In March, the National People’s Congress of China, largely a ceremonial parliament, ended term limits for President Xi Jinping, essentially enabling him to rule for life. Previously, the Constitution limited the President to two five-year terms, but that limitation was abolished by a 2,959 to 2 vote (with two abstentions). Surprising most, the Communist Party announced the proposals in February to align with Xi’s positions as head of the Communist Party and the military, where he has no limits.
Since Deng Xiaoping’s liberalization policy in 1987, China’s economic growth has been stellar; however, it has created an enormous bureaucracy, fostered crony capitalism, and led to widespread corruption.
During Xi’s first term, he led an aggressive campaign to root out corruption and end dissent. As President he has pursued China’s claims over the South China Sea, dramatically reorganized the military, began the Belt and Road Initiative to extend China’s economic reach, and enforced his ideology based on his mix of Communist and Confucius ideals. The removal of term limits will align his authority with his position as head of the military and Communist Party where he has no limits. Xi’s allies believe he needs this power to continue modernizing China and restoring it to its rightful place as a global power.
However, from my point of view, it looks very much like Putin’s seizure of control in Russia or Erdogan’s grab for power in Turkey. Even Putin did not attempt to scrap Russia’s constitution. Instead he had Medvedev, an ally, serve as president for a term and return later to run for re-election in order to stay within the constitutional mandate. In fact, not only was China’s constitution changed to remove the two-term limitation, its preamble was altered to add his “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era.” In addition, another major constitutional change was the creation of an anti-corruption committee, the National Supervision Commission. Headed by Xi, the Commission will have consolidated authority to vet out corruption in government. Additionally, the new Commission will also have power to crush any political dissent from people who have public positions. These changes reverse years of collective leadership, initiated after the deaths of Mao Zedong and Deng Xiaoping to reduce the excesses of one-man rule.
Although China’s economy has grown considerably since liberalism began, all hope of further liberalism should be abandoned. During his presidency, Xi has already suppressed dissent in Hong Kong by cracking down on journalists, lawyers, and activists who stand in his way. Last year, Liu Xiaobo, the Nobel Peace prize laureate, was imprisoned for organizing a democratic petition calling the rule of law and an end to censorship. He died under guard of liver cancer. The Chinese government only revealed Liu had cancer after he was beyond treatment. He is the first Nobel Peace prize laureate to die in state custody since Carl von Ossietzky died under guard in Nazi Germany. Even Liu’s wife is under house arrest to keep her silenced. Xi has also taken a tough stand on Taiwan and warned against any attempt to challenge China’s sovereignty.
Before deciding whether China’s move is wise or not, one must consider Lord Acton’s famous quote. Lord Acton was a 19th century English historian who expressed this opinion in a letter to Bishop Creighton in 1887, “Power tends to corrupt, and absolute power corrupts absolutely.” Well, Xi Jinping just assumed absolute power.
Washington Trust Bank believes that the information used in this study was obtained from reliable sources, but we do not guarantee its accuracy. Neither the information nor any opinion expressed constitutes a solicitation for business or a recommendation of the purchase or sale of securities or commodities.
Rick Cloutier, CFA is the Chief Investment Strategist for Washington Trust Bank with over 25 years of portfolio management and investment experience. He is responsible for directing the portfolio management, research, and trading activities for the bank’s multi-asset class strategies. He is also responsible for overseeing the client portfolio manager team and portfolio analytics team. Rick has written numerous articles for Investopedia and wrote a weekly column for the Fall River Herald News in Massachusetts. His research has appeared in numerous journals, including the Journal of Investment Management and Financial Innovations, the Journal of Business Management and Economics, and the International Journal of Revenue Management. He provided a nightly commentary on WALE radio and authored the novel Caveat Emptor. Rick earned his MBA at Boston University.