China Against China: Xi Jinping Confronts the Downsides of Success

Thirteen years after Xi Jinping ascended to the top of China’s leadership hierarchy, observers in Washington remain deeply confused about how to assess his rule. To some, Xi is the second coming of Mao, having accumulated near-total power and bent the state to his will; to others, Xi’s power is so tenuous that he is perpetually at risk of disgruntled elites ousting him in a coup. Xi’s China is either a formidable competitor with the intent, resources, and technological prowess to surpass the United States or an economic basket case on the verge of implosion. Depending on whom one asks, China’s growth model is either dynamic or moribund, relentlessly innovative or hopelessly stuck in the past.

Attempts to analyze Xi’s project have become even more convoluted in the wake of China’s slow recovery from the COVID-19 pandemic. When Xi suddenly ended China’s draconian pandemic controls and reopened the country in late 2022, Wall Street did not debate whether China’s economy would come roaring back, but rather what letter of the alphabet—a V or a W—the graph charting the upward path of the recovery would resemble. When the economy sputtered, some in Washington concluded the opposite extreme: that China had peaked, its governance structure had failed, and that it would start to decline relative to the United States.

This analytic confusion has shaped U.S. policy toward China. At the start of the second Trump administration, officials claimed that China was the greatest threat to the United States yet seemed to believe that China’s economic strains were so severe that it would immediately cave in a trade war—a viewpoint reminiscent of Mao’s famous declaration that the United States was a “paper tiger” that appeared threatening but was in fact weak and brittle. The attempt to pressure China with tariffs failed. Beijing responded to Washington’s trade escalation in April 2025 by imposing retaliatory levies and cutting off the U.S. supply of rare-earth magnets. The Chinese economy’s ability to weather the trade shocks endowed Beijing with newfound confidence.

Since the weight of a closed, illiberal system dragged down the Soviet Union, the United States has attributed much of its own resilience to its political system’s ability to recognize problems, propose solutions, and correct course. The painful irony for the United States is that under Xi, China’s opaque polity, in which officials have every incentive to obfuscate rather than admit mistakes, has proved adept at frankly acknowledging many of its weaknesses and taking steps to remedy them—arguably even more adept than the supposedly supple and adaptive American system. China’s rise under Xi is challenging not just American power, but a foundational tenet of America’s open society—that openness to debate and inquiry is the foundation of a self-correcting system.

For Xi, China’s most glaring weaknesses are the side effects of four decades of economic reform. Rapid growth brought wealth and power but also indecision, corruption, and dependence on other countries. However one assesses his leadership, Xi has identified many of China’s vulnerabilities and marshaled the resources to try to make the country more resilient. Beijing’s success in rebuffing Washington’s trade war suggests that Xi’s strategy is working.

REFORM REVERSED

When Xi took the reins of the Chinese Communist Party, in 2012, many observers inside and outside China were frustrated with the stalled reforms of his predecessor, Hu Jintao. They embraced Xi as a potential savior who could rescue the CCP’s ailing project of “reform and opening up” that Deng Xiaoping began in the late 1970s. These observers, mostly with more liberal instincts, hoped Xi would promulgate market-oriented policies, further reduce state intervention in the economy, and potentially even allow more political contestation. Xi had the makings of a reformer: he had served in leadership positions in three of China’s most prosperous coastal provinces, which were among the primary beneficiaries of the shift toward markets. Many thought that Xi, the scion of a revered revolutionary and proponent of economic reform, would have the clout and the will to effect change, which his predecessor had lacked.

In reality, however, the moment of Xi’s ascension was the beginning of the end of the reform era. What Xi saw when he returned to Beijing in 2007 as Hu’s heir apparent was not endless prosperity and a stable leadership structure but deeply rooted dysfunction. Hu rose to power by deferring to party elders and promoting collective leadership, which prevented him and others from acting decisively. Even if Hu had wanted to assert himself, his predecessor Jiang Zemin had boxed him in by surrounding him with cronies loyal to Jiang. Without full control of many of the party’s key nodes of power, Hu’s attempts to reorient policy—including efforts to address the glaring inequalities he saw emerging from China’s modernization—largely failed to gain traction. Meanwhile, corruption became endemic, pervading even the police and the military, which were supposed to be the bulwark of the party’s grip on power.

From Xi’s perspective, the rickety collective leadership model that Deng bequeathed was the source of many of the party’s maladies. With power diffused among top leaders and their allies in the bureaucracy, party discipline was slack. Xi seems to have further judged that China’s prosperity had made the party’s cadres soft. Opening to the outside world had propelled China’s economy, but it had also created vulnerabilities in the form of liberal values, which threatened core communist beliefs. China was also increasingly dependent on other economies, especially that of the United States, whose tightening trade restrictions on many Chinese goods since 2018 made clear to Xi the very real risks of economic interdependence.

In response, Xi has not only tried to address the symptoms of the problems that germinated in the era of reform and opening. He has also tried to cure what he sees as the underlying ailment by reversing liberalization altogether. Xi’s tenure can be described as what the scholar Carl Minzner calls a counterreformation—stripping the party down to its Leninist core of political and social control and rewiring it for neither revolution nor reform, but for a disciplined march toward technological-industrial and military might to enhance China’s geopolitical position.

For most outside observers, this counterreformation is dangerous because it shunts aside the tried-and-true playbook that brought China from poverty to power and introduces new political risks from strongman rule. But Xi’s actions are rooted in his recognition of the most pressing weaknesses that party leaders see as threatening China—most notably, internal corruption and the uncomfortable role of China’s chief rival, the United States, in supporting China’s prosperity. Rather than push for more economic opening, Xi has instead focused his considerable political power and resources on enhancing China’s resilience to threats that have emerged in part from past reforms. It is these deeply ingrained problems, not excessive state intervention or authoritarian politics, that Xi sees as stymieing China’s progress in catching up to the United States.

BURST BUBBLES

Many elements of China’s current dysfunction are the pathologies of its own prosperity. After Mao’s death, CCP leaders lacked a road map for how to lead China toward openness without abandoning their commitment to communism. They had made bitter sacrifices in China’s revolution and were still suspicious of capitalism and its depredations. Yet at the same time, they did not want to lead China back to the chaos of the Mao era. Many of these party leaders guiding China in the 1980s, including Xi Zhongxun, Xi Jinping’s father, had themselves been purged in the power struggles that unfolded under Mao.

After more than a decade of toggling between opening and retrenchment, economic reform triumphed. In the aftermath of the 1989 military suppression of protesters in Tiananmen Square, Deng—who had the fortune to outlive other party elders bent on constraining liberalization—set China on a course toward a more open economy. Deng’s so-called Southern Tour, in which he delivered a series of speeches endorsing a greater role for markets, resuscitated economic reform initiatives that had been sidelined after the Tiananmen crackdown. To secure his legacy, Deng handpicked not just his immediate successor, Jiang Zemin, who took control of the party in 1989, but also his heir’s heir, Hu Jintao. In a new political environment in which none of the new leaders could claim to be revolutionary founding fathers, Deng’s blessing hallowed Jiang and Hu and helped ensure that each survived the vicissitudes of succession politics. Both Jiang and Hu stepped aside peacefully, setting a fragile precedent for transferring power.

This leadership stability and the quickening pace of economic reforms produced astounding results. Throughout the 1990s and early 2000s, China regularly registered double-digit GDP growth, averaging over ten percent per year from 1992 (when Deng launched his Southern Tour) to 2012, the year Xi ascended to power. China’s rapid modernization was palpable everywhere: new high-rises dotted the skylines of cities like Shanghai, and roads penetrated deep into the countryside to connect previously isolated villages to the rest of the country. Deng also promulgated a successful foreign policy that eschewed geopolitical confrontation to give China time to develop its economy, issuing instructions that China should “hide its capabilities and bide its time”—an approach better known as “hide and bide.”

Unfinished buildings in Shijiazhuang, China, February 2024 Tingshu Wang / Reuters

Reform brought economic growth and geopolitical breathing room but also corruption, iniquity, and inequality. No single sector more vividly illustrates China’s interwoven political and economic dysfunction than real estate, in which prices soared to unprecedented heights but have cratered since 2021. In the late 1990s, Chinese leaders began allowing urban residents to secure long-term leases on property that they could sell on the private market as part of liberalizing reforms designed to spur economic growth. This policy change unleashed a torrent of pent-up demand for property and launched a nationwide real estate boom, one of the largest in history. Local governments, which legally own all urban land, sold their land to developers to fill their coffers. When Hu abolished China’s two-thousand-year-old agricultural tax in 2005—a policy that lightened the burden on China’s poor rural farmers but removed a major source of local government revenue—officials relied even more on land sales to balance their budgets, in many cases violently evicting farmers to reap the profits.

In the ensuing years, an enormous housing bubble formed—and with so much of the country’s wealth tied up in it, other leaders hesitated to stop its growth. But in 2020, after halting efforts over much of his first two terms to deflate the market gradually, Xi popped the real estate bubble by imposing restrictions on property developers’ borrowing that undercut the core of their business model. Property sales have fallen from 18 percent of GDP in mid-2021 to seven percent in 2025, and new housing construction has dropped 70 percent. The crash has been a leading cause of China’s sluggish economic growth, wiping out much of the wealth of many Chinese families and dampening consumer sentiment at a time when the economy desperately needs more consumption. Yet Xi, wary of the costs that a bloated housing sector could bring, has remained reluctant to intervene to prop up the market.

The arc of China’s real estate sector illustrates the dynamics at the heart of China’s reform efforts. Even when China’s leaders successfully pass a much-needed reform, such as commercializing the real estate sector or abolishing the oppressive centuries-old agricultural tax, they create nearly as many problems as they solve. The system’s endemic corruption only makes the challenges more difficult because local officials resist reforms or find new opportunities for self-dealing. Since Xi came to power, he has prioritized cleaning up the messes that he inherited from his more liberal predecessors, no matter the cost or potential backlash. These unprecedented moves have generated much grumbling and dismay but no real political fallout for Xi, suggesting the strength of his position.

IN SEARCH OF RESILIENCE

Political analysts as far back as Aristotle have noticed that oligarchies tend to oscillate between the pull of centrifugal forces, in which power is shared and spread widely, and centripetal forces, in which rule is centralized. Indeed, to Xi and many party leaders, the diffusion of power in China’s political system had enervated Hu’s leadership and threatened the party’s ability to effectively govern. Concentrating power in Xi’s hands was the obvious corrective. Xi has used his centralized power to move away from policies that would further liberalize China’s economy and toward efforts to enhance China’s economic and political resilience.

The military and security services have been crucial to Xi’s centralization of power and his counterreformation. Xi has used his aggressive anticorruption campaign, which he launched in 2012, to throttle the military and the security apparatus into submission. Xi has uprooted powerful officials and their networks and, to eliminate any doubt about his total control, has often purged the successors he chose to replace them. This campaign has reduced some of the pervasive corruption in party institutions; even more important, it has kept leaders uncertain and obedient, increasing Xi’s hold over them.

Despite purging the leaders of the military and the domestic security services, Xi, like his predecessors, has continued to fund those institutions handsomely. China supports the police and security forces at nearly the same level as the military. Xi has encouraged them to harness emerging technologies to systematically build out their capacity for surveillance and repression. In his first years in power, Xi circulated “Document 9,” an internal memorandum warning of the dangers of Western values. The leaked document reversed the party’s growing tolerance for outside ideas and ushered in an era of repression of civil society. Xi was clear that he sought to protect China from what he sees as foreign subversion—and thereby remedy one of the problems created by the prior decades of reform.

Reform and opening also brought dependence on foreign economies, and Xi has made it a priority to insulate China from global economic volatility. In 2020, Xi proposed the idea of a “dual circulation” strategy: China would structure more of its economy around domestic markets—the “internal circulation” of goods, services, and technology—while promoting the “external circulation” of international trade and investment. By taking advantage of China’s colossal domestic market, Xi’s strategy seeks to minimize reliance on the outside world while enhancing international dependence on China’s economy. The brief trade war in April and May 2025, at the beginning of U.S. President Donald Trump’s second term, suggests that China has successfully hardened itself against U.S. tariffs. Xi has been able to refrain from offering costly stimulus packages, instead providing the minimum support needed to stave off the worst effects on the economy and the export-oriented industries that have borne the brunt of the tariffs. Moreover, Beijing has figured out how to weaponize Washington’s dependence on China for important materials, such as rare-earth magnets, which many American manufacturers require for their products.

Xi has also sought to increase resilience by single-mindedly focusing economic policy on building China’s high-tech manufacturing prowess. Xi has pumped up China’s technology and industrial sectors by pouring resources into them while slighting the macroeconomy. The process has not been efficient, but it has been effective. According to a Bloomberg analysis of 13 key technologies, China leads or is globally competitive in 12 of them. If anything, China has been too successful in areas such as green energy, in which the proliferation of Chinese companies harnessing these emerging technologies has led to vicious price wars that have contributed to deflationary pressure on the economy.

Xi has also dispensed with Deng’s low-key foreign policy of “hide and bide” in favor of an approach that could well be called “show and go.” This change, too, stems from the perceived failures of Western-led economic models in the wake of the 2008 global financial crisis. With China able to weather the crisis more effectively than Western powers, many CCP leaders believed that China should take on a more prominent global role. Whereas Hu sidestepped calls for a major shift in foreign policy, making only piecemeal concessions such as adding that China should “actively accomplish something” to Deng’s “hide and bide” formulation, Xi harnessed China’s growing self-confidence when he took power. He established his nationalistic bona fides in his first term in office by aggressively asserting China’s territorial claims along its periphery—most conspicuously by reclaiming more than 3,000 acres of land in the South China Sea. This gave him political cover when he purged leaders from the military high command and insulated him from internal criticism when the demands of diplomacy required a more conciliatory approach. But it is also likely that Xi genuinely believed that the time had come for China to embrace its status as a great power. This reflects a natural generational change and a reformulation of what really ails China: Xi is the first Chinese leader whose political career began in the reform era. His career trajectory has coincided with the untrammeled economic growth—and growing pains—of the post-Mao years.

CONFIDENCE IN CONFIDANTS

In the course of remedying the problems he inherited, Xi has created new problems for himself and the party. Most notably, he has undone one of the signature achievements of the post-Mao era: the institutionalization of a process to peacefully transfer power to a successor. Xi abolished term limits on the presidency and transformed the vice presidency from a de facto apprenticeship for the top position into a sinecure for retiring officials. He has also refused to allow any other civilian to serve on the party’s supreme military body. Without the opportunity to cultivate supporters in the military by serving in this body, Xi’s eventual successor will struggle to maintain power, and his tenure is likely to prove short-lived.

Autocratic regimes are especially vulnerable to succession crises. The Soviet Union never solved the succession puzzle: previous Soviet leaders either died in office or were purged, or, in the case of Mikhail Gorbachev, steered the system to its demise. The central challenge for Xi is how to empower a successor enough so that he can survive in office after Xi’s departure without endowing the heir apparent with enough clout to threaten Xi while he remains in charge. Even if Xi designates a potential successor at the next party congress, in 2027, getting the balance right will continue to be a challenge. Nor is it guaranteed that his choice will survive as the leader in waiting. Before Hu, many of the presumptive heirs apparent were purged, arrested, ousted, or wound up dead before they could make it to the top of the CCP.

The succession challenge will be difficult, but it is unlikely to cause the collapse of the CCP, which has survived much more profound crises such as the Cultural Revolution and the 1989 Tiananmen crackdown. The real question is whether Xi’s counterreformation has undercut the party’s ability to learn from its errors. The CCP has a sordid history of extravagant, cataclysmic mistakes, such as the Great Leap Forward industrialization campaign, which resulted in widespread famine from 1959 to 1962. But in the post-Mao era, the party has demonstrated itself to be an incredibly effective learning institution. Although it still makes serious mistakes, such as failing to prepare health-care infrastructure to deal with the surge in infections following the widespread rollback of COVID-19 restrictions, it seldom makes the same mistake twice. Party leaders were caught flat-footed when Trump launched his first-term trade war, forcing them to scramble to respond; when Trump unveiled his so-called Liberation Day tariffs at the beginning of his second term, in 2025, however, Beijing was ready with a flurry of countermeasures that it could unleash in response.

Roads near the Temple of Heaven, Beijing, September 2025 Tingshu Wang / Reuters

Although the personalization of power could limit China’s ability to correct its mistakes, Xi’s centralized system of control has so far been able to alter course when needed. Part of Xi’s inheritance as the son of a revolutionary leader seems to be an intuitive understanding that everyone around him has an incentive to tell him what he wants to hear. This may be why he has installed officials he knows and trusts in positions across the top echelon of the party hierarchy: these confidants can tell him the truth in discreet ways that do not challenge his power. Somewhat counterintuitively, the perilous political atmosphere Xi has created offers another potential avenue for soliciting accurate feedback. As other effective authoritarian leaders have done, Xi can use the mistrust he has instilled among subordinates to play aides off one another and triangulate accurate information from otherwise unreliable sources.

Bolstering Xi’s confidence in his counterreformation is the inability of the United States to perform even the most basic governance functions, such as passing a federal budget on time. The Trump administration, similar to Xi, argues that executive power has become too diffuse and has undertaken aggressive efforts to centralize and personalize executive authority in the president. The increasingly unchecked and unbalanced executive power in the United States resembles that of other troubled and polarized republics led by populists that ruled Latin America for much of the twentieth century. But whereas Trump’s project deviates from how the U.S. system is designed to function, Xi’s power consolidation is consistent with the CCP’s operational DNA, which tends to empower rather than constrain the top leader. The result is that Trump is generating policy volatility and political turmoil that undermines U.S. capacity, whereas Xi’s centralization has buttressed Chinese resilience.

These developments are not lost on Xi and his peers, who, channeling Lenin, are already prone to see the United States as decadent and in decline. The party’s chief ideologist for the last quarter century has been Wang Huning, a political theorist whose visit to the United States in the late 1980s inspired him to write a book, titled America Against America, about the contradictions he observed. Wang detected what he called “undercurrents of crisis” in the United States and highlighted the corrosive effects of American individualism and the isolation it produces. Xi shares many of these concerns himself and has described Western countries as suffering from “chronic diseases such as materialism and spiritual poverty.” These worries are at the heart of what Xi sees as the pathologies of reform that he has sought to address.

Chinese officials and analysts also have an increasingly rich trove of evidence to draw on for their assessment of U.S. dysfunction and decline. Since the end of the Cold War, the United States has badly mishandled just about every national crisis it has faced. Each of these has diminished public confidence in the United States, both at home and abroad. In response to the 9/11 attacks, the United States launched, on false pretenses, a destructive and costly war in Iraq that sapped the country of the appetite or ability to deal with more formidable future challengers such as China. In its response to the 2008 financial crisis, Washington rescued the financial sector but not its victims, worsening inequality and generating public disillusionment. And in the face of the COVID-19 pandemic, despite having some of the most esteemed public health institutions in the world, the U.S. government bungled its response, further feeding suspicion and undermining public trust. Despite its repeated missteps, the United States remains a global superpower. But it is relying on the luxury of its inherited privilege: like a spoiled child, the United States can afford to make epic mistakes without suffering the devastating consequences that other countries would face if they acted similarly.

While strategists in Washington debate whether China has peaked, their counterparts in China are having an analogous debate about the United States—and reaching strikingly similar conclusions. China’s state media has diagnosed the United States with “hegemonic anxiety,” suggesting that Washington cannot cope with the possibility that it must face a multipolar world. And whereas U.S. thinkers such as Hal Brands have argued in their analyses of China that a power that has peaked is likely to lash out in violent ways, Chinese observers independently conclude that it is Washington that is anxious about preserving its position—and is increasingly willing to employ any means necessary to sustain its preeminence.

In the early years of the Cold War, the strategist George Kennan worried that the United States might lose confidence in its own system if the democracies of Europe succumbed to the Soviet Union. Today, the challenge is just the opposite: declining American confidence in its own system could be a cause rather than the result of the United States losing the competition with China. In contrast, Xi’s counterreformation—including the continuous purges and fallout from the property sector’s collapse—has not produced a crisis of confidence in China. Instead, if anything, Xi has gained confidence because he can point to tangible results in the form of technological breakthroughs. And Xi can afford to be patient because his is a long-term project, and he does not face the erratic fluctuations of an unstable political system swinging from one extreme to the other.

Indeed, a growing number of officials in Washington employ Cold War–style rhetoric when discussing China yet demonstrate little appetite to take on the difficult and expensive tasks, such as refurbishing the defense industrial base and shoring up key supply chains, that would help the United States outcompete China. If this dynamic continues, the United States will be left pursuing what might be called a “Reverse Roosevelt” strategy: speaking loudly about American power while wielding an ever-smaller stick. While Xi has been disciplined and methodical in his efforts to bolster China’s strategic position, the United States has been distracted and incoherent. Misreading Xi Jinping is, ultimately, part of the failure to address the problems facing the United States itself.

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