Weekly Geopolitical Report – Emperor Xi: Part I (March 5, 2018)

by Bill O’Grady

On February 25th, the Central Committee of the Chinese Communist Party (CPC) announced that it would recommend an end to term limits on the offices of president and vice president.  Previously, an officeholder was limited to two five-year terms.  We fully expect the recommendation to be approved (recommendations from the Central Committee are always approved).  Thus, President Xi Jinping will be able to maintain his current position beyond his second term, which ends in 2023.

Although there were clear indicators that Xi intended to stay in power beyond 10 years, the timing of the announcement was a surprise.  As we will discuss below, it’s not obvious why this action was even necessary.  The president’s role is mostly ceremonial; the real power resides with the general secretary of the CPC, which has no term limit.

We see this move as part of a much broader trend in China’s evolution as a regional power.  President Xi has situated himself as the central figure in this evolution.  This week, we will discuss China’s power structure and how this suspension of term limits changes recent precedents.  From there, we will examine what President Xi has done in his first term to consolidate power and prepare for the next phase in China’s transformation.  The next area of discussion will be the reasons for moving now and what it potentially signals about Xi’s view of his power and political capital.

In Part II, we will examine China’s challenges of shifting from the world’s high growth/low cost producer to a slower growth, “normal” economy.  We will show how these challenges fit into China’s overall geopolitics and Xi’s response to these constraints.  From there, an analysis of America’s policy toward China in the postwar era will be offered with specific discussion on the critical assumptions regarding democracy and markets that have clouded policymakers’ expectations toward China.  Finally, we will conclude with market ramifications.

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