(Bloomberg) -- After President Xi Jinping tore up the Communist Party rulebook to promote key loyalists last year, some China watchers expected his new team to operate more smoothly in tackling China’s biggest challenges.
Instead, his government looks like it’s in disarray. Xi’s mysterious purge of his foreign minister in July, followed by the reported ouster of his defense chief less than two months later, is making China appear unstable to the outside world. The Chinese leader also overhauled the generals overseeing China’s Rocket Force, which manages the nation’s nuclear arsenal, without giving an explanation.
And those are just the firings that have been made public.
While most analysts don’t see any threat to Xi, who has amassed more power than any leader since Mao Zedong, questions are being raised about his management style. China hasn’t seen such an intense period of high-profile purges since the reform era of the 1980s, exposing the “opacity and brutality” of Xi’s system, according to Richard McGregor, a senior fellow at the Lowy Institute in Sydney who wrote The Party: The Secret World of China’s Communist Rulers.
“These men were handpicked by Xi himself for promotion,” McGregor said. “So their fall reflects on him.”
The upheaval is leaving investors and governments spooked, as outsiders try to piece together Xi’s motives from a slim trail of clues. It’s also undercutting Beijing’s efforts to convince the private sector that it’s safe to invest in China, after years of bruising crackdowns on sectors including tech and education.
“International overtures are overshadowed by the renewed purges,” said Diana Choyleva, chief economist at Enodo Economics, a London-based research firm focused on China. “Investors are worried palace politics are keeping Xi away from addressing China’s pressing economic problems.”
$188 Billion Exodus
Western firms in China are now the gloomiest they’ve been about the future in decades, largely due to geopolitical risks, according to a recent American Chamber of Commerce in Shanghai survey. Persistent tensions with the West — coupled with China’s economic slowdown — have sparked a $188 billion exodus from Chinese stocks and bonds from a December-2021 peak through the end of June this year, diminishing the market’s clout in global portfolios.
Xi’s shift in behavior isn’t limited to his newfound hire-and-fire governing style: He’s also increasingly focused on security and is staying home much more than previously. In May, he led a meeting that declared the need for “extreme-scenario thinking” on national security while ramping up a push for self-sufficiency in advanced tech as the US tightened restrictions in a bid to stay ahead of the world’s second-biggest economy.
Xi has left China for only six days this year even after the nation opened up after the pandemic, and skipped the Group of 20 summit this month for the first time since he took power in 2012. When he attended a leaders’ summit in South Africa last month, he didn’t show up for a scheduled speech, getting his commerce minister to read his words instead. Chinese-language media reported that Xi made the address.
At that event, Xi’s security team swept his South African hotel so thoroughly it even took local police by surprise. The Chinese flew in their own beds, curtains and carpets on a cargo plane, South African Police Minister Bheki Cele told local media. “There was nothing from South Africa in those rooms,” he added.
That hyper-vigilance came after Xi stunned the world by removing Qin Gang as foreign minster after just seven months, the shortest amount of time anyone has spent in that post. An investigation found that Qin had an affair while serving as China’s ambassador in Washington that could have endangered national security, The Wall Street Journal reported, citing sources. The party’s senior ranks are now being scrutinized for their dealings with foreigners, insiders told the WSJ, adding that the top brass in China’s military were also under the spotlight.
As Xi’s mistrust of his officials grows, the system is showing signs of becoming paralyzed as he tries to micromanage domestic operations. One foreign executive in Beijing, who asked not to be identified, said Chinese officials now operate in “silos of fear,” with everyone scared of Xi and also isolated from each other.
Purging Political Rivals
Xi is no stranger to sacking high-level officials. In his first term he put ex-Politburo member Bo Xilai and former security czar Zhou Yongkang on trial. Those moves were part of a well-understood play to purge political rivals, and took down officials who had risen through the ranks under Xi’s predecessors.
The recent casualties shot to power after Xi last year threw out party protocol on norms such as de facto retirement ages. For example, Qin — the former foreign minister — leapfrogged several older and more conventionally qualified peers.
US officials have intelligence that Defense Minister Li Shangfu has already been removed from his post. China hasn’t officially commented on his status, but in July authorities announced a retrospective probe into the military equipment procurement department he once led, for a date range overlapping with the former aerospace engineer’s tenure.
“It shows a deficiency in the vetting process,” Neil Thomas, a fellow for Chinese politics at the Asia Society Policy Institute’s Center for China Analysis, told Bloomberg TV, adding that Xi appears to have skipped the stringent checks and factional haggling that accompanied Communist Party promotions in previous decades.
“It’s not a good look to have a couple of your handpicked generals or foreign minister taken out so early,” Thomas said. “But Xi’s base of power is not winning popularity contests in elections. It’s controlling these key levers at the top.”
--With assistance from Kari Lindberg and Lucille Liu.
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