Flooding in Hebei Province, resulting in the displacement of about 1 million people and the death of at least 30, has called into question the governance priorities and capabilities of Xi Jinping’s administration.

Public outrage at the flooding has focused on the privileges enjoyed by the capital city, even as Beijing pulls out all the stops to convince the private sector it is open for business again.

August downpours in northern China, caused by the remnants of Typhoon Doksuri, led to the unannounced lifting of flood gates in reservoirs and spillways to lessen the inundation in the capital city Beijing and Tianjin, a major port. The deluge was the heaviest since record keeping began 140 years ago, and caused flash floods and mud-slides in the Taihang mountains, as well as flooding in formerly marshy areas of the north China plain that are now thickly populated.

Anger mounted among displaced Chinese in Hebei province, after provincial party secretary Ni Yuefeng said that he would do everything to reduce “the pressure on Beijing’s flood control and [to] resolutely build a ‘moat’ for the capital.” Ni’s remarks contributed to the feeling that the government is willing to sacrifice the interest of millions of small town residents in order to protect the privileged capital.

Official rescue teams were slow to arrive, while volunteer helpers from neighboring cities and towns were prevented from entering worst-hit zones because they lacked the requisite documentation and approval from higher officials.

China’s top leader Xi Jinping, who early in his administration put Hebei province at the center of both his anti-corruption campaign and plans for new showcase cities and infrastructure, has yet to visit the devastated region.

The apparent lack of concern for the fate of ordinary Chinese – as well as the total lack of transparency over measures to combat the flooding – has been compared to the “party core’s” much-criticized zero-Covid lockdowns.

More Purges

The public fallout from the Hebei floods come in the heels of highly-public purges of officials who had been presumed to be close to Xi. The mysterious disappearance of Foreign Minister Qin Gang and his abrupt replacement by his predecessor, Politburo member Wang Yi, was closely followed by the international community.

Equally mysterious – and detrimental to the paramount leader’s prestige – was the wholesale purge of the Rocket Forces, which Xi personally established in late 2015 to take charge of the country’s missiles, including nuclear missiles. 

Former Rocket Force commander General Li Yuchao and several top aides disappeared without any official announcement in June. Their disappearance followed the death of deputy-commander, Wu Guohua, amid speculation that he committed suicide.

In late July, Xi surprised military watchers by appointing veteran navy commander Wang Haobin as the new Rocket Force commander. Wang, who is not a member of the elite Central Committee, is outranked by the new Political Commissar Xu Xisheng, who is a full Central Committee member. 

Going against long-standing tradition, neither Wang nor Xu had worked in the fairly arcane world of missile-related manufacturing or maneuvering. Beijing has also offered no hint as to the reasons behind the massive personnel shakeup of this military body.

Is the private economy lying flat?

Rather than touring Hebei, Xi is instead at Beidaihe, the seaside resort for the Communist elite. The leadership’s annual August retreat usually includes a series of informal policy-making sessions with Politburo members and top advisors, and is notorious for factional politicking.

Given unmistakable signs that China’s economy has failed to return to strong growth rates after pandemic-related lockdowns ended last year, the economy – and new outreach to foreign and private investors – is certain to be on the agenda.

Doubts over the party-state’s ability to run the economy are fueled by apparently self-contradictory policies. On the one hand, multinationals have been asked to boost their investments in China. On the other hand, new policies geared toward combatting espionage work among foreign communities in China and harsh investigations into a host of foreign firms specializing in auditing and due diligence leave no doubt about the party’s determination to interfere.

Last month, the State Council unveiled 31 measures to help the non-state sector grow “bigger, better and stronger.” Around the same time, regulatory authorities indicated that investigations into quasi-private IT firms such as Alibaba, Ant and Tencent had come to an end.

While details of the 31 favorable policies have yet to be announced, they are meant to enhance private firms’ capacity in the areas of market entry, fair competition, financing support, payment defaults, intellectual property rights and legal protection. Moreover, a “negative list of market-intervention behaviors” would be publicized in an effort to prevent regulators from interfering in the workings of the marketplace.

The Xi leadership’s about-face has won high praise from private-sector leaders including Pony Ma and Wang Jianlin. 

But private entrepreneurs are still waiting for “on-the-ground” concrete measures such as concessionary interest rates from state banks, more leverage in handling foreign exchange, or official help in the restructuring of heavy debt burdens.

Worryingly for the success of the new pro-business outreach, according to veteran China economist and advisor to the State Council Zheng Yongnian, a substantial portion of non-state companies have chosen to “lie flat”, that is, stop putting in funds for expansion plans. Other dissatisfied private firms have even moved abroad.

Conclusion

As always with Beijing’s attitude toward foreign capital or foreign firms, much hinges on whether paramount leader Xi could tamp down his ideological obsessions about socialist political correctness and bolster the chances of revitalizing the economy.

While his administration has been making the right noises since March, there is little sign that the fundamental Communist party instinct to control everything has receded.

Indeed, although the cases of the Hebei flooding and the recent political purges are very different in their impact, they both reveal the party’s tendencies towards control, centralization and secrecy. These are hard to reconcile with a market economy.