Defend Truth


Xi’s ‘China Dream’ of absolute control poses the greatest threat to open societies


George Soros, founder and chair of the Open Society Foundations, is the author, most recently, of ‘In Defense of Open Society’ (Public Affairs, 2019)

The year 2022 will be a critical one in the history of the world. In a few days, China — the world’s most powerful authoritarian state — will begin hosting the Winter Olympics, and, like Germany in 1936, it will attempt to use the spectacle to score a propaganda victory for its system of strict controls.

We are at, or close to, important decisions that will determine the direction in which the world is going. A new German government was formed late last year, and the French presidential election is set for April. In the same month, Hungary’s voters may — against great odds — turn their authoritarian ruler out of power. Together with Russian President Vladimir Putin’s decision on whether to invade Ukraine, these developments will help determine the fate of Europe.  

In October, moreover, China’s 20th Party Congress will decide whether to give President Xi Jinping a third term as general secretary. Then, the US will hold a crucial mid-term election in November. 

Climate change will remain a paramount policy challenge for the world, but the dominant geopolitical feature of today’s world is the escalating conflict between systems of governance that are diametrically opposed to each other. Let me define the difference as simply as I can. 

In an open society, the role of the state is to protect the freedom of the individual. In a closed society, the role of the individual is to serve the rulers of the state. As the founder of the Open Society Foundations, obviously I am on the side of open societies. But in a world teetering on the edge of military aggression, both in Ukraine and in Taiwan, the victory of open societies cannot be taken for granted. So, the most urgent question now is: Which system will prevail?  

Open or shut 

Each system has strengths and weaknesses. Open societies unleash the creative and innovative energies of people, while closed societies concentrate power in the hands of a one-party state. Those are the strengths. The weaknesses are more specific to local and regional conditions. For example, the relationship between the European Union and its member states is still evolving. The EU ought to protect Lithuania, which recognised Taiwan, from an unofficial blockade by China, but will it? 

US President Joe Biden has generally adopted the right policies. He told Putin that Russia will pay a heavy price if it invades Ukraine, but the US will not go to war to defend Ukraine. If Putin attacks, the heaviest penalty he will face will be greater transatlantic cooperation. The Biden administration won’t offer any unilateral concessions but seeks a peaceful solution. The choice now is up to Putin. 

At the same time, Biden has made it clear to Xi that if he uses force against Taiwan, China will have to confront not only the US but also a larger alliance, composed of Australia and the UK (which last year formed the Aukus grouping with the US) and Japan and India (which together with Australia and the US comprise the so-called Quad), with a number of other potential allies that are not yet fully committed to joint action, such as South Korea and the Philippines. Japan is the country that has most fully committed to defending Taiwan.  

Xi, however, has declared that he is determined to assert China’s sovereignty over Taiwan by force if necessary. He is devoting enormous resources to armaments. Recently, China surprised the world by demonstrating a nuclear-capable hypersonic controllable missile. 

The US has nothing comparable and doesn’t intend to compete. I think that is the right policy, because China’s hypersonic achievement does not change the dynamic of mutual assured destruction that will stop the enemies from attacking each other. The missile is merely a propaganda victory. Still, war between the US and its enemies has become more plausible, and that is not a pleasant subject to contemplate. 

A brief history of the present 

Recently, I have asked myself, how did the current situation arise? When I embarked on what I call my political philanthropy in the 1980s, US superiority was not in question. Why is that no longer the case? 

Part of the answer is to be found in technological progress, most of which is based on artificial intelligence, which was in its infancy in the 1980s. The development of AI and the rise of social media and tech platforms evolved together. This has produced very profitable companies that have become so powerful that no one can compete against them, though they can compete against each other. These companies have come to dominate the global economy. They are multinational, and their reach extends to every corner of the world. We can all name them: Facebook, Google, Apple, Microsoft and Amazon. There are similar conglomerates in China, but their names are less familiar in the West. 

This development has had far-reaching political consequences. It has sharpened the conflict between China and the US and has given it an entirely new dimension.  

China has turned its tech platforms into national champions; the US is more hesitant to do so, because it worries about their effect on the freedom of the individual. These different attitudes shed new light on the conflict between the two systems of governance that the US and China represent.  

In theory, AI is morally and ethically neutral; it can be used for good or bad. But in practice, its effect is asymmetric. 

AI is particularly good at producing instruments that help repressive regimes and endanger open societies. Interestingly, the coronavirus reinforced the advantage repressive regimes enjoy by legitimising the use of personal data for purposes of public control.

With these advantages, one might think that Xi, who collects personal data for the surveillance of his citizens more aggressively than any other ruler in history, is bound to be successful. He certainly thinks so, and many people believe him. I do not. Explaining why will require a thumbnail history of the Communist Party of China (CPC).   

The first person to dominate the CPC, Mao Zedong, unleashed the Great Leap Forward, which caused the death of tens of millions of people. This was followed by the Cultural Revolution, which destroyed Chinese traditions and institutions by torturing and killing the cultural and economic elite.  

After Mao’s death brought an end to this turmoil, a new leader emerged. Deng Xiaoping recognised that China was lagging woefully behind the capitalist world. Embracing the credo, “Hide your strength and bide your time,” Deng invited foreigners to invest in China, and this led to four decades of miraculous growth that continued even after Xi came to power in 2013. 

Since then, Xi has done his best to dismantle Deng’s achievements. He brought the private companies established under Deng under the control of the CPC and undermined the dynamism that used to characterise them. Rather than letting private enterprise blossom, Xi introduced his own “China Dream,” which can be summed up in two words: total control. That has had disastrous consequences.  

In contrast to Deng, Xi is a true believer in Communism. Mao and Vladimir Lenin are his idols. At the CPC’s centennial celebration, he was dressed like Mao while the rest of the audience wore business suits. 

According to the rules of succession established by Deng, Xi’s term in power ought to expire this year. But Xi, inspired by Lenin, has gained firm control over the military and all other institutions of repression and surveillance. He has carefully choreographed the process that will elevate him to the level of Mao and Deng and make him ruler for life. To accomplish this, Xi had to reinterpret the CPC’s history to show that it logically leads to his appointment as paramount leader for at least another five-year term. 

But Xi has many enemies. Although no one can oppose him publicly because he controls all the levers of power, a fight within the CPC is brewing, and it is so sharp that it has found expression in various party publications. Xi is under attack from those who are inspired by Deng and want to see a greater role for private enterprise. 

Hitting a wall 

Xi himself believes that he is introducing a system of governance that is inherently superior to liberal democracy. But he rules by intimidation; nobody dares to tell him what he does not want to hear. As a result, it is difficult to challenge his views, even as the gap between his beliefs and reality has grown ever wider.  

The gap is apparent in the economic crisis China is facing. Since Xi came to power, the real-estate market has been the main engine of economic growth. But the model on which the real-estate boom is based is unsustainable, because it is built entirely on credit. Local governments derive most of their revenues from selling land at ever-rising prices, and people buying apartments must start paying for them even before they are built. 

Eventually, prices had to rise beyond the level that ordinary people could afford. That happened in the middle of 2021. By then, the boom had grown to an unhealthy size, accounting for nearly 30% of the economy and eating up an ever-increasing amount of credit. 

After accelerating gradually, the property boom ended with a bang. With residential land prices in June 2021 more than 30% higher than they had been the year before, the authorities tried to slow the pace of appreciation and ordered banks not to increase lending for residential real estate. 

The directive had the opposite effect from what was intended. Credit rationing made it difficult for the largest and most leveraged developer, Evergrande, to meet its obligations. Subcontractors who didn’t get paid stopped working, and people who had bought apartments started to worry that they might never receive the homes they were paying for. 

When the main selling season started in September, there were many more sellers than buyers. For a while, there were hardly any transactions at the advertised prices, and prices for both land and apartments are starting to fall. That will turn many of those who invested the bulk of their savings in real estate against Xi. 

Evergrande has been placed in receivership, and other developers face a similar fate. The firm’s creditors soon started fighting to improve their position in receiving bankruptcy distributions. The courts took charge, and their first move was to protect the subcontractors, who employ some 70 million migrant workers. 

It remains to be seen how the authorities will handle the crisis. They may have postponed addressing it for too long, because now people’s confidence has been shaken. Xi has many tools available to reestablish confidence — the question is whether he will use them properly. In my opinion, the second quarter of 2022 will show whether he has succeeded. 

The current situation doesn’t look promising. Making matters worse, China also faces a serious demographic problem. The birth rate is much lower than the published figures indicate. Experts calculate that the actual population is about 130 million lower than the official figure of 1.4 billion. This is not widely known, but it will produce labour shortages, slow the economy, aggravate the real-estate crisis, and heighten fiscal strain. 

The revenge of the virus 

China is encountering serious problems with Covid-19 as well. The Chinese vaccines were designed to deal with the original Wuhan variant of the coronavirus, but the world has been struggling with others, especially Delta and now Omicron. Xi couldn’t possibly admit this while he is waiting to be appointed for a third term. He is hiding it from the Chinese people as a guilty secret.

All Xi can do now is to impose a “zero-Covid” policy, which entails severe lockdowns at the slightest sign of an outbreak. But this is having a negative effect on economic activity and is inflicting severe hardship on the people who are instantaneously quarantined wherever they are. The authorities will not be able to silence their complaints for long. 

After all, those complaints are bound to multiply. Omicron entered China mainly through the port city of Tianjin, which is 30 minutes by high-speed rail from Beijing. By now, it has spread to an increasing number of cities across China. It is no longer under control. 

This development threatens to be Xi’s undoing. Omicron is much more infectious than any previous variant, although it is much less harmful for those who have been properly vaccinated. But, because Chinese people have been vaccinated only against the Wuhan variant, Xi’s secret is bound to be revealed, most likely during the Winter Olympics or soon thereafter. 

The Winter Games are of course Xi’s prestige project, so the administration is going to incredible lengths to make the event a success. While the competitors will be isolated from the local population, continuing the effort after the Games are over makes little sense. City-wide lockdowns are unlikely to work against a variant as infectious as Omicron. This is evident in Hong Kong, where the outbreak looks increasingly serious. Yet the cost of zero-Covid is rising every day as the city is cut off from the rest of the world, and even from China. 

Hong Kong highlights the wider challenge Omicron represents for Xi. He tried to impose total control but failed. As Omicron spreads, opposition within the CPC will grow stronger. Xi’s carefully choreographed elevation to the level of Mao and Deng may never occur.

It is to be hoped that Xi may be replaced by someone less repressive at home and more peaceful abroad. This would remove the greatest threat that open societies face today. Their task is to do everything within their power to encourage China to move in the desired direction. DM

Copyright: Project Syndicate, 2022.

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