: China’s threshold of extreme poverty is $2.30 a day. The World Bank suggests that for upper-middle-income countries like China, a reasonable poverty line is $5.50 a day.

What to watch: The size of China's economy is projected to surpass the U.S. economy in the coming decade — although that key milestone may now be delayed due to a recent slump in growth caused by China's strict zero-COVID policy and a real estate crisis.

China's GDP growth rate plummeted amid Xi's zero- COVID policy

China's rapid economic growth gradually slowed over the course of Xi's tenure, then fell dramatically in 2022 as strict lockdowns brought cities as large as Shanghai to a standstill for weeks.

Why it matters: Economic troubles are putting pressure on Xi to pursue other routes to bolster the CCP's legitimacy and prevent social unrest.

  • The slowing growth rate is making it harder for young Chinese people to find jobs and save for the future.
  • It's also undermining the global perception that China's rise to supremacy is inevitable.
Year-over-year change in China's GDP
Data: IMF; Chart: Tory Lysik/Axios

What's happening: The country's export-driven model has largely "run out of steam" and hasn't yet fully transitioned to a domestic consumption-based model.

  • Meanwhile, government-financed infrastructure investment that long powered economic growth also helped create one of the world's largest real estate bubbles — which may now be bursting.
  • The economy contracted in the second quarter of 2022.
  • In late September, the World Bank projected China's economic growth rate would fall below that of the rest of Asia for the first time since 1990.

Population growth plunges

The number of births in China now only slightly outpaces the number of deaths: Births fell from about 16 million in 2012 to 10.6 million in 2021.

Why it matters: In the future, China's low birth rate will mean a shrinking working-age population to grow the economy and support the elderly. That could result in a stagnant economy and a heavy burden on social welfare systems.

Births and deaths in China
Data: China National Bureau of Statistics; Chart: Tory Lysik/Axios

Background: For more than 100 years, Chinese leaders have worried about the difficulties of ensuring health and prosperity for the country's huge population.

  • The CCP's solution was strict limits on births, sometimes accomplished through forced abortions and sterilizations. The restrictions did limit China's population growth but created other problems, including a gender imbalance from selective abortions and now an aging population.

What's happening: In 2016, the Chinese government scrapped its decades-long one child policy, allowing all couples to have two children.

  • When that didn't boost the birth rate, authorities further relaxed the policy last year to allow three births per couple.
  • But these efforts have yielded little result, with couples increasingly disillusioned about the skyrocketing costs of raising a child.

What to watch: Beijing proposed new incentives in August for Chinese couples to have more children, including health education, psychological counseling and assisted reproductive technology. It's unclear whether those measures will have a meaningful effect.

Military budget doubled

China is rapidly modernizing its military by investing in high-tech weaponry, shrinking its army and improving combat readiness.

Why it matters: Xi has committed to building "world-class forces" for a country that is already considered a "pacing threat" to the U.S., according to the Pentagon.

  • Beijing's increasingly aggressive posture toward Taiwan following U.S. House Speaker Nancy Pelosi's August trip there earlier this year has rekindled fears of a looming attack on the island.
  • Meanwhile, China's increased military presence in the South China Sea has complicated its relationship with neighboring countries in Southeast Asia.
Global defense spending
Reproduced from CSIS China Power Project; Chart: Axios Visuals

By the numbers: China now spends more on its military than any other country in the world besides the United States.

  • China's official defense budget in 2021 was $209 billion — doubling that of 2012, when Xi took over as head of the Central Military Commission.

What they're saying: Adm. John C. Aquilino, the head of U.S. Indo-Pacific Command, told the Washington Post in June that he was witnessing "the largest military buildup in history."

  • "I see advanced capabilities that are being delivered more quickly than we would have expected," Aquilino said of China's military. "Their goal is to have parity with the United States to ensure that they can’t be deterred."

What to watch: The Pentagon estimated last year that China could have 1,000 deliverable nuclear warheads by 2030, nearly tripling what it had in 2021.

R&D gets big boosts from Xi

China under Xi is intensely focused on becoming a world leader in scientific research and technology development that could help the country reduce its reliance on the U.S. and Europe for semiconductors and other critical technologies.

The big picture: Innovation is playing a bigger role in China's growth story, as the country strives to evolve from a manufacturer of cheap goods to a developer of advanced products.

Gross domestic spending on R&D
Data: OECD; Chart: Kavya Beheraj/Axios

What they're saying: "Science and technology make a nation stand on its own," Xi said in a speech last year. "Bolstering basic research is a prerequisite to self-sufficiency in science and technology."

Details: Revealed in 2015, the country's "Made in China 2025" blueprint seeks to bolster R&D in "critical and core technologies," such as next-gen IT, robotics and new energy vehicles.

  • Meanwhile, the Thousand Talents Plan has been attracting top scientists and engineers to China, including many Chinese students trained in the United States.
  • U.S. law enforcement has warned the program is a conduit for economic espionage and intellectual property theft, but there have been few such convictions in the U.S., and the Department of Justice's China Initiative, a controversial Trump-era effort to prosecute such crimes, was quietly shuttered earlier this year.

By the numbers: China spent a record $564 billion on R&D in 2020, according to the most recent data from the Organization for Economic Cooperation and Development.

  • In 2012, China spent $120 billion on development and only $7 billion on basic research, per government data.
  • But by 2021, China was spending $26.4 billion on basic research in 2021, nearly 24% higher than the previous year.
  • The increased spending on basic research reflected China's newfound focus on major innovations and scientific breakthroughs.

Human rights conditions worsened

The human rights situation in China has continued to deteriorate in recent years, as Xi "doubled down" on repression in the country, human rights groups say.

The big picture: Governments worldwide have coordinated international actions to condemn China's human rights violations, especially the government's repressive policies toward Uyghurs and other ethnic minorities in Xinjiang, which the U.S. recognized as genocide.

Change in Freedom Index score, 2012–2021
Data: Freedom House; Chart: Tory Lysik and Kavya Beheraj/Axios

The U.S. and EU have imposed sanctions on Chinese officials in connection with human rights abuses in Xinjiang. A U.S. law that went into effect in June after being passed by Congress last year prohibits the importation of products made by forced labor in Xinjiang.

  • Last year, the European Parliament overwhelmingly voted to freeze the ratification of a new investment pact with China until Beijing lifts sanctions on EU individuals and entities that have criticized CCP policies in Xinjiang.
  • In a long-awaited Xinjiang report released in August, the United Nations' human rights office concluded that China's serious human rights violations may constitute crimes against humanity.

Yes, but: Earlier this month, the UN Human Rights Council narrowly defeated a Western-led motion to hold a debate on China's alleged human rights violations in Xinjiang.

Negative views of China rise worldwide

People in many advanced economies have increasingly viewed China in an unfavorable light over the last decade, according to a recent report from Pew Research Center.

Why it matters: China has long touted its "peaceful rise" policy, but the rise of aggressive diplomacy, the growth of global media influence, and the impacts of its opaque overseas lending practices have cast doubts about China's stated approach to becoming a superpower.

U.S. public opinion of China
Reproduced from Pew Research Center; Chart: Axios Visuals

By the numbers: In 2012, slightly more Americans (42%) had a favorable view of China than an unfavorable view (40%), the Pew report said.

  • In early 2022, more than 80% of Americans said they had unfavorable views of China. How China has been viewed in the U.S. has been exacerbated by the trade war and Beijing's initial mishandling of the COVID-19 outbreak.
  • In South Korea, 4 in 5 people in 2022 had unfavorable views of China, compared to half in 2013. In the U.K., nearly 70% of people in 2022 had unfavorable views of China, twice as much as in 2012 (35%).
  • Survey respondents in Canada, Japan, Sweden, and other advanced economies also reported more negative views of China, according to Pew.

The intrigue: An Edelman survey this year found trust among Chinese citizens in their government reached 91%, the highest over the past decade.

  • However, many scholars acknowledge ratings-based public opinion polling in China may be misleading, as people living in autocracies are under pressure to express favorable opinions of the regime.

A homegrown film industry emerges

China's homegrown film industry is supplanting Hollywood at the country's box offices.

Why it matters: Beijing is leveraging domestic films as a key conduit for mass messaging aimed at achieving political goals, leaving little room for foreign films, Axios reported earlier this year.

Gross box office sales of  <span style="background:  #A98A4C; padding:3px 5px;color:white;">domestic</span> and  <span style="background: #168AA2; padding:3px 5px;color:white;">imported</span>  films
Data: Artisan Gateway; Chart: Tory Lysik/Axios

What they're saying: "Writers and artists need to tell China's story well, spread China's narrative well," President Xi said in 2014. “They need to showcase our country's marvelous culture and arts to the world ... and deepen foreigners' understanding of Chinese culture.”

State of play: Of the top 10 highest-grossing movies in China last year, eight were domestic films.

  • The only foreign films that made the list were "Fast & Furious 9" (fifth place/$196 million) and "Godzilla vs. Kong" (eighth place/$173 million).

The bottom line

The sectors that powered China's growth for decades, including real estate, manufacturing and technology, have faced headwinds in recent years.

  • Chinese people are spending less, raising fewer children and suffering from lockdown-related anxiety.
  • But Beijing's drive to become more self-sufficient in critical technologies and recent advances in science and technology could set the momentum for more growth and innovation.
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