The “X” Article for China

Colonel Allan Chiu, U.S. Marine Corps

The Arleigh Burke-class guided-missile destroyer USS John Finn (DDG 113) conducts routine operations during a transit through the Taiwan Strait, March 5, 2024. U.S. Navy photo by Mass Communication Specialist 2nd Class Justin Stack. The appearance of U.S. Department of Defense (DoD) visual information does not imply or constitute DoD endorsement.

Editor's Note: Secretary of Defense Hegseth recently made remarks at the IISS Shangri-La Dialogue on May 30th speaking to the U.S. vision for the Indo-Pacific. Colonel Chiu's thesis - looking at ways the U.S. could capitalize on inherent weaknesses in Xi’s outlook and vision - won the Foreign Area Officer Association writing award at the U.S. Naval War College. The FAO Journal is pleased to bring you this outstanding scholarship. Because of length strictures, we print the paper without research notes. To see the thesis with end notes and bibliography, email editor@faoa.org.

Disclaimer: The views expressed are those of the authors and do not reflect the official policy or position of the Naval War College, the Department of Defense, or the U.S. Government.

Introduction

In 1947, George Kennan published the “X” Article detailing the long-term U.S. strategy of containment against the Soviet Union. Kennan’s analysis not only provided clarity to the historical, societal, and institutional motivations behind the Soviet’s defensive aggressiveness, but also identified fundamental flaws, “seeds of decay,” within the Soviet system.Kennan urged the U.S to adopt a patient, long-term strategy of deterring and containing Soviet aggressive impulses until the Soviet regime either evolved or collapsed.

Similarly, Xi Jingping’s current methods of securing the survival of the Communist Party of China (CPC) are ultimately self-defeating, and bear within them the seeds of their own decay. The U.S. should recognize and exploit these self-defeating methods as part of a long-term competition and deterrence strategy against the CPC. These three self-defeating methods are:

1) extreme consolidation of power;

2) over prioritization of internal security, and

3) excessive reassertion of Party control over the economy.

Before delving into each seed, this paper will begin with a background examination of Xi’s theory of regime survival, which serves as an important foundation to better understand Xi’s rationale and thought process. This paper will then examine each of Xi’s three self-defeating methods and provide recommendation on how the U.S. could exploit them to gain an advantage.

This paper will then examine counterarguments against the“seeds of decay” approach, then finish with rebuttals and a conclusion.

Background: Xi’s Theory of Regime Survival

Xi’s core objective is to ensure the CPC remains in power as long as possible. If the CPC loses power, Xi believes the result would be disastrous: civil war, famine, and another century of humiliation. Throughout history, the biggest cause of death for Chinese people has been the violent transition period between ruling Chinese dynasties. As the latest Chinese dynasty, the CPC believes regime survival not only benefits itself, but also benefits the Chinese people by preventing the country from descending into chaos.

For Xi’s predecessors, their theory for regime survival prioritized stability and economic growth. The social contract was: follow the Party, and the Party will ensure stability and raise living standards. Domestically, Xi’s predecessors incentivized growth and innovation by empowering private enterprises and relaxing state control. Internationally, they demonstrated strategic restraint and avoided direct confrontation and conflict. The strategy was to bide one’s time, hide one’s strengths, and concentrate on improving economically, technologically, and militarily.

The theory for regime survival changed under Xi, who instead prioritizes strong central leadership and expansion of Party control into all elements of Chinese society. The social contract became: follow the Party, and the Party will ensure national rejuvenation. The rationale behind Xi’s different theory for regime survival can be traced to his extensive study of the Soviet Union collapse. Xi believes the primary causes of the Soviet Union collapse were the lack of strong central leadership, the loss of Leninist ideological discipline, the loss of Party control, and subversive Western influences. In a leaked 2013 speech to Communist Party officials, Xi stated that the Soviet Union fell because their “ideals and convictions waivered…nobody came out to resist.” In a leaked internal Party communique known as “Document 9,” Xi warned of the dangers of promoting western constitutional democracy; the dangers of economic liberalization, complete privatization, and marketization; and the dangers of weakening ideology and loss of Party control.

Xi’s theory of regime survival has thus led him down the following self-defeating paths:

1) extreme consolidation of power;

2) over prioritization of internal security, and

3) excessive reassertion of Party control over the economy.

Power Consolidation

Xi began consolidating power after he became General Secretary. In 2018 Xi amended China’s constitution to abolish term limits for the Presidency, allowing him to potentially rule for life. Xi also purged many officials deemed disloyal, corrupt, or ineffective, and replaced them with allies and supporters. In addition to his formal roles as the CPC General Secretary, Head of State, and the Commander in Chief of the People’s Liberation Army (PLA), Xi also directly chairs at least 11 of the 20 major Leading Small Groups (LSG) and Central Commissions. In comparison, Xi’s predecessors had more broadly distributed chair positions to other senior CPC officials. The LSG and Central Commissions are the nerve center of CPC decision-making on complex issues that span across multiple administrative entities or state organs. By directly chairing the most important of these groups instead of sharing the chair with other senior CPC officials, Xi simultaneously reduces the influence of other senior CPC officials while increasing his own personal control. Xi has replaced 40 years of collective leadership, where the General Secretary was considered first among equals on the politburo standing committee, with a new type of supreme leadership with him personally at the core.

Power Consolidation: Seed of Decay

While consolidating power makes Xi stronger, it also has unintended consequences. Xi’s purges have resulted in quiet political resentments against his rule. Xi’s purges have also resulted in him becoming personally responsible for China’s economy. Previously, the Premier would have been blamed (and potentially fired) for poor domestic economic performance. Now, Xi no longer has a scapegoat. These political and economic pressures combine to make Xi believe he cannot appear weak or indecisive at home, thus compelling him to act strongly and forcefully abroad. The result is the emergence of “Wolf Warrior Diplomacy” and increased Chinesе assertiveness in the East and South China Seas. To maintain legitimacy at home, Xi has resorted to being calculatingly aggressive abroad. Xi still wants to avoid outright direct military confrontation, but he will also take opportunities to score cheap victories through combative rhetoric or limited paramilitary skirmishes over disputed territory. Unfortunately for Xi, these actions are self-defeating and have encouraged the development of new U.S.-led partnerships in the Indo-Pacific dedicated to containing and pushing back Chinese over-assertiveness.

​Xi’s economic and military aggressions in the region have encouraged renewed Japanese outreach to Korea in the attempt to improve bilateral relationships. This reconciliation could pave the way for the long sought-after trilateral defense agreement between the U.S., Japan, and South Korea. Xi’s aggression in the East China Sea has also encouraged Japan to start shifting its stance on Taiwan. Japan’s Defense Minister Yasuhide Nakayama remarked in 2021 “we have to protect Taiwan, as a democratic country .” Likewise, Xi’s aggression in the South China Sea has pushed away Vietnam and the Philippines. The U.S. and Vietnam now have elevated their bilateral cooperation to a new historic high: Comprehensive Strategic Partnership. Despite former Philippine President Duterte’s attempt to balance Beijing and Washington, recent public opinion polling shows 84% of Filipinos believe the current Philippine President Marcos should work closer with the U.S. to defend its sovereignty against China.

How should the U.S. exploit this seed of decay? Firstly, while the U.S. should openly condemn Chinese regional aggression to score easy political points, the U.S. should not try to stop Chinese aggression. The U.S. may even want to encourage additional Chinese misbehaviors subtly. The more Xi upsets his neighbors, the closer he pushes them to the U.S. The U.S. should also realize Xi will not alienate his neighbors forever; at some point he may recalibrate (such as Xi’s recent attempts to reconcile with Vietnam). Thus, the U.S. must proactively seize every opportunity to codify and ratify new bilateral or multilateral agreements while Xi’s neighbors are still upset with China. The best way to exploit Chinese adventurism is with new access, basing, and overflight agreements, as well as closer military cooperation. The more Xi lashes out, the tighter the noose of U.S. allies and partners will close around his neck.

Secondly, the U.S. should think globally. The Europeans are becoming more dismayed with Xi for supporting Russia amid the invasion of Ukraine. European countries have suffered higher domestic energy costs by sanctioning Russia, only to see China and India reap the benefits of below-market energy prices from Russia. Meanwhile, China’s dual-use technology exports to Russia is helping Russia rebuild its military industry, counterbalancing European military aid to Ukraine. However, rather than trying to get China to abide by sanctions, the U.S. should instead focus on getting the Europeans to punish China in a way that benefits long-term strategic competition: restriction on foreign direct investments and high-end technology exports to China.

Internal Security

The CPC spends vast resources to maintain internal security. Historically, China’s internal security budget has kept pace with its national defense budget. However, soon after Xi assumed power, there was an upsurge in internal security spending from 2015 – 2020, with internal security spending surpassing national defense spending by as much as 22% in 2018. Spending re-balanced after 2021, and China spent approximately $217 billion on internal security and $230 billion on national defense in 2022. This is equivalent to 1.6% and 1.7% of the Chinese Gross Domestic Product (GDP),respectively. In comparison, in 2022 the U.S. spent $766 billion on national defense, which was approximately 3% of the U.S. GDP.

The $217 billion spent on internal security buys Xi a surveillance state capable of quickly suppressing ethnic unrests in Xinjiang and enforcing the world’s most restrictive coronavirus lockdowns. The CPC and Xi are now heavily investing in artificial intelligence and big data to pursue the holy grail of domestic surveillance: the ability to predict crime and protest before they happen by analyzing patterns and identifying aberrations.

The $217 billion spent on internal security also buys Xi the world’s largest gendarmerie: the People’s Armed Police (PAP). The PAP is a paramilitary defense force with law-enforcement authorities. The PAP is also known as China’s other army because with close to one million personnel, the PAP is about half the size of the entire PLA. They are used to control the population and quell protests in places like Xinjiang, Tibet, and Hong Kong. Unlike the rest of the PLA which is being slowly downsized to support modernization and reform, there are no plans to downsize the PAP. Instead, the PAP has enjoyed capability and budgetary increase every year. Furthermore, Xi has centralized the PAP’s command and control to take orders directly from the Central Military Commission (aka Xi). Xi sees the PAP as essential to regime survival and is clearly willing to devote more resources to the PAP.

Internal Security: Seed of Decay

Xi’s world view predisposes him to prioritize internal security above everything else. Recent history has also shown Xi is willing to devote vast amounts of money and manpower towards internal security. This tendency can become self-defeating, and the U.S. should seek to exploit it. Every country, even China, has limited resources. A dollar more spent on internal security is a dollar less spent on something else.

The U.S. should encourage Xi to spend and invest heavily on internal security, while simultaneously making it more expensive to do so. For example, the U.S. should better enforce export restrictions of Graphic Processing Units (GPUs). These chips are critical in the development of artificial intelligence and large-data learning needed to monitor and predict future crime. Making the acquisition of these chips more expensive or completely unavailable will drive up the cost of internal security. The U.S. should also continue highlighting human rights abuses perpetrated by the Chinese internal security apparatus against minority groups such as Muslim Uighurs. This will generate international condemnation that the U.S. can exploit to increase the cost of internal security, such as encouraging Middle Eastern countries to secretly fund and support Uighur resistance.

The U.S. should also develop a human rights program to help Chinese citizens resist the surveillance state, making internal security more ineffective and expensive. Although getting survey data from inside China has become more difficult, a 2016 study showed over 70 percent of Chinese citizens consider privacy breach to be a serious issue. The majority of Chinese citizens value privacy and freedom to access information, and are actively circumventing the Great Firewall. They also trade advice with each other on how to evade surveillance (i.e. wearing hats, wearing masks, pointing flashlights at security cameras). By discretely supporting these efforts to resist and evade surveillance, the U.S. will drive up the cost of internal security.

The U.S. should encourage increased international engagement with the PAP. The PAP could provide a net positive service to the world by conducting peace keeping operations and peace enforcement operations. Furthermore, Xi is always looking for ways of improving China’s reputation. Engaging the PAP could provide a triple-win: a win for global security, a win for Xi, and a win for the U.S. (through increased Chinese spending on the PAP).

Reasserting Party Control Over The Economy

Xi sees market liberalization as inherently risky. The damage that an unpredictable market can wreak on China took international center stage in 2015. There was a stunning stock market crash, followed by a spiraling devaluation of the RMB. The instability, turmoil, and political risk caused by this economic shock convinced Xi to reassert Party control over the free market and crystalized in his mind that “markets and private entrepreneurs, while important to China’s rise, are unpredictable and not be fully trusted.” State companies intervened to prop up the plunging stock market and stabilize the currency. Private investor deemed guilty of speculating and betting against the Chinese stock market and currency were identified and punished.

​As a result, Xi began leaning more heavily on Chinese state-owned enterprises (SOE) to implement his political and economic goals. A Chinese SOE is a legal entity that undertakes commercial activities on behalf of the CPC. Each SOE has an embedded CPC committee that directly commands the operations of the SOE. SOEs have become the main implementer of Xi’s industrial policy and are focused on 10 priority sectors. Compared to private companies, SOEs have grown faster and taken on more debt since 2015, even though they are significantly less profitable and contribute only about 30% to China’s GDP.

Xi is also asserting more control over the private sector. He is installing Party officials inside private firms, starving private firms of credits, and demanding private firm executives tailor their businesses to achieve Party goals. Some “undisciplined” companies are even being outright absorbed by SOEs. In 2020, Xi personally halted the initial public offering (IPO) of Ant Group after the controlling shareholder, Jack Ma, infuriated government leaders by criticizing the government’s increasingly tight financial regulations. The fact that the Ant Group IPO would have been the biggest in the world at over $34 billion did not faze Xi. To paraphrase a senior Chinese official, “Xi doesn’t care about getting rich; he cares whether if you are aligning your interests with the state’s interests.”

Reasserting Party Control Over The Economy: Seed of Decay

Unfortunately for Xi, his reassertion of Party control is depressing domestic economic growth, stifling innovation, and contributing to a brain drain of Chinese talent. The reinvigoration of SOEs as dominant players in the economy will result in inefficiencies, wastefulness, bad investments, market distortions, and lower investor confidence. The IMF evaluates the productivity of a Chinese SOE to be 80% of private firms. Nevertheless, Xi believes benefits gained from increased political control and stability outweigh the losses accrued from market inefficiency and underperformance. Xi’s decision has contributed to a decrease in Chinese domestic economic growth, thus delaying when the Chinese GDP will surpass the U.S. GDP, if ever.

Xi’s favoring of SOEs has a secondary effect of stifling innovation. Because SOEs enjoy high levels of government investment and political protection, the incentive for SOEs to innovate and compete is absent. Xi’s aversion towards the private sector further deprives the smaller, privately owned companies of the needed capital and investments to innovate. The introduction of Party cadre into private companies will also increase censorship and depress the free exchange of new ideas. Greater Party control means a greater tendency to dictate solutions from above, instead of transparently evaluating alternatives using commonly accepted rules and standards

Xi’s increased political and economic control have also contributed to exacerbating China’s brain drain. Wealthy people, young people, and entrepreneurs are voting with their feet to escape political oppression and worsening economic conditions. Highly-paid skilled workers in China’s tech industries have left for a variety of reasons, including Xi’s abolishment of the presidency term limit in 2018, Xi’s Zero-COVID campaign, and Xi’s re-assertion of state control over the economy. For example, one engineer who worked at a SOE decided to leave because increased Party control meant he and his colleagues had to spend more time in political studies than working, which forced everyone to work overtime. In 2022, despite travel restrictions and government incentives designed to lure back or keep scientists and other skilled people in China, over 310,000 Chinese still emigrated.

How should the U.S. exploit this seed of decay? First and foremost, the U.S. should recalibrate its approach. While the U.S. should continue pushing for fair practices, market access, and preventing intellectual theft, the U.S. should stop pressuring Xi to privatize China’s economy. The more Xi leans on SOEs at the expense of private enterprises, the slower the Chinese economy will grow. The more Xi asserts Party control over SOEs and private enterprises, the weaker Chinese innovation will become. The U.S. should even look for opportunities to encourage Xi to double down on SOEs and Party control. Perhaps the U.S. can provide preferential treatment for SOE exports into the U.S. or globally, thereby encouraging the SOEs to grow, become more heavily leveraged, and swallow up private enterprise competitors.

The U.S. should also immediately stop pushing back against the Belt and Road Initiative (BRI). Most BRI projects are executed by SOE construction companies and funded by SOE banks. Typical of SOEs, their primary motivation is not profit or solvency, but demonstrating how quickly they can achieve the Party’s stated goals. When Xi rolled out the BRI, many SOEs started aggressively looking for places to build ports, highways, and railroads without the necessary due diligence and risk assessment that a for-profit, private company would do. Many SOE banks willingly provide low-interest loans to countries with questionable abilities to repay the loan. As a result, many of the BRI projects have become insolvent, and are now a net economic drain on the Chinese economy.

The U.S. should encourage further brain drain from the Chinese economy by offering high-tech employment opportunities. While there may be hesitation to place recent Chinese émigrés on classified national security projects, there are numerous private and unclassified technical jobs that will raise the U.S.’ total factor productivity and strengthen America’s economic and technological advantage against China.

Counterarguments: Exploiting the Seeds of Decay Won’t Work

​There are several counterarguments on why a strategy based on exploiting Xi’s self-defeating methods will not work. They include:

1) Xi can simply recognize his mistakes and reverse the course;

2) China’s economy is big enough to pay for both internal security and military; and

3) this strategy does not address the elephant in the room: Taiwan.

The “seeds of decay” strategy relies on a cooperative adversary. At some point in the future, Xi will recognize the negative impacts of his self-defeating methods and adjust accordingly. First, China remains the largest trading partner with the same neighbors that it is currently antagonizing. There are strong motivations on both sides to reduce tension, improve strategic partnerships, and expand economic cooperation. Once Xi moderates his approach, these neighboring countries will no longer have any compelling reasons to sacrifice prosperity for security. They will drift away from the U.S. and re-embrace China. Secondly, Xi can reign in Party control over the economy to re-incentivize innovation, economic growth, and reverse the brain drain.

The “seeds of decay” strategy relies on exploiting the combination of decreasing economic outputs and increasing internal security costs to decrease military capability. But even a cursory examination of countries that are under the heaviest of economic sanctions, such as North Korea, reveals that they are still able to devote considerable resources to both internal security and the military, despite meager economic means. In other words, given the size of China’s economy, it can certainly afford to spend more on both internal security and the military.

The “seeds of decay” strategy does not directly address the most challenging scenario regarding China: a near-term forceful unification with Taiwan. Even after implementing this strategy, the correlation of forces across the Taiwan Strait remains heavily in favor of China. This strategy also does not address the relative advantage China has in space and time, given its proximity to Taiwan. Taiwan is 100 miles from China and 7,000 miles from the continental U.S. (5,000 miles from Alaska and Hawaii).

Rebuttal and Conclusion

In response to the first counterargument, while Xi can certainly undo most of the changes that he has implemented, it is likely too late to alter international perception. The international narrative has fundamentally soured against China: rather than the possibility of Xi and the CPC becoming more moderate and continuing to assimilate into and even help defend the existing rule-based order, Xi’s over-assertiveness politically, militarily, and economically has revealed China’s rise will be anything but peaceful. Countries like South Korea, Japan, and the Philippines now realize Xi’s China does not seek to co-exist; it seeks to dominate. While their prosperity may still depend on trading with China, their security has become irrevocably tied to the U.S., and increasingly with each other. The fact that China has presented itself as a common threat is a strong incentive to bring together new alliances and partnerships.

Xi’s China has also prematurely tipped its hand on the ultimate purpose of technological development. Previously, China’s desire to advance technologically was viewed as the best way to improve per capita GDP, improve quality of life, and make China more resilient against external market shocks. The common wisdom was that as China advanced up the technological ladder, it would make China more prosperous and therefore less authoritarian. Now, it is clear Xi plans on using advanced technology to develop and field a cutting-edge military capable of fighting and winning the next war against a dominant power, i.e. the U.S. Even if Xi was to walk-back his narrative, it is unlikely the U.S. and Europe will stop limiting and restricting any dual-use technology that may provide China a military advantage.

In response to the second counterargument, there are several reasons why increased spending on internal security will be at the expense of something else. Firstly, Xi is unable to push the Chinese people to the same level of economic deprivation as Kim. The global Chinese diaspora is staggering at over 49.7 million people. This creates secondary and tertiary information conduits between inside China and the rest of the world, preventing the CPC from completely dominating the narrative and demanding the same level of sacrifice endured by the North Korean people. For example, one of the primary sources of discontent during Xi’s “Zero COVID” lockdown was the fact that the length and degree of lockdown had greatly exceeded what the rest of the world experienced. Secondly, Xi’s total government spending is already at a historic high of 36.1% of GDP, which exceeds the amount of revenue China can generate.

China is thus running an increasingly expensive budget deficit: between 2013 – 2023, China’s spending on debt interest payments skyrocketed 287%. Debt payment is now the second largest expenditure area for China, after the military. Thirdly, Xi is increasingly spending more money on social security, employment, health, and sanitation. The spendings in these categories all rose by 175% between 2013 – 2023. Therefore, because Xi still needs to deliver some level of economic prosperity, he will not be able to devote additional resources to internal security without pulling it from somewhere else, likely the military.

​In response to the third counterargument, quantitative advantages alone do little to placate Xi’s concern over the qualitative differences between the PLA and the U.S. military. Xi has openly voiced his dissatisfaction at the PLA with the slogans “Two Inabilities” and “Five Incapables.” The PLA has little combat experience and lags the U.S. in several critical areas, including joint operations, command and control, expeditionary sustainment, amphibious operations, and under-sea warfare. Xi will be highly reluctant to initiate a war of choice without an almost 100% guarantee that the PLA will prevail; to do otherwise is to invite disaster. What Xi is betting on instead is to leap-frog the U.S. militarily by using futuristic technology such as Artificial Intelligence (AI) to revolutionize the PLA. AI can provide superior decision-making ability to the operational commander, and autonomous weapons can replace humans on the battlefield. Unfortunately for Xi, the “seeds of decay” strategy specifically focuses on preventing China from either acquiring or indigenously developing the scientific and technological advances needed to revolutionize the PLA. Xi’s self-induced brain drain and Europe’s desire to punish China for supporting Russia will all help the U.S. prevent the PLA from achieving a technological revolution. Secondly, the “seeds of decay” strategy also builds a tighter network of allies and partners that will reduce the geographical challenges associated with a Taiwan conflict. By capitalizing on Xi’s adventurism, the U.S. not only gains better access, basing, and overflight advantages, the U.S. also gains additional allies and partners to collectively deter and defeat a PLA invasion of Taiwan.

In conclusion, the “seeds of decay” strategy is a way of exploiting Xi’s theory of regime survival. In other words, this strategy attacks Xi’s strategy, which is the best approach to warfare according to Sun Tzu. It exploits Xi’s regional adventurism to build a stronger network of allies and partners to deter and defeat future PLA military aggression. It exploits Xi’s attempt to gain an economic advantage from the Russian conflict by denying Xi access to modern European technology, which slows Xi’s attempt to revolutionize the PLA. It exploits Xi’s need for internal security by making internal security more expensive, encouraging him to waste more money on it, and thereby making less money available to revolutionize the PLA. It exploits Xi’s need for economic centralization by reducing the Chinese economy’s ability to grow, innovate, and advance technologically, which in turn further slows Xi’s attempt to revolutionize the PLA. The cumulative effect is that Xi’s China will be unable to surpass the U.S. economically or militarily. This strategy, however, relies on one critical element that is beyond the scope of this paper.

Slowing China down economically and militarily will not achieve anything unless the U.S. continues to grow, innovate, and advance. The U.S. must recognize and avoid its own potential seeds of decay. In a competition where everything is relative, it is not enough to depress the adversary without also improving yourself. As Pericles timelessly remarked to the Athenian Assembly before going to war with Sparta, “what I fear is not the enemy’s strategy, but our own mistakes.”