China’s Great Transformation: No taxation without representation?

Three years into his anticipated decade-long tenure in office, volumes have been written about Chinese President Xi Jinping. Often compared to Mao Zedong, Xi’s “cult of personality” has fascinated China-watchers since his elevation to the Politburo in 2007. Undoubtedly a strong and centralising figure, critics say an “autocrat,” Xi has been the subject of domestic fascination – with elaborate songs and dances dedicated to Xi aired on Chinese national television – and intense international interest. Since assuming office, he has clocked-up dozens of international trips, projecting China’s image on red carpets as far afield as Fiji and the Maldives.

The propaganda dividends paid by such a frenetic flight schedule are clear. Xi has promised to restore China to “Great Nation” status, and the images of a statesmanlike Xi being welcomed and praised worldwide are eagerly beamed back to China; providing crucial support for the Party’s domestic legitimacy.

However, with the heady days of 14.2% GDP growth a dim and distant memory, the scale of the challenge facing China’s President, Party Leader and, as of this week, Commander in Chief, is clear. Over the next seven years or so Xi needs to fundamentally overhaul the Chinese economy: transforming factory workers into service providers, consumers and – above all – taxpayers. With China’s budget still hugely reliant on taxes paid by State Owned Enterprises (‘SOEs’) supported tacitly or otherwise by the Chinese Government, change is essential.

“One Belt, One Road” – Xi’s much-vaunted development framework to advance China’s role in global affairs and the international economy – demands greater participation in the international community. For the current Chinese government to oversee and direct that process they must have legitimacy. In the absence of democratic elections, the key question is whether the Chinese middle class, which will emerge as the backbone of an increasingly international China, will consent to be ruled – and, increasingly taxed – by a one-party State. Xi certainly hopes so, and it is this drive that underpins all of his reforming zeal to legitimise the Party, even if that means strictly controlling the message, and, increasingly, the messenger.

China’s 19th Party Congress, to be held in October, will be a key moment, with a possible five vacancies at the top of the Party. Early analysis from some close to the Politburo politics in China has prompted speculation that at least some vacancies might be filled from Xi’s tight-knit circle of friends and advisors, bypassing the decades-old system of internal promotions within the Party and further centralising Xi’s control. Whether and how changes are received will speak volumes on the great transformation that Xi is attempting. Having amassed more personal power than any Chinese leader has arguably held since Mao Zedong, Xi is also accepting an unprecedented level of personal responsibility and evolving a more representative government requires more than a red carpet show.