For Xi Jinping, the Economy Is No Longer the Priority

Beijing’s focus has been on strong and steady economic growth for decades. But China’s leader has just put an end to that era. For Xi, it’s only about power—at home and abroad.

October 2022

By Guoguang Wu

Xi Jinping secured his third term as head of the Chinese Communist Party (CCP) last week at the CCP’s Twentieth National Congress, which closed on 22 October 2022. Xi also announced a new Party leadership made up almost exclusively of his own men, and his predecessor, Hu Jintao, was mysteriously escorted out of the closing ceremony. Understandably, given the tediousness of Chinese politics, the world’s attention has been fixated on this handful of outcomes and events. But headline grabbers are obscuring a more dramatic change to China’s future—the end of the economy-centered era.

Today, the People’s Republic of China (PRC) is the world’s second largest economy, with a gross domestic product (GDP) of roughly US$17.7 trillion in 2021. China’s economic rise is a relatively recent phenomenon that did not begin until after the reign of Mao Zedong (1949–76), founding father of both the CCP and People’s Republic of China (PRC). In December 1978, the post-Mao leadership fundamentally shifted the country’s priorities from the class struggle to “economic construction.” Over the next forty years, economic development was China’s “central task,” which it carried out with great success—the country’s GDP was equivalent to just 8.4 percent of U.S. GDP in 1977 but today equals 77 percent of U.S. GDP.

This remarkable accomplishment is often credited to Deng Xiaoping, China’s post-Mao paramount leader who promoted economic reform and China’s open-door policy to the West. Xi Jinping, however, might not entirely agree with that assessment. According to Xi’s report to the Party Congress, during his ten years in power, China’s GDP more than doubled, growing from 54 trillion to 114 trillion RMB yuan.

In his report, Xi barely mentioned “economic development as the center.” Just once did he state that the country would “adhere to economic construction as the center”—ten words (in Chinese) in a thirty-thousand-word report, indicating its insignificance. Xi did not mention it at all in his other speeches during the Congress. Rather, the themes and policies that Xi emphasized all herald a significant, if implicit, change: The economy-centered era is over.

The Struggle for Security

What will replace “economic construction” as the CCP’s focus going forward? Xi has not explicitly said, but he has provided enough clues to guess the answer. “Security” is the word most repeated in his report and speeches, followed by “struggle.” What he means by these words can be teased out from his political statements and the way he has governed over the past decade: domestically, to maintain regime security by struggling against any possible threats to the CCP’s monopoly on state power; in foreign relations, to enhance China’s national security by struggling to gain dominance on the international stage.

This fundamental change in China’s focus has tremendous implications, three of which are particularly critical. First, China will “struggle” to control, harness, and contain market mechanisms, which were introduced and promoted by the CCP after Mao, and their ramifications in all spheres of social life. This effort has already begun, as evidenced by increasing state repression of the private sector, and will unquestionably continue. The intention is clear: Although China depends on the market economy in order to prosper, certain social, legal, and political requirements of market activities may challenge the one-party dictatorship. From Deng Xiaoping to Jiang Zemin to Hu Jintao, CCP party leaders have always tried to contain those elements while promoting the market. Xi believes that the regime has now reached the critical juncture at which the party-state must establish thorough and absolute command of the market.

Second, China will no longer “follow the United States,” as it had under Deng Xiaoping, and will instead comprehensively challenge its rival. Deng had seen those Asian countries that emulated the United States economically prosper, yet he also believed that the CCP regime had “political advantages” over U.S. democracy and had no intention of adopting American political institutions. Xi, however, wants to go further to actively mounting a challenge. His regime’s rivalry with the United States will not be limited to superpower competition, and will extend to the arenas of international institutional arrangements and ordinary people’s daily lives all over the world.

And third, rather than promoting “peaceful reunification” with Taiwan, Xi’s CCP is planning a takeover by any possible means, and to that end is speeding up China’s military preparation for actualizing “entire unification of the motherland.” China’s Taiwan policy in the past decades was strongly connected to the CCP’s economy-centered program. And Taiwan’s contributions to China’s early post-Mao economic development were huge and critical, especially in terms of capital, trade, management, and technology. Now that China has become exponentially more powerful, however, why not turn Taiwan into a PRC province and incorporate the Taiwanese economy into its own?

The Challenge of Xi’s Success

The end of the economy-centered program does not mean that economic development is no longer important. In fact, Xi repeatedly emphasized at the Party Congress the “material foundations” for actualizing his “great dream” of transforming China into a “socialist, modernized, world-class power.” But instead of highlighting “economic construction as the center,” he spoke of “development with high quality.” This is completely in line with the Hegelian-Marxist dialectics that guide Xi and his comrades’ way of thinking. More importantly, Xi explained his program as “coordinating development and security,” indicating clearly that the priorities have changed. “Economic construction” is no longer first on Xi’s agenda and must instead serve the new number-one priority: the “struggle” for “security.”

Many, including a huge number of CCP cadres, may find this fundamental shift in priorities—in CCP jargon, the “central task”—premature. Xi sees things differently; put frankly, the shift is in his interest. In the view of pragmatic CCP elites and party-state strategists, China should wait until its economy surpasses that of the United States to unveil its true intention not only to dominate the world but also to transform it according to the CCP’s rules of the game.

Xi could not wait, however. Had he chosen to continue the economy-centered program rather than introduce the “struggle for security,” he would have had no excuse to stay in power, and the Twentieth Party Congress would have witnessed his handover of power to someone else. That someone—and not Xi—could then have become the leader to oversee China’s world domination. To avoid that scenario, Xi was determined to grab the unripe but edible apple in his own hand, and he did. He presented himself as the only person capable of leading China and the Party into the new era. Xi has judged the East to be on the rise and the West in decline. He means to capitalize on this moment and knows how to do so.

Xi has secured his third and possibly even fourth term, and the Party’s endorsement of his program, policies, and personnel arrangements. But as China comes into “Xi Jinping’s new era,” it faces major challenges, many of which are products of Xi’s successes, including the silent stop he put to China’s economy-centered program. How, for example, will the regime strengthen the country’s “material foundations” when the market is contained and China no longer has the economic and technological benefits of U.S. connections? For Xi the answer seems to lie in the state sector and its contribution to the regime’s economic and financial strength. Also, ironically enough, Xi seemingly worships the “magic power” of advanced technologies, and trusts that the regime’s extraordinary capacity to mobilize resources—called the “whole-country system”—can replace human creativity in furthering Chinese technological progress.

Xi might also be willing to continue fueling his ambition with U.S. technology or economic benefits, so long as China does not become dependent on its foremost adversary. Xi’s promotion of Chinese ambassador to the United States Qin Gang to the Central Committee points to this possibility. And Xi might well promote Qin again in March to a more important position, when China’s People’s Congress meets. The irony is that Xi simultaneously will be overtly challenging U.S. democracy at both a societal and institutional level. If he does otherwise, China will have problems fortifying its “materialist foundation.” Yet even at its current strength, China can still present formidable and even immediate threats to regional stability, global peace, and cosmopolitan values.

The CCP’s Twentieth National Congress is clearly a turning point. With it, Xi has turned the Party’s post-Mao oligarchic dictatorship into a neo-totalitarian tyranny with himself as the “core.” But the change will be felt more broadly and deeply than a critical shift at the top of elite Chinese politics. The PRC that puts the economy first is no more, and it is a harbinger of greater changes to come.

Guoguong Wu is a senior research scholar at Stanford University’s Center on China’s Economy and Institutions.