The Third Revolution

1. Xi Jinping's "Third Revolution" Reverses Reform and Opening Up.

Yet in seeking to realize this common vision, Xi and the rest of the Chinese leadership have parted ways with their predecessors.

A new direction. Under Xi Jinping, China has embarked on a "Third Revolution," fundamentally altering the trajectory set by Deng Xiaoping's "Second Revolution" of reform and opening up. This new path largely rejects the previous emphasis on liberalization and integration with the outside world.

Reform without opening. The core shift is towards "reform without opening up." This involves strengthening the Communist Party's role in all aspects of life, restricting the flow of foreign ideas and capital, and projecting Chinese power more assertively abroad, contrasting with the previous era's low-profile approach.

Inflection point. Xi perceived China at a critical juncture, facing challenges like corruption, ideological drift, and economic imbalances. His revolution aims to save the party and state, propelling China toward national rejuvenation, even at the cost of reversing some liberalizing trends.

2. Xi Consolidates Unprecedented Personal Power as the "Core" Leader.

By many accounts, Xi is the most powerful leader since Mao Zedong.

Centralizing authority. Xi has systematically dismantled the collective leadership model that characterized the post-Mao era, accumulating vast institutional and personal power. He chairs key leading groups overseeing major policy areas, bypassing traditional bureaucratic structures.

Establishing dominance. His elevation to the status of "core" leader and the enshrinement of "Xi Jinping Thought" in the party constitution solidify his preeminent position. State media cultivates a personality cult, portraying him as a tireless, approachable leader, reminiscent of Mao.

Political maneuvering. This power consolidation is achieved through various means:

• Eliminating rivals via the sweeping anticorruption campaign.
• Promoting loyalists from his past career stops (e.g., Zhejiang).
• Reforming key institutions like the military (PLA) and weakening potential rival power bases like the Communist Youth League (CYL).

3. The Communist Party Deepens Its Control Across Society.

The current Chinese leadership, however, has launched an aggressive set of reforms that augments rather than diminishes the party’s role in political, social, and economic life.

Intensified penetration. Contrary to the Deng era's state withdrawal from society, Xi's leadership has aggressively expanded the party's presence and control. This is evident in various sectors:

• Universities: Increased ideological education, restrictions on Western textbooks, and political correctness requirements for hiring.
• Media: Mandating that media "must be surnamed party" and increasing censorship of content deemed undesirable.
• NGOs: The Law on the Management of Foreign NGOs imposes severe restrictions, requiring registration with the Ministry of Public Security and limiting activities.

Silencing dissent. The party actively suppresses alternative voices and perspectives, particularly those advocating for political reform or Western ideals, viewing them as threats to its legitimacy and control.

4. Chinanet: Building a Walled Garden for Information and Ideas.

In Anti’s words, China doesn’t have the Internet, it has a “Chinanet,” and that is not a legacy he wants to leave for the next generation of Chinese.

Controlling the virtual world. Xi views the Internet as a critical "battlefield for the public opinion struggle," seeking to impose the same political values and standards online as in the real world. This involves significant investment in technology and regulation.

Technological and regulatory walls. Measures include:

• Upgrading the Great Firewall and deploying tools like the Great Cannon to block and manipulate content.
• Restricting or blocking VPNs used to access the global Internet.
• Passing stringent cybersecurity laws requiring data localization and access for security officials.
• Implementing the "Seven Baselines" and punishing "rumor-mongering" online.

Targeting influencers. The government actively silences influential online voices ("big Vs") through account deletion, detention, and forced confessions, dramatically reducing political discourse on platforms like Weibo.

5. Economic Reform Prioritizes State Dominance Over Market Efficiency.

Instead of pushing forward with the reforms necessary to realize greater efficiency, productivity, and rationality in the allocation of capital, Beijing has elected to chart a less ambitious course.

State-led approach. Despite the Third Plenum's promise of a "decisive role" for the market, Xi's economic reforms prioritize consolidating and strengthening the state sector, particularly State-Owned Enterprises (SOEs).

Reinforcing SOE power. Reforms focus on:

• Merging SOEs to create national champions rather than allowing inefficient ones to fail.
• Encouraging "mixed ownership" that brings in private capital but ensures continued state control.
• Deepening the Communist Party's direct involvement in SOE management decisions.

Costs of state control. This approach leads to significant inefficiencies:

• SOEs underperform private firms but receive preferential treatment and access to capital.
• Mounting corporate debt, largely concentrated in the SOE sector.
• Overcapacity in key industries like steel and coal, exacerbated by state support.

6. Innovation is Driven by State Directives, Not Just Market Forces.

Xi Jinping may yearn for invention, but he and the Chinese state are already deeply invested in the current model of innovation.

State-backed strategy. China aims to become a global innovation leader through massive state investment in R&D, talent recruitment programs, and strategic industries like electric vehicles and AI.

Innovation vs. invention. The focus is often on "innovation" (improving existing technologies, process efficiency, commercialization) rather than "invention" (fundamental scientific breakthroughs). This is facilitated by:

• Large manufacturing capacity and rapid adaptation to market demand.
• Licensing foreign technology and innovating jointly or through acquisition.
• Government subsidies and preferential policies for targeted industries.

Challenges remain. Despite significant resources, hurdles persist:

• Weak intellectual property protection hinders original research and foreign collaboration.
• The education system emphasizes rote learning over creative thinking.
• Top-down funding and cronyism can stifle independent scientific inquiry.
• Government intervention and subsidies can lead to overcapacity and waste, as seen in the electric vehicle sector.

7. The War on Pollution Faces Hurdles in Implementation and Transparency.

For China’s leaders, the environment, and air quality in particular, has become much more than a casualty of rapid economic development and weak political enforcement.

Addressing public concern. Environmental pollution, particularly air quality, is a major source of public discontent and a threat to the party's legitimacy. Xi's leadership has declared a "war on pollution" with ambitious targets and new laws.

Legal and institutional reforms. Steps include:

• Revising the Environmental Protection Law to allow daily fines and public interest lawsuits.
• Piloting reforms to delink local environmental bureaus from local government control.
• Attempting to reform the corrupted environmental impact assessment process.

Implementation gaps. Despite legal frameworks, enforcement is challenging due to:

• Continued priority on economic growth over environmental protection.
• Collusion between local officials and polluting factories.
• Haphazard implementation and data falsification.

Constrained civil society. While public pressure initially spurred action, the government limits independent environmental activism and information flow, hindering accountability and transparency.

8. China Awakens as a Global Power, Asserting Its Influence.

China in the twenty-first century is a world power, ready to claim all the rights that such status confers.

Shifting foreign policy. Under Xi, China has shed Deng's "hide and bide" approach for "big country diplomacy," aiming to shape the international system and assert its presence more forcefully.

Global footprint. China's power is evident in:

• Its status as the world's second-largest economy and largest trading power.
• Significant and growing outward foreign direct investment.
• The world's largest standing army and increasing military capabilities.
• A more active role in global governance institutions and addressing global challenges (e.g., climate change, Ebola).

Challenging the status quo. While sometimes complementing existing institutions (e.g., AIIB), China also seeks to establish new norms and rules that better suit its interests, potentially challenging the U.S.-led liberal order.

9. Belt and Road Initiative Reshapes Global Economic and Political Landscape.

One former Chinese official characterized the BRI as “the most significant and far- reaching initiative that China has ever put forward.”

Grand strategic vision. The BRI is Xi's signature foreign policy initiative, a massive infrastructure and connectivity plan spanning Asia, Europe, and Africa, aiming to place China at the center of a new global network.

Economic and strategic goals. BRI serves multiple objectives:

• Exporting China's industrial overcapacity (steel, cement, construction).
• Securing access to natural resources and trade routes.
• Promoting the international use of the Renminbi.
• Enhancing China's political influence and strategic presence globally.

Mixed reception. While many countries welcome the investment, concerns exist regarding:

• Lack of transparency in deals and potential for elite corruption in host countries.
• Debt sustainability for participating nations.
• Environmental and social impacts of large-scale projects.
• Potential for Chinese economic penetration and strategic encirclement (e.g., India's concerns).

10. Assertive Maritime Claims Escalate Regional Security Tensions.

Xi Jinping has made enforcement of Chinese claims in the South China Sea a priority.

Securing sovereignty. China is aggressively pursuing its expansive claims in the South and East China Seas, viewing maritime territory as a core interest and a historical grievance to be rectified.

Actions on the ground (and sea). This involves:

• Large-scale dredging and militarization of features in the South China Sea (e.g., airstrips, military buildings).
• Increased presence of Chinese coast guard and naval vessels in disputed waters.
• Declaring an Air Defense Identification Zone (ADIZ) in the East China Sea overlapping with neighbors.

Regional pushback. China's assertiveness has heightened tensions with other claimants (Vietnam, Philippines) and regional powers (Japan). This has led to:

• Increased security cooperation among U.S. allies and partners in the region.
• International legal challenges (e.g., the Permanent Court of Arbitration ruling against China's South China Sea claims).
• Sporadic diplomatic efforts interspersed with continued provocative actions.

11. China's Soft Power Ambitions Are Undermined by Its Political System.

Even as China’s economy and military assume world- class status, its political system hinders its quest for soft power throughout much of the rest of the world.

Elusive influence. Despite significant investment in promoting Chinese language, culture, and media abroad, China struggles to gain widespread positive appeal and trust globally.

State control backfires. Efforts like Confucius Institutes and state-run media are often perceived as propaganda tools, compromising academic integrity and lacking credibility. The government's desire to control the narrative clashes with the principles of open discourse.

Domestic constraints limit appeal. The repressive nature of China's political system, human rights record, and societal problems (e.g., pollution, inequality) limit the attractiveness of the "China model" for other nations, particularly liberal democracies.

12. Managing China Requires Understanding Its Domestic Transformation.

Working with and managing the relationship with Beijing, therefore, requires not only consistent assertion of U.S. interests and priorities and attention to China’s foreign policy interests but also equal consideration of the country’s domestic political and economic evolution.

A new reality. Xi Jinping's Third Revolution has created a China that is more ambitious internationally but also more controlled and less open domestically. This requires a recalibration of foreign policy approaches.

Adapting policy. Effective engagement requires a mix of traditional and new strategies:

• Diplomacy: Leveraging Xi's ambition for global leadership on shared challenges (e.g., North Korea, global health).
• Multilateralism: Partnering with allies and other nations to address issues where China's actions conflict with international norms (e.g., maritime security, trade practices).
• Reciprocity: Considering punitive or reciprocal measures when China's closed domestic environment disadvantages foreign actors.

Understanding internal dynamics. Policymakers must pay close attention to China's domestic political and economic shifts, recognizing that internal pressures and contradictions can influence foreign policy and create opportunities for engagement or pushback.

Last updated: May 18, 2025