What Might Happen in China in 2018, and Why It Matters

But I don’t really know. And neither do you.

Consistent with the annual tradition in the wonkosphere of “Top Risks” or “10 Things to Worry About in [year],” I have decided to dip my toes in the water here for you at Inkstick and offer some thoughts on China and Chinese politics as we move into 2018. But I have long had a problem with the prognosticating tone of these pieces, as analysts seek to lay out the “most likely” or “biggest risks” of a year, which is usually an exercise in futility. So here are a few possible, if not necessarily likely, occurrences that might happen in Chinese politics and foreign relations this year, along with some speculation as to what they would mean:

  1. Additional Purges: Xi Jinping consolidated power in a big way in 2017, writing himself into the party constitution in a way that goes beyond his two immediate predecessors, and establishing himself as the “Core” of the party. Xi’s first five years have been suffused with intra-party maneuvering and elimination of internal adversaries. Starting with Bo Xilai, whom he outfought in 2012 for the position, then Zhou Yongkang, former feared head of the internal security services, Xi has dispatched hundreds of political adversaries with his “Tigers and Flies” anti-corruption campaign. He appears to have succeeded in removing two important potential successors from the Politburo Standing Committee. However, internal CCP politics remains exceedingly opaque, and whether Xi feels comfortable in his position will be revealed by whether he continues these purges through 2018. More internal shakeups would signal that division at the highest levels is more substantial than meets the eye, and indicate some reason for concern about the direction of CCP decision-making.
  2. Worsening Relations with India: China and India had a tense military standoff in the Himalayas in 2017, with China blustering into all-or-nothing domestic political rhetoric and propaganda about its territorial integrity, wholly downplaying the potential counter-claims or interests of other parties. Needless to say, this played very badly in Delhi. Indian strategic thought on China has been bouncing around for a while, not able to settle on whether to see China as mostly an Asian adversary or as a developing-country partner. But the Doklam standoff appears to have given an upper hand to the China hawks in Delhi, and the strategic community is getting behind it. China has recently reacted very badly to other countries’ espousing a negative perception of China, or moving against Party interests, and has pushed negative propaganda to its domestic population in response. This has historically led to angry protests in Chinese cities and retaliatory actions from Beijing, often to distract the population. Beijing may roll out that same playbook this year with anti-India rhetoric, which would signal a commitment to a longer-term adversarial tone in South Asia
  3. More Closing of the Capital Account: Across 2017, Beijing introduced a series of measures designed to restrict outflows of capital from Chinese accounts. The reasons for this are as much political as they are economic, but they indicate at least a serious concern in Beijing that worsening conditions may be at hand, which would prompt more Chinese citizens to expatriate their money. Whether or not actual economic disaster is on the horizon is not something I can usefully speculate on, but any moves by Beijing to shut down the capital account even further would indicate increased concern among CCP policymakers as to the direction of the economy. And whether or not they end up being right about these concerns, it will suggest they feel more boxed-in, which could increase the chances of rash or risky decisions
  4. Taiwan: The capture and integration of Taiwan into the mainland remains the ne plus ultra of CCP policymaking. It would also be a global political crisis of the highest order, being the single most likely flashpoint that could lead to conflict between the US and China. The party has staked a foundational part of its legitimacy on the held-out promise to the population that this will be achieved. As the balance-of-forces across the Taiwan strait has been moving ever more in the mainland’s direction, Beijing has concomitantly increased the bellicosity of its rhetoric towards Taiwan. With the Taiwanese presidency in the hands of a member of the more pro-independence party, the opportunities for manufactured outrage in Beijing are structurally increased. And to the extent that the Party has backed itself into a corner, rhetorically, on the Taiwan issue, political pressure for “Do-Something-ism” is likewise raised. If intense Taiwan rhetoric follows on from worrisome signals in any of the previously-mentioned flashpoints, we’re in dangerous territory
  5. And, of course, DPRK and the Trump wild card. Very little to add here to what’s been said at great length around the web for weeks. But Beijing’s plans for what to do in the event of a full-scale Korean Peninsula crisis are unknown. The last two times a Chinese regime faced a significant crisis there (1950 and 1894), its response was to deploy troops. The first time resulted in Japanese control of the peninsula, and the second helped give us the DPRK in the first place. Neither time were there ICBMs to worry about.

These are only a few possible inflection points, or “red flags” to be on the lookout for. This list shouldn’t be taken as exhaustive or even as a “top five.” But, by understanding where major risks lie, we can think through how we might react to them and plan appropriately. The China Rise story is now becoming “China has mostly risen – now what?” It’s time to change how we think.