Key Takeaways

• China’s aggressions on the India-China border have not led to swift and irrefutable land grabs along the Line of Actual Control but rather incurred strong India resistance and worldwide condemnation.

• For the past decade, we have witnessed how Chinese soft power has been intelligently diversified and how it is increasingly being flanked by cold hard power politics. 2020 can probably be seen as the watershed of this process: Finally, in their own opinion, Chinese influence is deemed strong enough, that China thinks it can get away with outrageous displays of brute force without eliciting an appropriate response from the western world.

• A huge part of China’s strategy around the border provocations at Galwan and Pangong Tso hinges on its ability to withhold information from the Chinese public and thereby the wider world without consequences.

• The world owes much of the havoc wreaked by the pandemic so far to China’s handling or rather mis-handling of the crisis in its initial stages: The authoritarian structures were clearly overwhelmed by the demands on China’s health infrastructure.

• Social stability is a topmost concern for China’s leadership as they see it as essential for the perpetuation of the CCP’s monopoly on power. To achieve this, they play, to an extent, on the fears of the Chinese populace of dongluang (upheaval/turmoil).

• Despite the efforts of the CCP leadership, especially under Xi Jinping, there is noticeable resentment and dissatisfaction. The trigger for this was the abolition, at the 19th Party Congress,by Xi Jinping of term limits on top posts as well as his own ignoring the informally set age limits for elevation of cadres to top positions which were set by Deng Xiaoping to eliminate one-man rule like the Mao era. Soon after the declaration of end of term limits, many CCP veteran cadres wrote ‘open’ letters criticising the move.

• The road map of China’s goals set out by Xi Jinpingsuch as China Dream – 2021; Made in China - 2025, Modernisation of the PLA - 2030 and China becoming an advanced nation with pioneering global influence by 2049, has triggered the Sino-US rivalry. China’s call for a‘Community of Common Destiny’ has caused the ideological conflict with the US.

• The US targeted the technology sector, identifying it asthe major driving force for China’s ‘rise’. ZTE was the first major Chinese technology company to face problems and it is virtually bankrupt now.

• Huawei, China’s champion technology and telecommunications company was next. The US stopped the supply of microchips to Huawei including from suppliers in South Korea and Taiwan. After initial blustering, Huawei announced it has stopped manufacture of smartphones from this month. China’s ambition of Huawei leading the 5G roll-out and setting the global standard for 5G telecommunications has been thwarted. 

• Coronavirus hit China very hard. Unemployment soared to 80 -90 million in March-April 2020 from 17-20 million the previous year as almost all sectors of business were closed down. More than 300 million workers who went back to their villages have yet to return to work.

• Jack Ma of Alibaba and Liu Chuanzhi of Lenovo addressed a letter to Xi Jinping calling for urgent reforms. There is serious concern about the economy and, after considerable debate, it was decided not to mention the economic growth target in the Government Report to the NPC session of March.The budgets of all central ministries were cut by 50% except the Ministry of Public Security.

• Most obvious in Xi Jinping’s style of governance is how he has altered the party state structure/balance.It would be interesting to see how this change has been tested by the pandemic in the last five months and whether Xi Jinping has passed the test.

• Since coming to power in 2012, Xi Jinping has acquired power much faster than expected and is the most powerful leader after Mao.

• Another way Xi Jinping centralised power is the manner in which he set up numerous Leading Small Groups (LSGs) that now decide on issues ranging from  national security to economic reforms whereas in the past, there were divisions of power among Politburo Standing Committee members.Economic Affairs used to be handled by the Premier and the State Council, but now Xi is in-charge.  Last month, he met nine famous Chinese economists sending a signal of how he is managing the Chinese economy. Xi Jinping also heads the LSGs for “Comprehensive Deepening of Reforms”, which is possibly one of the most important decision-making bodies at present in China. There are reports that he also chairs the LSGs related to the South China Sea.

• Ever since his appointment as General Secretary of the Communist Party of China (CPC) in Nov 2012, Xi Jinping has moved to ensure his stranglehold on the Party and the PLA. His purges were covered in the garb of the anti-corruption drives, and more than a 100 Generals have been sacked since 2012. As such, most generals are tenanting their posts only due to their loyalty/fealty to Xi, and not merit. The generals, thus, are fearful of taking any steps without Xi’s directives, and continue to look over their shoulders even during crises.

• The last war that the People’s Liberation Army (PLA) fought was in 1979, against the Vietnamese Army. It was a disaster for the PLA. It seems that it hit the morale of the PLA quite badly.They are now made to remember only their victory over India in the Border War of 1962, and not the defeat in the skirmish in 1967 at Nathu La,  the Vietnam war and the Sumdorong Chu incident of 1986-87. Fed on a false perception of own capabilities, the PLA and Xi Jinping find it hard to swallow the ‘bitter Galwan and the Kailash Range pill’.

• After decades of ruling the roost within the PLA, the restructuring and reorganisation drive by Xi Jinping since December 2015 has seen the Ground Forces (GF) losing their pre-eminence. To force the issue, Xi Jinping purged more Generals from the GF than any other service. Yet at the critical Line of Actual Control (LAC), the importance of the GF more than other combat and support service is an irony not lost on them.

• The GF, which needs more boots for mountain warfare, does not have the same since the entire infantry has either been mechanised or motorised, reducing its bayonet strength. In mountains, where the attacking troops need a force ratio of 1:9 to 1:12 over the enemy for success, the GF, with less bayonet strength, would be found wanting. This limits Xi Jinping’s options in the escalatory matrix and he would need to depend on other hybrid and asymmetric resources, further relegating the importance of the GF.

• There seems to be a growing disconnect between Xi and his Generals and the lower ranks of the PLA. Some reports say Chinese Militia are being deployed in the sector.

• Even ‘hawks’ in the PLA National Defence University (NDU) are voicing concerns about Xi Jinping opening many fronts, none of which furthers the overall aim of national rejuvenation and the China Dream.

• This misadventure has pushed Xi into a corner. His tactics of a face-saving action on the border against India seems to have backfired and pushed the lower ranks of the PLA away from him and his Generals. Xi Jinping would need to orchestrate some success or face saver before the 5th Plenum in October, to ensure that the PLA stays with him and he can retain full control of the CPC and gets his third term as General Secretary of the Party in 2022. He may have to resort to more purges, which is already proving counterproductive, but bringing the State Police under himself and targeting the judiciary is an indication of his intent in that direction.

• China’s economic growth halved in the first quarter of 2020- weakest since 1990 - as the pandemic and strict government containment measures crippled factory production and led to a slump in demand.

• China is an export dependent economy. Even though the COVID-19 was yet to unfurl in 2019, China’s share of exports in its GDP had dropped to approximately 17.4% in 2019. It was 18.2 % in 2018, and the highest share of exports in Chinese GDP was in 2010, at 26.17%.

• Global demand is sluggish and slow. China’s exports rose by 4.3% y-o-y in April, but the rise is too weak to provide much growth. Foreign buyers are cancelling orders.

• China’s southern provinces have experienced massive flooding and swarms of locusts this year.

• There is an uptick in Pork prices even as China attempts to rebuild its supply of pigs after an outbreak of the African Swine Fever devastated herds, contributing to an overall jump in food inflation.

• Fears of imported goods being contaminated by the COVID-19 adds to the pressures Southern provinces face. Cold storage companies have been ordered to suspend imports of frozen meat and seafood from ‘virus hot’ regions. Food security is a problem for China.

• On March 22 this year, on Weibo, “princelings” or the children of high-level veteran CCP cadres called for an “emergency enlarged meeting of the CCP’s Politburo to discuss Xi Jinping’s replacement. On March 23, Ren Zhiqiang, a Chinese realty tycoon wrote an opinion piece, in which he called Xi Jinping a “clown” who insisted on wearing the Emperor’s new clothes (Chen 2020). Ren Zhiqiang is a former chief of Beijing Huayuan Group and a billionaire real estate tycoon. He is an outspoken critic of Xi Jinping.

• Clearly internal pressures are driving aggression in foreign policy under Xi Jinping to deflect attention from the fact that the country is reeling under the impact of the COVID-19.