Ian Johnson has lived and reported from China about the country for over two decades. During this period, he has won the Pulitzer Prize for his reporting. He is the Stephen A. Schwarzman Senior Fellow for China studies at the Council on Foreign Relations and the author of the forthcoming book ‘Sparks: China’s Underground Historians and Their Battle for the Future’. In this long article in Foreign Affairs he describes how Xi has changed China for the worse in the last couple of years. If you are an investor or an entrepreneur with a vested interest in businesses where China is part of the supply chain, we would recommend the entire piece carefully.
Mr Johnson’s article begins by describing how day-to-day life has changed for the worse in China: “Although the zero-COVID measures are gone, Beijing has clung to a strategy of accelerating government intervention in Chinese life. Dozens of the young people who protested last fall have been detained and given lengthy prison sentences.
Speech is more restricted than ever. Community activities and social groups are strictly regulated and monitored by the authorities. And for foreigners, the arbitrary detention of businesspeople and raids on foreign consulting firms have—for the first time in decades—added a sense of risk to doing business in the country.”
He then goes on to link the economic slowdown in China not to demographic factors or the stress in the financial system (which is the line economists seemed to take) but to Xi’s crackdown on dissent and diversity: “For anyone who has observed the country closely over the past few decades, it is difficult to miss the signs of a new national stasis, or what Chinese people call neijuan. Often translated as “involution,” it refers to life twisting inward without real progress. The government has created its own universe of mobile phone apps and software, an impressive feat but one that is aimed at insulating Chinese people from the outside world rather than connecting them to it. Religious groups that once enjoyed relative autonomy—even those favored by the state—must now contend with onerous restrictions. Universities and research centers, including many with global ambitions, are increasingly cut off from their international counterparts. And China’s small but once flourishing communities of independent writers, thinkers, artists, and critics have been driven completely underground, much like their twentieth-century Soviet counterparts.
The deeper effects of this walling-off are unlikely to be felt overnight. Chinese society is still filled with creative, well-educated, and dynamic people, and the Chinese government is still run by a highly competent bureaucracy. Since Xi came to power in 2012, it has pulled off some impressive feats, among them completing a nationwide high-speed rail network, developing a commanding lead in renewable energy technologies, and building one of the world’s most advanced militaries. Yet neijuan now permeates all aspects of life in Xi’s China, leaving the country more isolated and stagnant than during any extended period since Deng launched the reform era in the late 1970s.”
In case you are thinking that the measures described in the previous paragraphs only impact the lives of the intellectual and business elites in China, Mr Johnson will tell you that you are wrong – Xi’s crackdown has made life worse for the middle class as well: “…ever more pervasive restrictions on civil society have shuttered magazines, driven artists out of the country, and caused hundreds of thousands of middle-class people to emigrate. Yet the tightening is having a deep impact on ordinary Chinese people as well. Consider the experience of participants in an annual folk religion pilgrimage to a holy mountain near Beijing. Mao’s zealots destroyed many of the original temples in the 1960s, but in the late 1980s, the mountain’s mainly working-class visitors raised money to rebuild them, and for more than 30 years, the annual 15-day event was largely self-managed and self-financed. Over the past two decades, authorities encouraged this traditional communal activity, which drew on Han Chinese folk practices…Officials showered the pilgrimage with positive media coverage, allowing it to grow rapidly into one of the country’s largest religious festivals, attracting hundreds of thousands of visitors.
But state sponsorship has now brought state supervision. Over the past decade, the government has imposed rules on religious sites across China, closing down unauthorized places of worship, forbidding minors from attending religious services, and even insisting that religious sites fly the national flag. In the case of the holy mountain near Beijing, the government transferred management of the site’s temple complex to a state-owned company, which has deployed private security guards and uniformed police to patrol the shrines and has cluttered the mountain with party propaganda. Near the top, next to a shrine to the Buddhist goddess of mercy, managers from the state enterprise erected a giant billboard emblazoned with hammers and sickles. One panel displays the oath of allegiance that new members must take when they join the party. Another panel announces in huge characters: “The Party is in my heart. Eternally follow the Party line.”
As a result of this overt politicization, the number of visitors is down, and on some days this spring, no pilgrims came at all. Many people who attend the temple or work there are intensely patriotic and support the party line on many issues… But they are also dismayed by the slowing economy, the government’s handling of the pandemic, and political “study sessions” at work—even bus drivers must now listen to lectures on “Xi Jinping Thought” and download mobile phone apps that instruct users on party ideology. Observing a squad of police officers march past, one manager who has worked on the mountain since the 1990s expressed disappointment at how much the pilgrimage has changed. “In China today,” he said, “you can’t do anything without taking care of one thing first: national security.””
Even more consequential than the hindering of the freedoms of the middle class, might be China’s jamming the freedom of academics to do the research that they want. Mr Johnson’s article describes the new surveillance systems now in place in China’s universities and strict censorship system which now edits out large chunks of research that academics now want to publish. China, it appears in this narrative, is sinking into the same Kafkaesque hell hole that destroyed Eastern Europe in the 1980s.
If you want to read our other published material, please visit https://marcellus.in/blog/
Note: the above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India as a provider of Portfolio Management Services. Marcellus Investment Managers is also regulated in the United States as an Investment Advisor.
Copyright © 2022 Marcellus Investment Managers Pvt Ltd, All rights reserved.