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Looking forward to the following 100 years, Xi is seizing the chance to guide China to higher energy

Chinese Communist Leader and Chinese President Xi Jinping spoke at the celebration of the 100th anniversary of the Chinese Communist Party on July 1, 2021 in Beijing, China.

Lintao Zhang | Getty Images News | Getty Images

BEIJING – A hundred years after the founding of the Chinese Communist Party – which allegedly emerged from a secret meeting on a boat – President Xi Jinping now has the chance to turn the country into the world's largest economy.

In order to achieve this level of growth, China must overcome the looming challenges: the so-called middle-income trap, lack of innovation and a rapidly aging population. This is what analysts say, who mainly come in from abroad.

For Xi, his eyes are already on the next hundred years and an unfulfilled dream of "the great rejuvenation of the Chinese nation" that he affirmed this week at the party's centenary. Xi also holds the highest political position of general secretary of the ruling Communist Party's Central Committee and heads China's military commission.

"He has iron in his soul, more than [former President] Hu Jintao, who rose the ranks without facing the trials and tribulations Xi went through," said the late founder of modern Singapore, Lee Kuan Yew, the American Foreign policy experts Graham Allison and Robert D. Blackwill in 2012, just before Xi officially became president.

The 68-year-old is the son of an early communist leader who rose to vice premier and was then politically persecuted for 16 years under the dominant party founder Mao Zedong.

During the Cultural Revolution, which Mao used to regain power and eliminate his political rivals, Xi himself spent about seven years in the countryside as a teenager.

Xi's political career

Xi served as the village party secretary for a while, studied chemical engineering school at Tsinghua University, and then worked his way up through government media through government positions across the country, particularly in Fujian Province and Shanghai, according to state media.

Meanwhile, the architect of China's economic reforms, Deng Xiaoping, led an economic restructuring that allowed individuals and even foreign companies to take possession of the state. Many attribute these changes to helping lift hundreds of millions of Chinese out of poverty and making China an economy that is now second only to the United States.

The key factors that really drove China's phenomenal growth have either stalled or lost their performance.

Tony Saich

Professor, Harvard Kennedy School of Government

"When you think of the party's centenary, you think less of the party than you think of the economic progress of the past 30 years," said Dmitri V. Trenin, director of the Carnegie Moscow Center.

“Most of the people here rely on continuous progress and even higher performance in the years to come. That's clearly not how the story works, ”he said. "There are successes. There are also failures."

Until 2007, Xi was a member of China's top leadership group and president of the Central School for the Training of Communist Party Leaders. In 2013 he officially became president and launched a comprehensive anti-corruption campaign.

To consolidate his power, Xi abolished term restrictions in 2018 while strengthening the party's role in the private sector.

"Middle Income Trap"

However, China's economic growth has started to slow in recent years, although it has remained relatively high compared to other major economies.

"The key factors that really drove China's phenomenal growth have either ended or have declined in performance," said Tony Saich, professor at Harvard Kennedy School of Government.

He pointed to China's aging population and an inability to continue to rely on FDI.

Xi's challenge is to "bring financial resources to the more productive parts of the economy," said Saich, who wrote the author, "From Rebel to Ruler: A Hundred Years of the Chinese Communist Party."

Privately owned companies are the largest contributor to growth and jobs in China, while the financial system is dominated by state-owned banks that prefer to lend to state-owned companies. Beijing frequently mentions the funding problem in political statements, although it is less clear how significant the moves are in practice.

As risks mount from tensions with trading partners like the US, Xi has revamped calls to stimulate domestic consumption and build technology at home.

This type of innovation will be harder to achieve than past GDP targets, said Yuen Yuen Ang, associate professor of political science at the University of Michigan. Innovation is "inherently uncertain and cannot be planned from above".

But such new growth drivers will be decisive in the long term.

"The most difficult task for China's leadership is to avoid the middle-income trap," Bonnie Glaser, director of the Asia program at the US German Marshall Fund, said in an email. "If its governance system fails to achieve this goal, it could lead to domestic instability."

It referred to the theory that once a country has grown rapidly due to a large number of cheap workers, its economy stagnates and cannot sustain higher wages for workers and greater growth.

There is always danger when there is a very powerful authoritarian figure because if he chooses to use power it could have very adverse effects on the country.

Ann Lee

Author of What America Can Learn From China.

Xi's individual association with politics in particular increases the commitment to securing growth, Rana Mitter, professor of the history and politics of modern China at Oxford University, said in an email.

The Chinese leader referred to policies ranging from "Chinese-style socialism" to "diplomacy" as "Xi Thought." It is common for official documents to begin with the line: "Under the strong leadership of the Central Committee of the Communist Party of China, with Comrade Xi Jinping at the center."

Questions about the future

Next year, the ruling party will hold its 20th National Party Congress, which will provide signals as to whether Xi will remain in power beyond the two terms of his most recent predecessors.

"There is always a danger when there is a very powerful authoritarian figure because if he chooses to use power it could have very adverse effects on the country," said Ann Lee, former professor at Peking University and author of " What the US can learn from. " China."

"Since he took power," she said, "I believe that he has not used it so far to increase his own wealth for selfish reasons, but rather to build nations."

China's growing economic strength has brought new challenges, including increased opposition from the United States.

President Joe Biden's administration has criticized China for human rights in Xinjiang, Tibet and Hong Kong – matters that Beijing, along with Taiwan, considers part of its internal affairs. Taiwan's democratic government feels different.

Within China, the disparities between central and local government are slowing policy implementation, while some are questioning the direction of leadership.

Read more about China from CNBC Pro

Among the country's academic thinkers, there is a rethinking of China's experiences outside of the political revolution and a desire to combine some kind of democracy, said David Ownby, professor of history at Université de Montréal and founder of Reading the China Dream Website that translates articles by Chinese intellectuals.

But for most people in China, their rise in prosperity over just a generation or two is enough for now. In many ways, the Xi party has responded skillfully to and controlled majority opinion while using centralized power to, for example, quickly channel resources to contain the pandemic.

Analysts generally believe that China will overtake the US and become the largest economy in the world in the next decade, if not sooner.

Chinese leaders "can become their own worst enemies if they become too confident and develop hubris," Trenin said. "You are not here yet."

Correction: This story has been updated to reflect that Yuen Yuen Ang is an Associate Professor of Political Science at the University of Michigan.

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