China's economic upheaval could increase Xi's risk appetite

China expert Matt Pottinger: ‘Even with a weak economy, Xi is feeling emboldened’

Former Trump adviser says upheaval could increase Chinese leader’s appetite for risk 

A year ago, Xi Jinping bestrode the Communist party congress, having banished his rivals. Now, puzzlingly, he has started banishing his allies too. China’s defence minister and former foreign minister have disappeared from public view. Two generals from the country’s nuclear rocket force have been removed from their posts.

For veteran China watchers, the country’s elite politics are largely impenetrable. “The system is a black box,” says Matt Pottinger, a Mandarin speaker who served as Donald Trump’s deputy national security adviser between 2019 and 2021.

Pottinger’s best guess is that upheaval is a feature, not a bug, of Xi’s rule. In 11 years in power, the Chinese president has removed “six politburo members, 35 central committee members, 60 generals and the best estimate I’ve seen is that he’s purged around 3.5mn people in the party”. The latest turnover may be “a proactive set of moves designed to keep the party off balance in a way that deepens his primacy”.

Pottinger notes that “Joseph Stalin was purging his military right up until they were at war. He personally did not suffer any negative consequences of that. He died in office. My best guess is that Xi Jinping will die in office too.”

Along with abrupt personnel changes, the centralisation of power in Xi is likely to create both “miscalculations” and “oscillations”, argues Pottinger: “Policy paralysis followed by overcorrection in another direction and policy paralysis and overcorrection again.” That was exemplified by the rapid unwinding of zero-Covid policies last year. It may yet manifest in Xi’s response to the continuing property crisis.

You can call me a hawk, and maybe I am, but I’m not someone who wants war

Understanding the Chinese leadership involves holding “several very different ideas in mind at the same time”. Xi dominates the political system yet presides over a stumbling economy and a public that is “increasingly upset with his leadership”.

“A handful of years ago, people would never even utter his name. Now people refer to ‘you know who’. People will say things like, ‘He’s taking out his childhood trauma on our whole economy now.’ Or they will complain they have to do study sessions during working hours to learn Xi Jinping Thought. This doesn’t mean Xi Jinping is about to topple.”

Joe Biden has claimed Xi’s predicament is such that no world leader would be happy to swap places with the Chinese president. More recently, the US president suggested this could make China more dangerous. Pottinger agrees. China’s economic slowdown — the World Bank now forecasts gross domestic product growth of just 4.4 per cent next year — could mean “Xi Jinping can have a greater appetite for risk . . . to try to lock in gains geopolitically while he enjoys a number of advantages”.

Pottinger, a 50-year-old former journalist in China and former major in the US Marines, has long been on the hardline end of China policy debates. The heart of his analysis is that the best way to deal with Beijing, and prevent war over Taiwan, is through strength. “Hard power is the prerequisite for peace . . . You can call me a hawk, and maybe I am, but I’m not someone who wants war.”

Courting China — as the Biden administration has done recently by sending senior officials to visit — gives “the wrong signal”. More to the point, Pottinger says, “[Beijing] treated them not all that well. [Treasury secretary] Janet Yellen was fed psychedelic mushrooms at a lunch. [Commerce secretary] Gina Raimondo — the moment she was leaving, [Huawei released a phone that] managed to subvert the export controls she’d put in place. [Climate envoy] John Kerry could barely even get a meeting. While John Kerry was in China [in July], Xi Jinping hosted Henry Kissinger for an intimate chat, but would have nothing to do with President Biden’s emissary. China is giving every indication that they view us as weak right now.”

Pottinger believes that is a “miscalculation” by Beijing (“if Xi does roll the dice, and attempt something over Taiwan, I think he’ll be inviting cataclysmic war”), but it should not be encouraged.

The foreign policy mainstream has welcomed signs of increased communication between the world’s two major powers. Pottinger’s response is that China, like Vladimir Putin’s Russia before 2022, may respond to dovishness with aggression. “Right now is not the time for detente. Beijing is not feeling constrained enough that it has no choice but to start making concessions. Even with a weak economy, I think Xi Jinping’s feeling emboldened.”

The husband of a virologist, the brother of an infectious-diseases doctor, Pottinger was one of the Trump officials most alarmed by the outbreak of Covid-19. He saw China’s response to the virus as dishonest, even malicious.

He has argued that it is most likely the virus emerged from a Wuhan laboratory. “I haven’t dismissed any theory, but I can’t even find circumstantial evidence at this point that supports the natural outbreak [theory]. More and more circumstantial evidence mounts that supports an accidental lab leak.”

In May 2020, Pottinger delivered a speech in Mandarin, aimed at the Chinese public. He argued that Chinese history had a democratic tradition of brave protest, which had been continued by a doctor who had warned about Covid. US officials reported it had received “millions of downloads” in China before censors expunged it. Beijing responded: in January 2021, it imposed sanctions on Pottinger, along with other Trump White House figures such as Mike Pompeo, accusing them of “crazy moves” and banning them from entering the country.

By then the pandemic, together with China’s aggression on the border with India and crackdown in Hong Kong, had swayed those in the administration who had favoured a softer line on Beijing. “Xi Jinping began to make my arguments for me.” How did Pottinger learn to exert influence in the chaotic Trump White House? “Like President Reagan used to say, you can really get a lot done in Washington DC if you’re willing to give someone else the credit.”

Some Trump-era initiatives on China fell apart. TikTok, which is owned by the Chinese technology firm ByteDance, was never banned, nor were its US operations sold to a US company. Pottinger still sees the site, which claims to have 150mn users in the US, as one of the Communist party’s greatest weapons. “This thing is designed to destroy the fabric of democracies . . . Based on the type of content that is flowing, their aim is really to divide us against ourselves and cause us to lose faith in our form of government.” The US should ban it and could do under existing laws, he argues, “it’s just that we don’t have the will right now”.

In response, TikTok pointed to research by Milton Mueller, a professor at the Georgia Institute of Technology, that found no evidence the platform constituted a national security threat.

Pottinger resigned from the Trump administration after the January 6 Capitol riots, and moved to Utah. He is now a distinguished visiting fellow at the Hoover Institution.

China depends on us far more than we depend on it. That’s even truer now under Xi

But Trump-era protectionism has endured. Last year the Biden administration announced sweeping controls on high-end semiconductors: the “small yard, high fence” policy. Pottinger would like it to go further and encompass legacy semiconductors too: a bigger yard, a higher fence.

Other analysts are sceptical whether the west can maintain its technological supremacy given the resources China has at its disposal. A smartphone that Huawei released this year contained a 7-nanometre chip that had previously been beyond the capabilities of Chinese chipmakers.

Pottinger warns against overestimating China. When Trump closed China’s consulate in Houston in 2020, alleging industrial espionage, Beijing “barely retaliated . . . because they knew they had far more to lose in a tit-for-tat closure of consulates than the United States has to lose. They still need access to US capital, access to our labs and universities, access to our markets.

“China depends on us far more than we depend on it. That’s even truer now under Xi Jinping. He’s interested in making China basically Germany, except bigger. He just wants to be the exporting factory floor for high technology for the whole world. We can foil those plans pretty easily.”

How would US policy to China differ after 2024, under the various possible presidents? Pottinger’s overall panorama is bleak: “Sometimes people like to use the word de-risking because it sounds more polite, but let’s face it, we’re talking about an orderly decoupling, with things like new restrictions on outbound American capital into Chinese high tech.”

Trump “would resume the tariff war . . . You would not see any chance of a Chinese electric vehicle getting exported to the United States under a Trump administration.” But the most significant variation between Republican candidates, and compared with Biden, would be a consequence of their stance on Ukraine and how strong a line they would take with Russia, a key Beijing ally.

So would the Communist party prefer Biden or Trump? “China was really rattled by President Trump’s administration. The thing that would make China most fearful of a second Trump term is if they believed Trump was going to have Ukraine’s back, have Nato’s back and have Taiwan’s back. If any candidate shows weakness on Nato, on Ukraine and on Taiwan, that will be the preferred candidate for China, even if it means they have to stomach more tariffs.”

Even if the trade war drags on, some hope China and the US can cauterise a small number of policy areas, such as climate, in which to co-operate. Pottinger cites his experience of trying to do something similar. In his telling, Beijing responded by demanding concessions on other issues. “A Leninist system isn’t looking to advance common interests! Any time you seek co-operation, they will view that as an opportunity to gain leverage against you in wholly unrelated areas.”