Xi Jinping as Emperor Yongle: Insights for Navigating Xi’s China
By Doug Guthrie
This article was originally published on January 15, 2020, at https://ongloballeadership.com.
Operating in China always comes with its share of risks and hurdles for multinational companies, but the stakes are higher now that President Xi Jinping has migrated back toward a more authoritarian path. At the beginning of the month, we wrote about the “Cost of Doing Business in Xi’s China.” Following on that post, we thought it might be useful to spend a little time talking in greater detail about who Xi Jinping really is. In this post, we consider a few different archetypes of who Xi Jinping might be – the authoritarian strongman, the economic protector, and the historical emperor. It is important to understand who we are dealing with in our attempts to navigate Xi’s China.
Take, for example, the Trade War, which looks like it might have reached a Phase One resolution in recent days. If you want to reach a trade deal with Xi Jinping, you need to understand what motivates him, what he is driving towards, what his ultimate goals are. (It would follow that the same is true of Donald Trump or any global leader; but the purpose of this post is: how well do we understand what motivates Xi Jinping, President of the most populous nation on earth and the soon-to-be largest economy in the world.) In a nutshell, Xi’s motivation is this: President Xi will do whatever it takes to return China to is “rightful” position of the most powerful nation on earth, a position it has been waiting to reclaim for about 600 years. Xi and China are playing the long game; as we noted in an earlier post, Xi is playing chess while Trump and his team are playing checkers (or tiddlywinks).
The last eighteen months – Fall of 2018 and Fall of 2019 – have really driven home what Xi and the Communist Party are up to. Xi caught the world’s attention a little over a year ago during 19th Chinese Communist Party (CCP) Congress in October, 2018, as he was elevated to the status of two historic, modern-era leaders – the revolutionary Mao Zedong and the reformer Deng Xiaoping – a signal that we have now truly entered a new era. Then, in this past Fall’s Plenary Meeting, Xi set down the tenets for reporting lines that will bring back a true “Chairmanship” in the ilk of Mao. For the last seven years, we have been witnessing the most aggressive consolidation of power in China since Mao, and it is critical that we understand the implications of the political changes that are afoot. Breaking tradition that has governed 40 years of China’s “Economic Opening,” Xi will be the paramount leader of China until he abdicates or until he dies.
Some China watchers have argued this grasp for power signals the coming end of China’s Communist Party. As David Shambaugh put it in a provocative and widely-debated Wall Street Journal article in 2015, “The endgame of Chinese Communist rule has now begun,” and his book, which followed in 2016, China’s Future. Shambaugh may be the most prominent Sinologist to predict the CCP’s demise, but he is not the only one; writers like Gordon Chang have been predicting the Coming Collapse of China for decades. Facile as these arguments are (and, in our view, they are just plain wrong), it is nevertheless important to consider the underlying dynamics that are animating Xi’s grasp for power over the last six years.
Party Background
When the Communists took power in 1949, they were largely a rural movement. The control of the cities was the crucial next step in taking control of the country. The strategy of the Party, at this point, became the mobilization of the population through mass campaigns in which Communist ideology would be spread, and people energized by the ideology and commitment to the Party would emerge as urban cadres. These campaigns not only asserted the Communist control over the people ideologically, but it also allowed the Communists to step in and take control of industrial organizations, ending the independent modes of operation and production for Chinese people. Over the next sixty-five years of Communist rule in China, the Party has grown into a one-party authoritarian governing body with over eighty million members.
While the first eight years of Communist Party rule in China (1949-57) were widely regarded as successful, the years from 1957 to 1979 were a tragic chapter in Chinese history. Some scholars have argued that the reason for the Party’s “organizational involution” can be traced to the nature of revolutionary Lenist parties themselves. Given that revolutionary parties often fail to institutionalize rules, regulations, and offices, a cult of personality often accompanies them. The Cult of Mao was among the most famous of these movements in the 20th Century. Despite Mao’s popularity and power in the 1960s and 70, the Chinese Communist Party was not without factional infighting. Deng Xiaoping and Liu Xiaoqi were probably the most prominent members of the reform-leaning faction, and some scholars have gone so far as to argue that the Cultural Revolution entirely driven by the goal of bringing the “Rightist” faction down.
Following Mao’s death in 1976, the economic reforms opened up China and began to reform the economy. This period of “thawing” also ushered in a detente with respect to the factionalism that had driven the Party in the previous decades. Since 1979, there has been a variety of norms that guide the Communist Party and create continuity from generation to generation; this is not a highly institutionalized system, where firm rules and laws govern political practices of the Party; rather, it is a system in which Party leaders from the two factions respect the norms that the two groups have jointly established. These factions are generally referred to as “hard-liners” and “reformers” or “Communist Youth League” and “Princelings”. Since 1979, three of the key norms that these factions had agreed upon and operated by were: (1) the Party would be jointly governed by the two factions; (2) paramount leaders would serve a maximum of two five year terms; (3) the factions would work together on a succession plan that would ease transitions between leadership teams. (The closest thing to a leadership team is the Standing Committee.)
All this is important because, in the last seven years, Xi Jinping has blown up several of the norms by which the Party had been operating since the economic reforms began. For example, in 2013, Xi advocated a downsizing of the Standing Committee from 9 to 7 members, thus constraining the ideological diversity of the group. In addition, while few would have argued against the need for reigning in corruption in 2012, Xi’s anti-corruption campaign has been as much about burying political rivals as it has been about ending corruption per se (see, for example, the beginning of the anti-corruption campaign with the bringing down of Bo Xilai). Finally, leading up to the 19th Party Congress, many China watchers were waiting to see if Xi would respect the norm of succession. Given that none of Xi’s potential successors were elevated to the Standing Committee, it is now clear that Xi is laying the groundwork to do away with the norm of term limits.
The 19th Party Congress
Held every five years, the National Congress of the Communist Party is usually a rubber-stamp of the president’s initiatives rather than a collaborative body with the authority to appoint new leaders or to freely determine military, political and economic policies in China. No one expected independence. However, this particular Party Congress served to elevate Xi’s position in a way we have not seen since the pre-reform era. During the Congress, the Communist Party took the rather remarkable step to add a passage called “Xi Jinping Thought for the New Era of Socialism with Chinese Special Characteristics” to the Constitution. The only other leader to receive this honor while in office was Mao.
“Xi Jinping thought” has 14 doctrines, including reforming the rule of law, following socialism with Chinese traits, environmental protection and conservation, and giving the Communist Party “absolute authority” over the military. Xi’s ascendency to dominance was not a surprise. After all, he had been consolidating power and dismantling power structures established by his predecessors since he became president in 2013. But now Xi has broken succession traditions and will not step down in 2022. (The tradition of picking the next leader to follow the current leader occurs every five years at the congress.) While there was much speculation about this possibility in the lead up to the 19th Party Congress, fears were realized, as not a single next generation leader was named to the Standing Committee, the normal stepping stone for the highest leadership position. As one scholar of Chinese politics observed, “The concentration of power in one person’s hands means that Xi’s personal qualities and abilities have potentially profound implications for the nation as a whole. The fate of China is once again vulnerable to the bad emperor syndrome.”
What’s behind Xi’s political moves? Some view it as a calculated step to become an autocratic leader along the lines of Russia’s Vladimir Putin, who seems to primarily be focused on power for personal and economic gain. Others believe that Xi understands he needs to be a powerful leader to wrangle China’s economic challenges toward stability. Still others think that Xi is trying to walk the middle path between authoritarian and economic strongman, allowing him to serve the nationalistic goals of the historically powerful Middle Kingdom and continue on the path to modern economic prosperity for China all at once. Xi’s new position might appear to stabilize the country’s leadership and its economic policies, but his wholesale annexation of power could lead to public and local government discontent, as well as a reluctance to adopt reforms that are needed to further grow China’s economy and open doors to foreign multinationals.
Instability in any form – from too much dictatorship or a wayward determination to hide the extent of China’s economic challenges – threatens the finely tuned balance that has been in place since China joined the World Trade Organization. And it presents a quandary for foreign companies seeking to maintain and sustain its Chinese operations. Below, we examine some alternative arguments of what lies behind Xi’s consolidation of power. The key questions that animate this discussion are: Who is Xi Jinping really? What are the motivations behind his aggressive consolidation of power? And what are the implications of these movements for foreign countries in general and MNCs specifically?
Xi the Authoritarian Strongman
One possibility is that Xi is Putin: a maniacal leader obsessed with as much personal control and power (and personal enrichment) as China and the world will allow. And, indeed, China looks more like a dictatorship today than it has in more than four decades. While former paramount leader Deng, who came to power in the late 1970s, moved China gradually toward more personal and even political freedom and Jiang Zemin, with the help of Zhu Rongji, pushed the country toward a rule of law system (the Tiananmen massacre notwithstanding), Xi has signaled a different path – one driven by despotism and nationalism, a take-no-prisoners approach to political opposition, and an aggressive consolidation of power not seen in China since the death of the Great Helmsman, Mao Zedong.
Certainly, Xi has continued Deng’s approach of opening up the Chinese economy, nurturing more competition, sanctioning trade flexibility and allowing private corporations to vie with state enterprises. But Xi has also touted his philosophy of the “great rejuvenation” as a way to advance China’s fortunes and global reputation without adopting western political and economic systems. “Chairman Mao made China stand up, Deng made China rich and we can only rely on Xi to make China strong,” the People's Daily quoted a participant at a recent forum as saying. Xi has embraced his own unique approach, embracing a form of neo-Confucianism to emphasize Chinese values and culture in the face of Western pressures, forging an aggressive anti-corruption campaign that has put all political rivals on notice, and promising to double the economy in his two terms in office. He is often referred to as “Xi Dada”, or Uncle Xi. A paternalistic figure, Xi has cleverly used his fight against corruption in China to remove political rivals in the armed forces, government and the state-owned sector.
Globally Xi has dismissed Deng’s directive to refrain from meddling in other countries. While Deng suggested China should “hide its light and bide its time,” Xi has been active abroad, reinforcing China’s economic influence globally and its military clout in the region. He also has taken advantage of U.S. retrenchment under Donald Trump, positioning China as the world power in everything from trade to climate change. In October 2017, The Economist magazine wrote in its cover editorial: “Xi Jinping has more clout than Donald Trump.” Sinologist Christopher Johnson writes, “He’s taking Deng Xiaoping’s formulation of socialism with Chinese characteristics, but adapting it to his own perception – that there’s this new era – and that helps him… erase his two immediate predecessors, Jiang Zemin and Hu Jintao, from political history… [H]e’s effectively saying there are three eras in modern Chinese history: the Mao era, the Deng era, and now the Xi Jinping era.”
For MNCs, Xi as authoritarian strongman has its advantages, but it has clear disadvantages as well. China under Xi has grown sufficiently to not need any single company, whether it is Apple or a locally grown Huawei. Protectionist policies have actually served companies like Alibaba, Baidu, and Tencent well, and MNCs from around the world have felt this shift in the balance of power. An authoritarian-driven China decides how much freedom Apple and other western companies will have to operate, manufacture and sell in China. The government has already trimmed Apple’s wings in recent years, and it can and likely will do it again, whether it’s locking down the iTunes store, requiring China-specific workarounds for software or constraining the flow of labor with new regulations on the dispatch labor system.
Xi the Economic Protector
A second possibility is that Xi is a leader responding to a crisis that the world has not yet seen and does not yet know the depths of. There is some concern that the gravity of China’s economic woes may be underestimated by the West, or not fully known, and that only Xi and his corps of lieutenants know for sure the extent of the problems. In this sense, Xi’s seizure of power could be a play to maintain control to ensure the economy, even if lagging, is stable. If this is the case, there is a certain logic in the marriage of efforts to stabilize the economy with Xi’s aggressive anti-corruption campaign. Since the Tiananmen movement, the Chinese government has operated by an implicit bargain struck with the Chinese population: as long as the economy continues to grow (and people’s lives steadily improve), the population will set aside pressures for political reform.
The urgency facing Xi and the Communist Party is getting China’s economy back on track before it slows to a point that will make continued growth nearly impossible. While the economy is still growing, the original China model of export-driven, investment-based growth is slowing down. The key question here is whether China can avoid what economists call the middle-income trap. This particular issue actually hinges on some very technical issues about how China’s current economic growth is being measured. Economists Dwight Perkins and Thomas Rawski laid down the seminal argument in the field of scholarship analyzing the investment-led growth. Based on a cross-national comparative analysis, Perkins and Rawski surmise that a critical tipping point occurs at about $13,000 per capita GDP. The key issue here is, once a country passes this critical point it becomes impossible to continue to grow through state-led investment. Essentially, at this point, labor costs become too high for the state to finance growth without taking on more and more debt. By one measure (Nominal GDP), China is still about 5-6 years away from the magical $13K number (nominal per capita GDP in China is about $10,000); however, if we adjust for Purchasing Power Parity (PPP), i.e., Real GDP, China has already blown past the tipping point (the adjusted per capita GDP number for China is now well above $15,000). So, optimistically, China still has about six years to continue the work on making the transition to a consumption-based economy; by a more pessimistic reading, China’s economy is in much deeper trouble then is widely acknowledged.
Those on the pessimistic side who watch the market express concern about China’s debt-fueled growth, industrial overcapacity and capital outflows that could possibly spur a global economic crisis. China’s debt is reaching indefensible levels – over 2.5 times the GDP, and the Communist Party has described it as “unbalanced and inadequate development.” China needs stability for economic success, and Xi represents the best path forward to stability, especially when so much energy is being expended to conceal the extent of the problems. By consolidating power, he is in the best position to ameliorate China’s economic lethargy and mitigate the growing threats to its long-term stability. Sustaining healthy economic growth could prove challenging to a lesser leader.
A more authoritative Xi may be in a position not only to keep the secret of China’s lagging economy but also to implement new economic reforms to address it. Without such reforms, China could face a period of stagnant economic growth and living standards, the “middle-income trap” (described above). The impact of China on the rest of the world and on the standard of living of its own people depends mainly on whether the nation continues to double the size of its gross domestic product (GDP) every seven to ten years or whether that growth slows markedly or even halts.
“We see China’s recent development as first and foremost a story about productivity growth supported by the growth of factor inputs, notably, capital,” noted Perkins and Rawski. “From this perspective, China’s ability to sustain high rates of GDP growth in the future will depend critically on the capacity to generate continuing growth in TFP (total factor productivity).” China already significantly influences the world economy through its exports, its demand for natural resources, its geopolitical authority and much else. If it fails to keep pace with its past growth and global investment, and fails to honestly assess its economy, it likely could destabilize the global economy.
In May 2017, Moody’s Investors Service downgraded China's long-term local currency and foreign currency issuer ratings to A1 from AA3 and changed the outlook to stable from negative at the lower level. Moody’s based its decision on the belief that China’s financial strength would erode in the coming years, with economy-wide debt continuing to rise as growth slows. When it made its announcement, Michael Taylor, Moody’s chief credit officer for Asia Pacific, explained, “[I]t remains unclear whether the increased centralization of authority will result in an acceleration of the pace of reform or a continuation of the gradual implementation of economic liberalization, which balances other policy objectives such as maintaining relatively strong growth and the strong role of state-owned enterprises observed in recent years.”
“The cost of this decline could be joblessness and bankruptcies over the next five years… With his new heightened authority, a commanding Xi would be able to weather such economic turmoil in order to keep China on the right trajectory. A strong Xi can press forward on economic reforms, which can transform the economy and financial system over time, and he would be best positioned to prevent the rise in debt and contingent liabilities. He’ll also be able to grow the corps of market-friendly leaders in the Politburo and rein in unruly provincial leaders and state-owned enterprises… We believe this consolidation could increase the alignment of incentives between the central leadership and other officials, and thus could advance the process of economic reform and rebalancing.”
Some believe that Xi’s second five-year term will be a defined by its statism, with the market, market reforms and corruption deferring to the state. That may put global market integration on hold, a disquieting development, but it also could mean that Xi will retain and expand the power of the state in the private sector. This would not bode well for multinational companies looking for more flexibility and freedom within the China market, though it might bode well for the Chinese “National Champions,” who have all done well under the new protectionism.
Xi as Historical Leader (or Xi as Emperor Yongle)
A third possibility is much more tied to Chinese history: when Xi Jinping looks in the mirror, he sees Emperor Yongle staring back at him. Emperor Yongle was the Second Emperor of the Ming Dynasty, and was the last ruler of China when the Middle Kingdom was the most powerful nation on earth. During Emperor Yongle’s reign, China controlled about one-third of the global GDP and had naval fleet far larger and more technologically advanced than any in the world. It may very well be the case that Xi, believing himself to be a man of destiny, understands this moment as the time in which China will reclaim its rightful position as world leader. At some point in the next few years, China will surpass the United States as the largest economy in the world. With the United States’ exit from the Trans Pacific Partnership (TPP), there is no country that has more influence in Asia than China does. And, as a nuclear power with the largest standing military in the world, it would not be surprising if Xi was indeed seeing this as the moment to reclaim its position as world leader. It is a somewhat jarring irony of our time that, while the United States abandons multilateral engagements, Xi is quietly (or not so quietly) positioning himself as the global leader on matters from environmental sustainability to free trade, not to mention the control of much of the Global South through the Belt and Road Initiative.
Xi’s consolidation of power into an authoritarian core could help him rebalance and reform the economy, and many are hoping that is what is behind his grand strategy to delay an heir-apparent or to lay out a comprehensive plan to spur double-digit economic growth. With the centenary of the founding of the Communist Party in 2021, China will be focused on attaining its goal of being a moderately well-off society, which will require the doubling of 2010 per capita income and national gross domestic product levels by 2021.
Observers expect China’s economic policies under Xi to continue supporting state control and stability, even if it comes at the cost of some economic growth. Xi remains immensely popular, in part, because he is viewed as a defender of China and its global interests, and he can continue in this role. Johnson of CSIS said China’s actions suggest “a willingness to tolerate slower growth in the coming years, which is unexpected, I think, internationally. So, if they switch to a more aggressive policy on trying to tighten up on debt, which I think they will in the new year, that’s going to take a lot of people by surprise.”
There could be implications for China's economy with Xi’s consolidation of his power. Xi must avoid the flaws of other strongmen such as Putin who set Russia on a trajectory for long-term stagnation. While continuity of leadership may benefit current economic stimulus efforts, overstaying may weaken the relatively stable current political structure. For Xi, presumably the danger of having a designated successor “might limit his power in that recalcitrant officials could drag their feet on policy implementation knowing that Xi would be gone in 2022,” Stanley Rosen, a specialist in Chinese politics at the USC US-China Institute, told Business Insider. “This way they have only Xi, with the possibility that he stays on after 2022, so that as an official you should try to keep him happy. In this sense, it might help to get his agenda enacted more quickly. But when the rules of the game are changed, it is always accompanied by some risks,” Rosen said.
What This Might Mean for MNCs Operating in China
Xi’s position as the leader of the one remaining superpower willing to invest enthusiastically in other countries has also been confirmed by the embrace of the Belt and Road Initiative (BRI). The Congress gave formal status in the Constitution to Xi’s Belt and Road initiative, a massive international infrastructure project that supports construction through loans in the region and beyond. Projects include ports in Pakistan and roads in Sri Lanka. It should be noted here that the Belt and Road initiative has stark parallels to the kind of control over trade routes that China exercised in the early Ming era, under the leadership of Emperor Yongle and his Admiral, Zheng He.
Some China observers say there are still questions about what this new era of Xi’s leadership will look like, especially now that his time in office appears boundless. If Xi’s goals are guided by two main themes – to gain power and to protect the economy – this formulation might be the best approach for the west, and particularly western companies inside China. It certainly is far more appealing than Xi as a capricious authoritarian strongman or the national government hiding the severity of its economic problems at the expense of the world.
For what it’s worth, our view is the following:
? Authoritarian Strongman Thesis – Xi is not Putin. Putin’s naked attempts at self-aggrandizement and personal enrichment seem a far too narrow for Xi’s operation as the paramount leader of China. Xi is interested in something much grander than personal enrichment; he is interested in shepherding China back to a position in which it is the most dominant economy and military nation on the planet.
? Economic Protector Thesis – The economy may indeed be in deeper crisis than we know. Xi may be operating from this insider knowledge about where the economy is versus where it needs to be vis-a-vis the transition from investment-led growth to consumption driven growth. For whatever reasons, Xi has promised to double the economy during his first ten years in power. This can be done through investment-led growth. However, depending on where per capital GDP sits, ($10,000 versus $15,000), such a growth model may require taking on much more debt than is safe for stable growth.
? Nationalist, Historical Story Thesis – It may also be that Xi is bent on being the leader that oversees China reclamation of the hallowed position it occupied during the years of the early Ming.
? So, we would place our bets on scenario 2 or 3 or a combination of 2&3. {One final point: scenarios 2 and 3 are not mutually exclusive. It may very well be that Xi sees himself as the leader that will oversee China’s rise to power; and it may also be that the economy is in worse shape than many outside observers know. Thus, Xi’s aggressive control of society may be set in place to assure that his position will be secure when the economy begins to falter.}
So, what might this mean for MNC strategies in China? While many companies might aspire to remain independent of political movements, China allows us no such luxury. In China the State and the market are so intimately intertwined that you cannot get away from politics. So, at the very least, we need to observe political moments like the 19th Party Congress or the 2019 Plenary Meeting, strive to understand what is going on, and learn what we can from them. In addition to the basic political machinations that are going on at the highest levels of the political system, we need to be aware of several other issues in the realm of politics:
? Political History – While we might think that spending our time studying political history would fall low on the list of the many issues we need to keep tabs on for navigating Chinese society, we would argue that recent (and, in some cases, deeper) political history is crucial for our understanding of current politics. Understanding the nature of strongman authoritarian politics since 1949 is crucial for understanding the ways in which Xi Jinping’s regime is shaping up. More recently, understanding the contrasts between the Xi Jinping, Jiang Zemin, and Deng Xiaoping eras is also crucial for grasping what is going on today.
? Geopolitical Tensions – Being in the private sector, we might imagine that geopolitical tensions have little to do with our operations. However, this perception could not be further from the truth. In the era of globalization, business interests and operations are intimately tied to national politics. Unfortunately, the United States is as responsible for this dynamic as China is. As I have argued elsewhere (Guthrie 2012), “Following the Tiananmen Square massacre in 1989, the logic of the Jackson-Vanick Amendment guided U.S.–Chinese relations for more than a decade. The basic position was that the United States would agree only to have normal trade relations with China on an annual basis, depending on an annual review of the country’s record on human rights. At the time, following the language of Jackson-Vanick, this was referred to as Most Favored Nation status (MFN), and then later as Normal Trade Relations. Each spring, a group of politicians, pundits, and lobbyists would converge on Washington to debate the merits of engaging in trade relations with China. Behind the annual debate was a set of issues that are intimately tied to larger theoretical questions about the relationship between economic and social reforms.” Whether it is the logic of trade dynamics, currency issues, Tibet, human rights, cybersecurity, or the Belt-Road Initiative, it is important to understand the connection between geopolitical issues and business interests in China today.
? National Policies and Local Implementation – The tension between national and local politics is a crucial feature of economic structure in China today. As I have explained elsewhere, “One of the interesting differences between China’s planned economy and that of the Soviet Union was that China’s was much more decentralized. This fact has played a crucial role in the success of China’s economic reforms, as a number of scholars have argued. Nevertheless, despite the relative decentralization in China, giving autonomy over to localities was still a key factor that guided the economic reforms forward. Economic decentralization ushered in two forces that have been key to the economic reforms: (1) local officials, who were much closer to the economic strengths, opportunities, and necessities of their localities, would be given the autonomy to pursue various development strategies, and (2) this measure would introduce a level of competition among local officials vying for different economic opportunities… National development has proceeded along these lines throughout the era of the economic reforms. Individual provinces and municipalities have had the autonomy to make economic decisions and innovations in developmental strategies to gain advantages over neighboring regions and provinces. It is also the case that individual regions, provinces, and municipalities were given the power to create small-scale special economic zones for the localities within their jurisdictions” (Guthrie 2012). How we understand the tension between national policy setting and local implementation will be critical for how we move forward in China today.
? Going Low to Influence High – In many countries (including the US), understanding local politics is important. However, this issue has perhaps deeper significance in Chinese society than it does in others. There are several reasons for this. First, many top Chinese politicians have walked the path from local to national politics themselves – they have risen from the level of county or township boss to smaller municipality to larger municipality to national politics. Understanding the local political scene and connecting with the people at this level is critical for gaining credibility with top leaders in the Communist Party (and, frankly, it is an opportunity that many foreign business leaders miss). Second, relatedly, there is a long, romantic (and sometimes brutal) history of economic and political elites in China connecting with the masses. From the May Fourth Movement of 1919 to the Communist Revolution to the Cultural Revolution, a dramatic trope in modern Chinese history has been the connection between economic and political elites and the masses. The majority of Chinese people still reside outside of the top-tier urban cosmopolitan landscapes. The more corporate leaders know and understand the deep nuances of the world below tier-one and tier-two cities, the stronger their presence in China will become.
? Soft Power – In 1990, Joseph Nye introduced the concept of “Soft Power” in his breakthrough book Bound to Lead: The Changing Nature of American Power. The concept would become popularized over the next decade, culminating in his widely acclaimed book Soft Power: The Means to Success in World Politics. While the concept is rooted in the geopolitical system (i.e., at the level of nation states), the concept also applies to political individuals and companies within a political system. Understanding who the soft power political players are within China’s current system and understanding how to influence them will be a critical thing for the success of MNCs operating in China.
With all of this knowledge in hand, we will continue to watch the ways in which President Xi exerts his influence over the world. We are likely to see many more years of it.
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Doug Guthrie has been a China scholar since the late 1980s, when he began studying Chinese language, literature and history at the University of Chicago. After graduate work at the University of California, Berkeley, he was a Professor of Management and Sociology at New York University for several years (1997-2010) and served as Dean of the School of Business and Vice President for University China Operations at the George Washington University (2010-14). From 2014-2019, he was a Senior Director at Apple and was based in China. Currently, he is Professor of Practice and Director of China Initiatives at the Thunderbird School of Global Management.