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A Look Back at China in 2018

In 2018, the outlook for China regarding its politics, economy, and relationship with the United States darkened considerably. The removal of presidential term limits and Xi Jinping’s interactions with the Trump administration prompted rare instances of internal Chinese dissent in a year marked by deepening repression. U.S. policies toward China gained in cohesion and assertiveness, demonstrated by an expansive levying of tariffs. China’s global influence continued to grow in the wake of U.S. withdrawal. But China, which in recent years has been masterful in playing geopolitical offense abroad, appears to lack the same sure-footedness now that the United States and other nations are finally making it play defense too. In an era of great power competition, China and the United States are testing the resiliency and adaptiveness of their respective systems.

Politics

In February, the ruling Chinese Communist Party (C.C.P.) sparked outcry by announcing a long-rumored constitutional amendment to remove term limits on China’s presidency. Despite China’s well-honed propaganda machine, netizens briefly erupted into a flurry of thinly veiled criticism online; tellingly, searches for “migration” spiked in the hours following the announcement. While the amendment passed in March with a farcical vote of 2,958 to two, discontent continued, particularly as criticism mounted that Beijing was mishandling its relationship with the United States. The most prominent public criticism, by Tsinghua law professor Xu Zhangrun, noted that the Chinese “feel once more lost in uncertainty about the direction of the country and about their own personal security.”

In addition to eliminating term limits, the C.C.P. amended the constitution, strengthening Party control. The new constitution enshrined Xi Jinping Thought and established a more powerful supervisory commission to institutionalize the long-running anti-corruption campaign. Wang Qishan, who previously led Xi’s anti-corruption drive before stepping down from the Politburo Standing Committee, the ruling body, in October 2017 due to age limits, found a new role as vice president, a sign of his importance to Xi. The 40th anniversary of China’s Reform and Opening Up appeared to be an exercise in effacing Deng Xiaoping, the paramount leader who launched it, in favor of Xi.

And in a stunning development, the head of Interpol Meng Hongwei, who had previously leveraged the organization to advance China’s anti-corruption dragnet, found himself detained in China and forced to resign from his position.

Beijing lured three more nations to switch diplomatic recognition from Taiwan to the mainland, leaving the island with just 17 partners. In June, the United States opened a new building in Taipei that serves as its de facto embassy. Voters delivered a sweeping rebuke during local elections to Taiwanese president Tsai Ing-wen, leading her to resign as party leader. While mostly an election focused on local issues, Beijing viewed the results as a win for its influence operations. And Beijing pressured Hong Kong to take a hard line against calls for independence. In what was widely seen as retaliation for inviting the head of a now-banned party advocating for Hong Kong independence to speak at the Foreign Correspondents’ Club, the city’s government denied the visa renewal of Financial Times journalist Victor Mallet. Beijing promoted its vision of a Greater Bay Area with closer economic integration between Hong Kong, Macau, and a dozen cities in Guangzhou; the October opening of a bridge between Hong Kong, Macau, and Zhuhai symbolized a step forward to that end. Although Macau experienced robust casino revenues, the special administrative region’s most senior P.R.C. official reportedly committed suicide in October, joining a long list of officials in the Xi era with uncommon causes of death.

U.S.-China Relations

The United States began to take a more assertive approach to China, supported by the Trump administration, politicians of both parties, scholars, and even disaffected businesspersons. A crystallizing moment came in October, when Vice President Mike Pence sharply criticized China’s domestic, foreign, economic, and trade policies, prompting talk of a new Cold War. Over the course of the year, President Trump ordered tariffs on U.S.$250 billion of Chinese exports, prompting China to reciprocate with their own tariffs on U.S.$110 billion of U.S. exports. (Trump also claimed that China benefited from unfair postal rates.) While nominally driven by Trump’s nationalist economic ideology, some analysts beganto view the tariffs as an effort to decouple the two countries’ economic interdependence. In a December meeting with Xi, Trump agreed to suspend further tariff increases for 90 days in exchange for substantial Chinese purchases of U.S. goods, while both sides renewed negotiations on their trade disagreements. The December arrest in Canada of Huawei CEO Meng Wanzhou for extradition to the United States, on suspicion of evading Iran sanctions, escalated the U.S. government’s already aggressive stance against the company and sent shockwaves through China’s business elite.

The Trump administration’s effort to articulate a “free and open” Indo-Pacific mostly lacked specificity and heft. It did, however, reform its development finance apparatus, creating the U.S. International Development Finance Corporation in an attempt to better compete with China’s money abroad, especially in Africa. In rare instances of bipartisanship, U.S. Congress moved on several fronts directed at China: they strengthened the review process for inbound foreign investment and pressured universities to reject China’s Confucius Institutes. Congress also passed a measure encouraging closer ties with Taiwan, whose president made an historic stopover in the United States on August 19. After initially penalizing the Chinese firm ZTE for evading Iran sanctions—which could have put the firm out of business—President Trump unexpectedly reversed the decision and negotiated a less severe penalty. The U.S. government intensified enforcement against Chinese entities engaged in economic espionage.

International Affairs

China’s encouragement of rapprochement between North Korea and the United States did not halt the broader deterioration in the U.S.-China relationship. Controversy surrounding China’s growing influence elsewhere festered, outweighing China’s attempts to exploit the United States’ partial abdication of global leadership. China unconvincingly claimed its militarization of the South China Sea was for self-defense, as the United Kingdom and France joined the United States in conducting freedom of navigation operations in the region. Concerns grew about the merits of China’s Belt and Road Initiative, specifically regarding allegations of debt entrapment. The United States, Europe, and Japan undertook talks to rewrite trade rules prompted by their dissatisfaction with China’s mercantilist economic policies. New governments in Malaysia and Pakistan reassessed their relationships with China, canceling or renegotiating a number of prior arrangements. Australia passed significant restrictions aimed at reducing pernicious Chinese influence in that country, while stepping up efforts to prevent other Pacific nations from falling further under China’s sway. Europe also acted to increase its scrutiny of foreign investments, especially from China.

China did make meaningful gains closer to home, while continuing to score points from the Trump administration’s disdain for multilateralism. China and Russia held large joint military exercises as their relationship deepened. Relations with India also improved somewhat, seeing an April visit to the city of Wuhan by Prime Minister Narendra Modi, although India maintained efforts to balance against its northern neighbor. In a departure, China and Japan endeavored to improve their ties this year, culminating in an October visit to Beijing by Prime Minister Shinzo Abe. Relations with South Korea also improved, but had not fully returned to the same level as they were prior to China’s 2017 protest of Seoul’s decision to host a U.S. missile defense system.

President Xi offered more billions to African nations while China’s interest in Latin America also grew, perhaps best indicated by the surge in Chinese students studying Spanish and Portuguese.

Economy and Business

China’s economic policymakers continued their tortuous effort to maintain economic growth while attempting to contain dangerous structural imbalances. The country forcefully quelled the debt-fueled foreign ambitions of several companies. Chinese regulators placed Anbang, an insurance and investments vehicle, into a form of receivership. HNA moved to sell assets unrelated to its core operations as an airline; one of its co-founders died in an accident in France. The government allowed some smaller firms to default on their debts; many peer-to-peer lenders also failed, prompting protest from mom-and-pop investors who had lent out their money. The country’s GDP was on track to meet its 2018 target of 6.5 percent growth, but other signs were less promising. In the fall, the International Monetary Fund lowered its forecast for 2019 by 20 basis points to 6.2 percent and consumer weakness manifested in numerous areas, including a drop in car sales. Censors restricted negative reporting on the economy, and the country’s stock markets performed poorly. The government opened some industries to further foreign investment. While Xi offered reassurance of the state’s support for the private sector, Beijing authorities revoked the business license of Unirule, a think tank promoting economic reform.

China appeared to downplay its Made in China 2025 innovation policy out of concerns that it unnecessarily provoked the United States. Nonetheless, China continued to encourage investment in artificial intelligence and semiconductors, two pillars of its innovation strategy. Meanwhile, the government more aggressively policed video games and other social media, especially hurting Tencent. Short video platform TikTok exploded in popularity. Tech company Xiaomi’s IPO disappointed; IPOs for Meituan-Dianping, a food delivery service, and Haidilao, which operates a chain of hot-pot restaurants, fared better. Ride-sharing service Didi Chuxing upset users after a driver raped and murdered a female passenger. Jack Ma, founder of Alibaba, announced plans to step down to pursue philanthropy.

Society and Culture

In Chinese society, the #MeToo movement arguably had the largest impact of any country other than the United States, remarkable for a country that tightly controls its media and Internet. The movement primarily focused on academics, leading to several resignations. After a public outcry, the social media service Sina Weibo reversed a decision to ban gay content.

New insight also emerged into China’s repression of its Muslim Uighur minorities in the region of Xinjiang. Reports confirmed the detentions of hundreds of thousands, making it one of the worst human rights abuses since the Mao era. In the wake of these reports, China’s government passed legislation to “legalize” the “educational” centers. The Vatican and Beijing reached an agreement in which the Pope would recognize church leaders appointed by Beijing in exchange for being recognized as head of the Chinese Catholics. Crackdowns on Christians nonetheless intensified.

Students, claiming communist ideals for themselves, organized labor protests in southern China, demonstrating the extent to which the Party’s challenges to maintain stability exist as much on its left as on its right. Separately, protests by retired soldiers seeking better benefits erupted across several cities throughout the summer. The government further encouraged couples to have two children to curb the country’s demographic crisis.Beijing launched a new program sending thousands of retired teachers to the countryside in an effort to improve China’s failing rural education system. A new private university modeled on Caltech opened in Hangzhou. A film about a Robin Hood-esque pharmaceuticals smuggler was a surprise hit, reflecting anger with China’s healthcare system. News that hundreds of thousands of children may have received tainted vaccines provoked outrage.

Tax authorities ordered Chinese actress Fan Bingbing, who vanished for four months, to pay nearly U.S.$70 million in unpaid taxes and penalties. Scathing commentaries on China by comedians John Oliver and Stephen Colbert attracted attention. Major books published on China included Elizabeth Economy’s The Third Revolution, Dinny McMahon’s Great Wall of Debt, and Daniel Kurtz-Phelan’s The China Mission. Charles Kao, a refugee from mainland China to British Hong Kong who would go on to win a Nobel Prize for his work on fiber optics, died at the age of 84. Louis Cha, celebrated writer of martial arts fiction, died at 94. Liu Xia, the wife of deceased Nobel laureate Liu Xiaobo, emigrated to Germany after eight years under house arrest.

In 2019, growing economic uncertainty and President Trump’s mounting legal risks may cause leaders of both China and the U.S. to turn their focus inward. (The year also will see a number of sensitive anniversaries in China, including the 30th of the Tiananmen Square protests.) If the U.S. continues to press its case against China, while managing to not alienate—if not win the support of—other countries, it could embolden internal critics of Xi. But it also risks inflaming China’s nationalists, leaving the balance between easement and further escalation in China’s opaque political system disconcertingly unclear.