The Chinese Communist Party will hold its 19th Party Congress on Oct. 18, marking the end of President Xi Jinping’s first five-year term as the organization’s general secretary. During his tenure, Xi has bewildered Western observers and politicians by turning back to a Mao style of authoritarian practice, with the consequence of creating a more nationalistic China at the rest of the world’s expense.

Many observers were unpleasantly surprised because, dazzled by the country’s economic rise, they had forgotten that China’s ruling Communist Party retains a Leninist core. Not that this Leninist core has anything to do with “communism.” What remains of it is simply a vast and powerful bureaucracy that puts its own collective interests above all, including the welfare of the people it is supposed to serve.

An Anti-Corruption Drive Led by the Crooked

One simple explanation for Xi’s management style is that to tame this bureaucratic beast, he could find no better method than Mao’s. But instead of “communism,” Xi’s rallying cry is “anti-corruption.”

Five years into his reign, Xi’s hallmark achievement is nothing more than the purging of an array of corrupt officials, high and low (“tigers and flies”). While this campaign has earned him a degree of public support from among the poorest and least-informed citizens, there is no sign that systematic corruption has lessened at all. In fact, messy infighting involving rampant corruption has intensified as Xi’s first term comes to an end, and though it seems Xi is spending all his time and energy on reining in the bureaucracy, no apparent order has emerged as a result of his efforts.

Quite the contrary: The biggest political story in China this year was of outspoken Chinese tycoon Guo Wengui and his allegations of widespread corruption among top-ranking officials. Guo claims that the country’s chief public security official asked him to assist in Xi’s investigation of Wang Qishan, China’s anti-corruption czar and the second most powerful man in the nation.

If Guo’s accusations are true, modern Chinese history suggests that catastrophic political consequences will follow. In 1966, after Mao Zedong purged his second in command, Liu Shaoqi, China was plunged into the Cultural Revolution, which left no person’s life undisturbed. In 1971, Mao once again turned against his second in command, then Lin Biao, who died in a plane crash when he attempted to flee with his wife and son; tens of thousands of military officers were purged in the aftermath. In 1989, paramount leader Deng Xiaoping set his sights on General Secretary Zhao Ziyang, and the infamous Tiananmen crackdown immediately ensued.

Guo’s allegations against the man in charge of Xi’s anti-corruption drive includes the funneling of huge amounts of capital from state banks to companies secretly controlled by Wang’s family and friends, money laundering and hiding assets overseas — the same kind of wealth accumulation schemes used by other corrupt officials, but on an even more obscene scale. According to Guo, China’s rapidly expanding Hainan Airlines Group (HNA), which owns the largest single share of Deutsche Bank and Hilton Hotels and continues to purchase aggressively overseas, is tied to Wang and his family. Numerous follow-up reports by international media organizations have been unable to confirm a solid connection between them, but they have uncovered some alarming signs of one. As a recent New York Times report described:

“HNA is part of a new breed of aggressive Chinese deal makers that have risen, seemingly out of nowhere, into the ranks of the global corporate elite. But the ambitions of these giants have been fuelled by debt and masked by opaque ownership structures, creating uncertainty over their corporate governance, strategic motivations and financial health.”

Meanwhile, Wang is personally responsible for ordering the detention, investigation and punishment of select high-level officials for corruption. Without proper systemic change, it is becoming apparent that Wang’s self-serving anti-corruption tactics are plunging officialdom into a chaotic and dangerous realm where the only rule is the law of the jungle.

The biggest mystery now is what stake Xi has in Wang’s fate. Regardless of the answer, the uncertainty itself makes the run-up to the 19th Party Congress a vulnerable period for the Communist Party.

The Fear of the Fall

No one knows this risk better than Xi and his fellow party elites. That is why, in the name of safeguarding the party congress, Beijing has stepped up its “security measures,” from reducing the number of rural migrants in the big cities and tightening internet controls to scaling back on foreign cultural exchanges and academic conferences and closing down even mildly liberal magazines. Given the lack of precedent of previous security incidents, demands for greater “security measures” have only gone over the top, baffling both foreign observers and the Chinese populace.

What’s behind this apparent apprehension among China’s elites? The answer is simple: Any incident big enough to draw political attention can jeopardize the positions of party leaders, whose hidden opponents in the Chinese government are more than ready to exploit any opportunity to knock them down. In 2012, a 23-year-old driving a Ferrari got into an accident that cost him not only his life, but his father’s political career. Ling Jihua, director of the General Office, was a rising star about to be promoted to a top leadership position at the 18th Party Congress that year, but the sensational details circulating in public about his son’s accident apparently became an embarrassment for party elites. As if failing to get the promotion weren’t enough, Ling was later arrested and charged with corruption. The hidden forces that turned a traffic accident into a high-stakes political purge remain a mystery to this day.

This delicate balance of interests within the upper echelons of the Communist Party is what Xi must maintain at all costs before the approaching congress, where his party needs to display unity and strength. Even if history does not repeat itself, and catastrophic political infighting does not take place between Xi and Wang at the event, Wang’s misdeeds could still have serious consequences beyond October.

With Wang’s image tarnished, the reputation of his self-styled, top-down anti-corruption campaign has been damaged as well. Moreover, with the revelation that the scale of corruption has reached hitherto unimaginable proportions, almost no fast-growing Chinese megacompany has been free of allegations of hidden stakeholders and entrenched interests. Besides Wang’s reported links to HNA, other high-ranking powers are likely tied to Anbang Insurance Group and Wanda Group, both companies now facing investigations into their finances. This undermines China’s aggressive overseas investments and the powers behind them, making for highly unpredictable political risks back in Beijing.

Even if Xi and Wang successfully consolidate their power at the 19th Party Congress, the blow to Wang’s reputation is bound to have repercussions for Xi’s own legitimacy. But if Xi removes Wang, he must find a way to maintain the anti-corruption drive that is his crowning political achievement. Either way, Xi faces a dilemma: How can he tackle systematic corruption using a failed strategy and faced with bankrupt public confidence?

Source: Stratfor September 1, 2017