Xi micromanagement leaves underlings scrambling

Xi Jinping makes a speech during the celebration marking the 100th founding anniversary of the Chinese Communist Party. Picture: Reuters

Xi Jinping makes a speech during the celebration marking the 100th founding anniversary of the Chinese Communist Party. Picture: Reuters

By Josh Chin

37 minutes ago December 16, 2021

Earlier this year, Xi Jinping issued brief instructions to education officials in Beijing. China’s leader wanted to reform the country’s $100 billion private tutoring industry, which the state worried was helping well-to-do families gain advantages for their offspring and creating anxiety among families that couldn’t afford the help.

Education officials drafted a plan that included new limits on tutoring for children up to the equivalent of ninth grade, said people familiar with the effort.

The plan was too soft, Mr. Xi said, in a one-sentence note to the education ministry, according to the people.

Scrambling to please him, the ministry expanded the limits to include students up to the equivalent of 12th grade. In addition, it required all private education companies to re-register as nonprofits.

Shanghai schoolchildren in the classroom. Picture: AFP

Shanghai schoolchildren in the classroom. Picture: AFP

The more extreme rules, issued in July, triggered panic selling that erased tens of billions of dollars from the value of education companies listed on U.S. and Hong Kong stock exchanges. Officials from the China Securities Regulatory Commission hastily scheduled meetings with foreign investors to calm them down, according to people familiar with the conversations, and promised that Beijing would consider market impact before introducing future policies.

The episode is just one example of Mr. Xi’s evolving management style as the Chinese president consolidates control of the world’s second-largest economy. He is widely considered the most powerful Chinese leader in a generation. He is also a micromanager who intervenes often, unpredictably and sometimes vaguely in policy matters big and small.

People inside the government say that sows confusion among bureaucrats, stifles policy debate and sometimes leads to policies that aren’t carefully thought-out. Some bureaucrats, unsure how far to push Mr. Xi’s priorities, err on the side of aggressive interpretation, and this sometimes means reversing policies later.

Xi Jinping has cracked down on the ubilding and real estate industry. Picture: AFP.

Xi Jinping has cracked down on the ubilding and real estate industry. Picture: AFP.

“When loyalty is the critical measure for officials, no one dares to say anything, even if the instructions from the great leader are vague and confusing about what to do,” one official said.

Publicly, Chinese officials credit Mr. Xi with providing decisive leadership as he cracks down on technology, real estate and other industries to rein in what he sees as excesses of Western-style capitalism. He has called for more focus on “common prosperity,” which involves reducing inequality and returning China to its Communist roots by empowering the disadvantaged at the expense of highly profitable private companies.

Behind the scenes, many officials question some of Mr. Xi’s decisions. In late July, a Covid-19 outbreak caused more than 1,200 infections after months of nearly zero reported cases. Some central government officials, eyeing other countries, suggested it might be time for China to stop its strategy of pursuing “zero Covid” and learn to live with the virus, according to a person familiar with the discussions.

Mr. Xi was furious, said people familiar with the issue. In a note to underlings, he asked if officials were becoming “lax and numbed” in fighting the virus, according to these people and to state media reports. “Zero Covid” would remain the policy.

Disneyland in Shanghai. Picture; AFP.

Disneyland in Shanghai. Picture; AFP.

Local officials intensified their efforts. In late October, they locked more than 30,000 visitors into Shanghai Disneyland and forced them to undergo Covid-19 tests after one customer tested positive. Authorities temporarily shut one of China’s biggest container ports after a single case, hurting global supply chains.

China’s economic growth slowed to 4.9 per cent in the third quarter from the previous quarter’s 7.9 per cent rate. Economists have said China’s zero-tolerance pandemic measures, including lockdowns of residential compounds and cancellations of public events, are likely to have a significant impact on China’s growth if they don’t succeed in snuffing out the virus soon.

Some local government officials have warned against “excessive pandemic prevention” measures, according to speeches quoted on websites. Yet officials keep pressing, fearful they might be punished if a Covid-19 case emerged in their area.

Mr. Xi’s micromanaging became easier after he used corruption purges and new appointments to re-engineer a governance system, dating back to Deng Xiaoping in the 1980s, through which top leaders ruled by consensus.

The classic creature of that system, Hu Jintao, made decisions collectively with other leaders and was often criticised for a dithering style. He and other Chinese leaders also had a history of trusting details of major policies to underlings, a strategy known in Chinese as “grasp the big, let go of the small.” Mr. Xi, by contrast, takes personal charge of issues he cares about and intercedes often. He personally chairs at least seven committees and commissions responsible for areas such as the economy, which used to be managed by China’s premier, and national security, leading some Chinese officials and foreign academics to describe him as “chairman of everything.” Mr. Xi personally made the decision, as reported earlier by The Wall Street Journal, to cancel fintech giant Ant Group’s initial public offering in late 2020.

He personally approved a deal with Washington to ensure the safe return of Huawei Technologies Co. finance chief Meng Wanzhou after nearly three years of detention in Canada, according to China’s foreign ministry.

A five-year economic blueprint that Mr. Xi personally oversaw included details such as a provision to crack down on illegal trade in wild animals. He personally designed plans for new economic zones, including a “Greater Bay Area” linking Hong Kong more closely with neighbouring mainland cities, according to state media.

Chinese police officers take part in a drill in Shenzhen, across the border from Hong Kong. Picture: AFP.

Chinese police officers take part in a drill in Shenzhen, across the border from Hong Kong. Picture: AFP.

Few details are too small. According to state media, he gave at least six instructions on ecological preservation in a Shaanxi province nature reserve and multiple instructions on protection of a lake in Zhejiang province. He has given instructions on improving public toilets, state media reported.

Any punishments against officials at the vice minister level or above require Mr. Xi’s signoff, rather than that of top authorities in charge of discipline, people familiar with the matter say. More than 200 officials at the vice minister level and above have been punished since Mr. Xi took power in 2012.

To ensure that officials Mr. Xi has installed stay in line, he started a performance-review system in 2018 that grades leaders on loyalty, on top of other metrics.

Mr. Xi has personally signed off on decisions to investigate senior businesspeople such as Anbang Insurance Group Co. founder Wu Xiaohui, who was sentenced to 18 years in prison after being convicted of fraud and abuse of power, people familiar with the matter said.

Given how many policies Mr. Xi involves himself in, ministerial officials have come up with creative ways to get his attention. Some submit slides or audio reports so that Mr. Xi can take a break from reading or absorb them while multitasking, people familiar with the matter said.

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In 2017, Beijing’s municipal government launched an effort to clear out poor neighbourhoods to help modernise the city. People familiar with the campaign say it started because Mr. Xi didn’t like how Beijing, where he spent most of his childhood, had grown so big and polluted.

Some residents were given only a few hours’ notice before their homes were demolished. To facilitate the move, officials cut off heating in some buildings occupied by migrant workers.

The campaign was quietly discontinued, though, after it triggered a public backlash, with images on social media of expelled workers dragging their belongings along wintry streets.

Mr. Xi later “personally planned, personally proposed, personally deployed and promoted” the development of Xiongan, a new “eco-city,” out of farmland about 60 miles from Beijing, according to state media, and urged state firms to move there. Despite billions of dollars of investment, it hasn’t matched the quick success of Deng-era special economic zones such as Shenzhen.

To comply with the new regulatory regime for after-school tutoring this year, education companies have laid off tens of thousands of employees, including teachers. Given the impact on the industry, officials have been enforcing the rules on tutoring for children only up to the equivalent of ninth grade — as originally proposed.

At last year’s United Nations General Assembly, Mr. Xi promised that China’s carbon emissions would peak around 2030 and reach net zero before 2060.

Some local officials began more aggressively phasing out coalmining operations, causing coal prices to surge, and abruptly ordered some factories to close temporarily this past summer.

The factory shutdowns and electrical-power cuts hit global supply chains. Social media lit up with images of cars driving on dark roads and families trapped in stopped elevators.

After emergency meetings in September, Mr. Xi came down on the side of steps that would encourage more coal production, according to people familiar with the matter. Reversing course, local officials began pulling out the stops to produce more coal.

Authorities have started to waver, though to a lesser degree, on Beijing’s crackdown on the real-estate industry. After repeated exhortations by Mr. Xi that “housing is for living, not speculation,” regulators tightened the screws on developers this year, making it harder for them to borrow for new construction.

The restrictions triggered a liquidity crisis for developers, including ones with healthier balance sheets, and in private meetings with the government, some pushed back. Some local governments have since made it easier for home buyers to get mortgages and relaxed rules for land sales, though the overall thrust of the campaign remains in place.

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Hong Kong business leaders recently got word that Mr. Xi had agreed on a new law that would cut them off from Western finance if they were caught complying with U.S. sanctions against Chinese firms.

Some of the business leaders approached local officials seeking help in halting the law, which they feared would drive multinational companies to leave. Hong Kong leader Carrie Lam had already publicly expressed support. Local officials were afraid to challenge Mr. Xi, people familiar with the matter said.

A group of businesspeople, led by Hong Kong’s former chief executive Tung Chee-hwa, decided to bypass the local government. Mr. Tung, now in his 80s, drafted a letter directly to Mr. Xi and suggested putting off the law, people familiar with the matter said. Through a spokesperson, Mr. Tung declined to comment.

Beijing delayed the plans and decided to continue studying the issue after new instructions from Mr. Xi, who the people said agreed the legislation could shake investor confidence, which has fallen because of China’s regulatory crackdowns on education, technology and other sectors.

Mr. Xi sometimes appears to be growing weary of micromanaging China. “Some only act when the party’s central leadership has instructed them to do so,” Mr. Xi said in a speech to the party’s top disciplinary officials last January, made public only recently. He complained that many officials aren’t competent to deal with complicated issues, and that if he didn’t issue so many instructions, little would get done.

“I issue instructions as a last line of defence,” he said.

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