“I found Rome a city of bricks and left it a city of marble” is attributed to Augustus, the first Roman emperor. It’s an ancient board that comes to mind as Chinese President Xi Jinping maneuvers his power and his country for the future.

A proposed repeal of term limits for China’s presidency has set off accusations that Xi who now will probably take a third five-year term as president in 2023, has become the country’s newest emperor. The presidency is something of a ceremonial position – Xi already holds the real power as head of both the Communist Party and the country’s military commission, neither of which have term limits.

Still, if he isn’t an emperor, he is certainly at least a king. The proposal is the strongest indication yet that the 64-year old Xi expects to stick around beyond 2022, when his presidential term runs out, and probably much longer.

For investors, having a modernizer intent on building a stronger China staying on for a longer period might be a good thing. If Xi were an American politician, his motto could be “Make China Great Again.”

Indeed, Xi appears to be steering the economy in the right direction, says Andy Rothman, investment strategist for Matthews Asia, one of North America’s largest active money managers in Asia. The private sector effectively generates all of the new jobs, income growth is strong, inflation moderate, and Xi has begun addressing China’s debt problem.

And while the move to modify the Chinese constitution was a surprise, “the price of a prolonged Xi reign was already baked into markets,” says Yanmei Xie, a Beijing-based China policy analyst for Gavekal Dragonomics. “The short-term impact is minimal,” she adds.

Long term, however, there is a growing risk for foreign investors in that the China story gets wrapped up in the fate of one man. China will have a structure where the nation, state, and party all rise and fall with Xi, and the “one-man rule” is a risk, Xie says.

An extension of Xi’s reign would be a move away from whatever checks and balances existed in the Communist Party system, China watchers say.

Rothman of Matthews Asia worries that longer term, the country is retreating from establishing the rule of law and strong institutions. The development of private property rights has led to Chinese income growth of about 120% over the past decade.

Any country whose economy depends on private property also depends on the rule of law, and progress toward that is key to China’s economic prospects over the next 10 to 20 years, Rothman says.

The prospect of a much longer Xi reign appears not to be going down well with the Chinese people or the Communist Party, says Steven Tsang, director of the China Institute at the School of Oriental and African Studies at the University of London. “There’s considerable pushback.”

For example, there were published reports that Chinese social-media websites had plenty of critical reaction, using euphemistic symbols for the party and Xi. Web censors rapidly took action. Results for search terms like “third consecutive term” and “Emperor Xi” were no longer shown. There are subtle indications of party resistance, too. Tsang says, though ultimately he believes Xi will win out.

Stratfor senior East Asia analyst Zhixing Zhang says the term-limit move has unraveled informal succession plans for collective rule installed by Deng Xiaoping after Mao Zedong died. Deng’s idea was a collective leadership model with checks and balances to reduce the chance of the kind of chaos that existed under Mao.

While centralizing power allows faster and quicker changes, Zhang says is has generated resistance inside the party. His opponents don’t have a legal challenge unless there is a policy mistake of economic downturn, she says. Still, removing terms limits doesn’t change the fact that the president can still fall from favor, and disruptions could cause the knives to come out as submerging antagonisms within the Communist Party surface, Zhang says.

Moreover, it’s now an environment where excessive centralization could lead to policy failures and mistakes, says Evan Medeiros, a Eurasia Group managing director and head of the Asia practice.

As the paramount leader, Xi’s acolytes might fear giving him bad news. In the wake of policy failures, he won’t be able to point to others Medeiros says. And what will be the process for choosing the next ruler? he asks.


For the Chinese people, the removal of term limits would mean little in the short term. The average standard of living has continued to rise since China abandoned the socialist path. That should continue. Freedom of conscience, however, doesn’t exist, and the proposed change gives no reason to be more optimistic that the country is any closer to political freedom.

The economic miracle in China hasn’t been wrought by Xi or any of his predecessors—the hundreds of millions of hard-working Chinese created it. Allowed a modicum of economic freedom in the past 30 years, they strove to better their lives and the lives of their children. Think what a dominant nation China would be if its people were truly free.

History shows that one-man rule often doesn’t end well. At some point in the not-so-distant future, Xi could well decide to hold on to the reins of power for many more years.

But investors who bet on a long, prosperous imperial era of Xi may find out that it can collapse on a much shorter time schedule.

Source: Barron’s Vito J. Racanelli / March 5, 2018