China and the World

20 February 2022

While the Winter Olympics will draw international attention early in 2022, for the Chinese government, the year’s main event will be the 20th Communist Party Congress, to be held in the last quarter of the year, which will draw Beijing’s economic, political and social planning inwards for the year.

  • CCP Congress will reappoint President Xi Jinping to a third term, and the government will devote post-Winter Olympics efforts to primarily ensuring that no social or economic instability jeopardizes this outcome. 
  • Beijing is unlikely to relax its “COVID Zero” policies this year, complicating business travel, supply chains and logistics, both internationally and internally.
  • Protests at the Winter Olympics are unlikely, but the US and its allies, along with human rights activists, will use the Games to draw further attention to Beijing’s poor human rights records, potentially damaging the reputation of sponsors and other companies associated with the Olympics. 
  • Economic growth will likely be slower this year, forcing Beijing to lean harder into its “common prosperity” goal to mitigate public dissatisfaction ahead of the Communist Party Congress.
  • An improved US-China relationship is highly unlikely this year, with neither Washington nor Beijing having domestic or international political interests in doing so.

While the Beijing Winter Olympics will focus the attention of the international community on China in February, the country’s trajectory for 2022 will more likely be dominated by a critical domestic political gathering late in the year. The five-yearly 20th Communist Party Congress (CPC) will be held in the autumn of 2022 and looks set to appoint Xi Jinping to a third term as national leader, following constitutional changes in recent years to permit such an appointment. Although public statements by Xi and other Chinese leaders explaining the underlying motivations for their policies are vanishingly rare, it seems likely that much of Beijing’s policy direction in 2020 and 2021 has been aimed at stabilizing public support and preventing any unrest or dissatisfaction which could jeopardize Xi’s reappointment. Chinese government policies throughout 2022 are likely to follow a similar trajectory, making major domestic reforms or unpopular policy decisions very unlikely. This does not mean, however, that China’s interactions with foreign countries will be similarly placid throughout the year, with Beijing almost certain to play up confrontations with the US and other countries to bolster its domestic image as a powerful international actor.
The Great Bio-Security Wall of China
A core element of Beijing’s plans to maintain domestic stability throughout 2022 will be efforts to prevent outbreaks of COVID-19 – China’s so-called “COVID Zero” strategy – even in the face of the highly transmissible Omicron variant and potentially other future variants. For multinational companies, the most intractable problem will be continued supply chain problems running well into the third quarter of the year, as the country goes through successive rounds of hard lockdowns that slow or delay production and logistics. It will also mean continued difficulties traveling to and from China, as Beijing declines to follow international trends in liberalizing border controls and travel restrictions. Instead, travelers to China will likely continue to be subject to unworkable extended quarantines upon entry for most, if not all, of 2022, as the government seeks to keep infection rates very low prior to the CPC. But outbreaks remain a certainty throughout the country across the year, with Beijing responding with the tools that have served it well since the original Wuhan outbreak – widespread lockdowns, mass testing and vaccination programs and internal travel restrictions.
The Olympics
In February, Beijing will become the first city to host both the Summer and Winter Olympic games; however, the contrast between the 2008 and 2022 games will be stark. The 2008 Summer Games were held at a time of greater optimism regarding China’s emergence into the world community, prior to its high-handed construction of artificial islands in the South China Sea, mass protests and crackdowns in Hong Kong, and revelations of mass human rights abuses and repressions in Xinjiang. By contrast, the 2022 games will be held at a time when China’s international reputation is at its lowest point in decades and will be held in a strict “closed loop” environment due to the pandemic, excluding any international spectators. Nonetheless, from an international television perspective, the games are likely to provide the Chinese government with substantial positive publicity, enabling them to demonstrate the claimed strengths and successes of China’s culture and political system in holding the Olympics during the pandemic, even if their triumphalism will be constrained somewhat by likely modest sporting successes.
However, the US and its allies will use the Olympics to turn a spotlight on what they perceive to be China’s failings and misdeeds, particularly Beijing’s human rights abuses. The US-led diplomatic boycott embarrassed Beijing but is, in itself, little more than a token gesture, while China’s “closed loop” Olympics all but eliminate the prospect of activist protests at the games. Instead, the US and other boycotting countries may still use the Olympics period to announce further sanctions or penalties on China and Chinese companies, keeping the focus on China’s human rights record at the risk of accusations of politicizing sport, while activist groups protest at Olympics-related sites in other countries – such as the International Olympics Committee headquarters in Switzerland – or at facilities belonging to prominent Olympic Games sponsors. Multinational companies sponsoring the games, teams or athletes, or involved in other ways such as broadcasting, are likely to continue to be accused of complicity in “sportswashing” China’s human rights record.

State control over technology, political speech, and daily life has increased dramatically under President Xi. This trajectory will continue as the President seeks another term and is expected to make it more even more difficult for multi-national business operations.

Domestic Politics, the Economy and the Rest of the World
Strong COVID-19 border restrictions will suit the Chinese Communist Party’s predominantly internal focus in 2022 and will be accompanied by steadily increasing focus on the domestic economy. China will remain an export-driven economy in 2022 and for many years beyond; however, Beijing’s “dual circulation” strategy will likely become more coherent this year, with more obvious attention and support for domestic economic policies and programs. Most economic observers anticipate substantially lower economic growth in China this year – around 5-5.5% or lower, compared to an estimated 8.0% in 2021. This will likely drive increased government focus on “common prosperity” – a theme which emerged in 2021’s crackdown on China’s giant technology companies and billionaires – as part of efforts to ensure public support for the Communist Party and President Xi in the lead-up to the end of year 20th Communist Party Congress. Common prosperity efforts in 2021 were little more than propaganda and pressure on major companies to establish social welfare funds; however, lower economic growth in 2022 will increase the imperative for wealth distribution from China’s corporate elites to the middle class and blue-collar workers. Foreign corporations making substantial profits in China are likely to be a favored government target in such programs as Beijing seeks higher wages, greater jobs growth and possibly higher taxes on foreign corporate profits. Similarly, Beijing will continue its crackdown on China’s major technology companies, seeing their independent power as a threat to the omnipotence of the Communist Party and increasing its blunt force efforts to bring them to heel, including requiring companies to support and contribute to government policies and goals. Foreign companies will be somewhat spared from this attention, not infringing as severely on the Communist Party’s hegemony; however, further government regulation of dataflows, online platforms and other elements of the tech economy will increase overhead for multinationals and complicate their operations.
Throughout 2022 further revelations of ongoing human rights abuses in Xinjiang, Tibet and elsewhere in China are near certain, with the US, EU and other countries likely to place increased moral and regulatory pressure on companies to ensure their Chinese supply chains are free from such abuses. The Chinese government will remain intransigent in the face of such accusations, denying any such violations have occurred and threaten retaliation against Western companies who sever ties with Chinese suppliers, including covertly directing “consumer-led” boycotts of such brands in favor of “patriotic” Chinese alternatives. Elsewhere in greater China, Beijing and the Hong Kong government will continue to crack down on political freedoms and democratic institutions in the territory, increasingly complicating the operating environment for the many multinational companies there. After deep changes to the security environment in 2020 and the city’s political system in 2021, the government seems set to further censor Hong Kong’s previously free media and to enact substantial pro-Beijing reforms to the education system, while changes to the British Common Law-based judicial system and constraints on the entertainment sector are also possible. In the South China Sea, the People’s Liberation Army-Navy, the Chinese Coastguard and maritime militia vessels will continue near-constant intrusions into the Exclusive Economic Zones (EEZ) of Southeast Asian littoral states. In particular, China will continue harassment of legitimate fishing vessels and hydrocarbon exploration operations and will extend operations further south in the region, venturing increasingly far into Indonesian and Malaysian territory, straining relations with those countries.
The US-China Relationship
The US-China relationship is at one of its lowest points since the resumption of diplomatic relations in 1979 and neither Washington nor Beijing is likely to see it as in their domestic political or international interests to substantially improve ties this year. For Beijing, continued criticism and pressure on what it sees an America weakened by the pandemic and internal division bolsters its image as a strong government domestically, strengthens its claims to global leadership and boosts efforts to dominate the Asia-Pacific at US expense. In Washington, anti-Chinese policy is one of the few issues which draw genuinely bipartisan support, with little political appetite to reduce tariffs on Chinese-made goods, relax restrictions on technology transfer to Chinese companies or decrease pressure on Beijing over its human rights performance. Taiwan is likely to be a particular irritant in the relationship this year, with US political, economic and military support for the island growing at the same time Beijing intensifies its gray zone pressure tactics on Taipei. With the US facing mid-term elections in November 2022, around the same time as the 20th CPC, neither government will be motivated to take steps toward détente this year, although both with likely loudly proclaim that the other should do so. 2023 offers better prospects for improved bilateral relations, once the political situation in China is clarified and should the Biden Administration lose control of Congress in the mid-term elections, potentially forcing it to increase its attention on foreign affairs over domestic policy priorities.
Three Times Xi
Much of the Chinese political elite’s attention this year will be consumed with opaque political maneuvering ahead of the Communist Party Congress in the last quarter of the year. Over the past decade, Xi has assiduously set the stage for a third term – and potentially more – revising the constitution, purging rivals through anti-corruption campaigns and strengthening the positions of his lieutenants. At the start of 2022, there is no apparent alternative to a third Xi term as Chinese president, although there will still be substantial internal competition for other party leadership positions. Xi has been an autocratic, inwardly-focused leader since coming to power ten years ago, intent on securing his own power and a legacy on par with Mao Zedong and Deng Xiaoping, and there is no evidence to suggest that he will moderate his policies or change his focus in his third term or beyond. Under Xi China in 2023 and beyond is likely to remain increasingly inwardly focused and rejecting of Western political, cultural or economic influence. Nonetheless, Xi will be determined to continue to build China into a globally dominant superpower – economically, militarily and potentially culturally – probably leading to increasingly tense relations with the US, EU, Japan and others. Moreover, the tactics that have served Xi well domestically – repression, surveillance, human rights abuses and crackdowns on democracy and freedom in Hong Kong – will almost certainly continue through the next five years at least, alongside continued spreading of Chinese influence through the Belt and Road Initiative and increasingly strident nationalism on the international stage.

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