ឆ្នាំ 2022 មើលទៅមុខ៖ ពេលវេលានៃការពិតរបស់ Xi និង Biden

Expect bilateral tensions to intensify as domestic politics weakens both powers

According to the Chinese zodiac, 2022 is the Year of the Tiger. Traders in Kabutocho, Japan's equivalent of Wall Street in New York and Lombard Street in London, often refer to this proverb: A Tiger runs a thousand miles.

That is to say; tigers can run to a place one thousand miles away and come back to where they started safely in a single day. When applied to financial markets, this implies significant volatility.

Coming every 12 years, let us consider the Year of the Tiger over the last six calendar cycles: 2010: Greek government bonds were downgraded to junk status; 1998: The Long Term Credit Bank of Japan was nationalized; 1986: The Chernobyl disaster; 1974: The Watergate scandal forced the resignation of U.S. President Richard Nixon; 1962: The Cuban missile crisis brought the world to the brink of full-scale nuclear war; 1950: North Korea invaded South Korea to begin the Korean War.

During each of the above Years of the Tiger, the Nikkei Stock Average -- which measures the performance of 225 large, publicly owned Japanese companies -- ended the year lower in all cases except 1986. One win from six is the worst performance among the twelve zodiacs.

So, what can we expect from this current Year of the Tiger? Perhaps it is worth reexamining the geopolitical insights we gained in 1950 and 1962.

In my view, 2022 will prove decisive and be remembered as the year of Chinese President Xi Jinping's rise and U.S. President Joe Biden's fall. As a result, the escalating competition between the two superpowers will be much harder and stronger, and we will see accelerated geopolitical risk in the Taiwan Strait.

But there are grave risks for China too. Not only will the ruling Communist Party spend too much political capital on solidifying its regime, but I believe that China's economy will not be as strong as many have predicted. In other words, by increasing authoritarianism, China will waste its growth potential. In the long run, this means that 2022 could represent both the acme of Xi's power and the beginning of China's decline.

Let's take a closer look at this hypothesis from three different aspects: Chinese domestic politics, U.S. domestic politics and how bilateral relation between the two powers is shaped by domestic political considerations.

First, I would like to emphasize that every single political event in China this year will be staged with a view toward granting more power to Xi Jinping at the 20th National Congress of the Chinese Communist Party in autumn, most likely in October.

Remember that one of Xi's most important achievements came in March 2018 when Chinese lawmakers passed changes to the country's constitution abolishing presidential term limits, effectively enabling him to lawfully rule the country indefinitely.

At the same time, Wang Qishan was elected Vice President, an important step for Xi because then 69-year-old Wang had already stepped down from the seven-member Politburo Standing Committee the previous year, respecting the unwritten rule barring anyone aged over 68 from being reelected to the top leadership body. Wang's elevation to the vice presidency set a precedent that high political office does not end at the age of 68.

These two events came a year after another giant leap for Xi, when his "thought" was formally enshrined into the party's constitution alongside the party's greatest leader Mao Zedong at the Communist Party's 19th National Congress in October 2017. In addition, at the sixth plenary session of the Chinese Communist Party's Central Committee last month, Xi made the third resolution on history along with Mao and Deng Xiaoping.

This means that by the time of the next National Congress when Xi will be 69, no one will be in a position to challenge his eligibility to enter a third term as the party's general secretary. Some even expect that Xi will become the first party chairman since Mao.

Contrast this with the year Joe Biden is facing in the U.S., where the most important event on the political calendar is the midterm elections in November. According to RealClearPolitics, President Biden's job approval rating stood at 43.0% during the two weeks to Dec. 27, 10.4 points lower than his 53.4% disapproval rating. This double-digit spread is too significant to ignore.

Seen as a reflection of Biden's mishandling of COVID-19 and inflation, the Democrats may well lose their majority in both the Senate and the House of Representatives. Facing such difficult circumstances, how can we expect Biden to respond?

When it comes to foreign policy, it seems obvious. Having an external enemy like China will help Biden deflect some of the negative attention on the pandemic and the U.S. economy. Bashing China will prove popular even among Republican voters.

This is why I predict a weakened Biden to escalate his administration's anti-China stance. Biden will keep criticizing China's policy on Xinjiang, Hong Kong and Taiwan. Economic and business decoupling between the two nations will widen, and Asian nations will be forced to play along with U.S. economic sanctions on China.

Conversely, and perhaps surprisingly, Beijing's hard-line policies on Xinjiang, Hong Kong and Taiwan are popular with its own domestic political audience, the majority Han Chinese people.

When we have a situation where on one side of the Pacific, anti-China policies are applauded by both Democrats and Republicans, while on the other side, counterattacks by Beijing's so-called Wolf Warrior diplomats are broadly welcomed by the Chinese people, then confrontation is easily escalated by nature. With a lame-duck president in the White House, it is difficult to imagine the bilateral relationship improving in 2022.

With Xi and Biden well aware of the potential risks, it will be more crucial than ever to establish guardrails to avoid any unintentional and unpredictable military collisions between the two superpowers.

Here, the two leaders can learn from former Soviet Premier Nikita Khrushchev and former U.S. President John F. Kennedy, whose 1962 standoff over the deployment of Soviet ballistic missiles in Cuba brought the world to the brink of nuclear disaster. It is well-known that in the aftermath of the crisis, a hotline was established to enable the two countries to communicate directly to defuse any future emergencies. Such confidence-building measures between China and the U.S. are urgently needed.

Lastly, I would like to expand on my pessimistic outlook on the Chinese economy. As I have stated, the year 2022 will be remembered as a critical moment for Xi's rise and Biden's fall. But this does not necessarily mean that China's economy will become stronger.

For example, once flourishing Chinese corporate icons such as Tencent Holdings and Alibaba Group Holding vanished from the world's Top 10 companies ranked by market capitalization. Today, the top three are Apple, Microsoft and Alphabet. Amazon is ranked number five. In the world of capitalism, U.S. Big Tech is still dominant.

Beijing's crackdown on its own Big Tech sector in 2021, especially the style of entrepreneurship exemplified by Alibaba's Jack Ma, came under the guise of "common prosperity" but was, in reality, an attempt to strengthen Xi's grip on power.

In my view, China's competitiveness in the 2000s was underpinned by the reform and open-door policy that began in 1978. As observed in the booming mobile phone and bike sharing sectors, entrepreneurship, deregulation, competition and the free flow of capital, goods and services across borders formed the basis of China's prosperity that is now threatening U.S. hegemony.

I doubt that making Xi's ideas compulsory learning for Chinese students from primary school through university will make China more prosperous. In fact, the Japan Center for Economic Research (JCER) recently revised its long-term China forecast down, predicting that the country's gross domestic product will surpass that of the U.S. in 2034, not 2029 as previously forecast.

Considering China's aging population, which may influence labor input, it will have to depend on capital input and innovation to sustain long-term economic growth. According to JCER, the U.S. will surpass China's real GDP again in 2056, so China's reign at the top will last only 22 years. If Beijing wants to dominate the world in terms of GDP for more than one generation, then it will need to undertake structural reform and a further opening-up of its economy.

In conclusion, the Year of the Tiger will see Xi solidify his power internally, Biden will become a lame-duck president, bilateral ties between Washington and Beijing will worsen and geopolitical tensions will be a major concern.

This does not mean China's eternal hegemony over the world. Why? Because under Xi's authoritarian rule, China seems intent on mismanaging the task of creating a sustainable labor market and attracting new investment, as well as stifling innovative entrepreneurship.

Nikkei