(THIS ARTICLE IS COURTESY OF FORTUNE MAGAZINE)
Shanghai changes faster than any place I know. Each time I return, I’m flabbergasted by the pace of development. Pudong’s financial district sprouts new skyscrapers. The Bund sports pricier restaurants. Huaihai Lu, once the Avenue Joffre in the old French Concession, is recolonized by a few more European luxury boutiques. Buildings, city blocks, entire neighborhoods seem to vanish and reemerge as something else. If I am away for more than six months, it feels like coming back to an entirely new metropolis: bigger, richer, sleeker, chic-er.
I have been thinking about the breakneck pace of growth in Shanghai while trying to parse the implications of Chinese president Xi Jinping’s declaration last Thursday that China’s development has reached a “new historical starting point.” Xi’s pronouncement was part of a major policy address he delivered in Beijing to provincial and ministerial officials ahead of this year’s 19th Party Congress. At that gathering, likely to be held in the next few months, Xi is expected to install a new generation of leaders and consolidate his position as the party’s “core” leader. The speech seems to signal Xi’s determination to double down in his second term on the authoritarian policies that have been the hallmark of his first five years in power: a zealous campaign against graft, expanded support for state-owned enterprises, and new measures to strengthen the party’s grip on China’s economy and society.
You can get a flavor of Xi’s remarks from these reports in Bloomberg and the Wall Street Journal. Alas, both those outlets are blocked in China. And so, no matter how stylish and seemingly cosmopolitan the lobby of my hotel, to access the global business press from it, I am obliged to rely on a “virtual private network” or VPN. In recent months, Xi’s push to bolster the party has included a sweeping crackdown on the use of VPNs and tightened party control over nearly all permutations of Internet use. In fact, TechCrunch reports today that Beijing has ordered Apple to purge all major VPN apps from the App Store in China. The move was first noted by ExpressVPN, a provider based outside of China—and, as it happens, the service I’m using to write this. The company says it received a notice from Apple that its app was scrapped because it “includes content that is illegal in China.”
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Xi is also putting the squeeze on privately owned Chinese companies the government deems too aggressive in expanding outside China. In recent weeks, China’s state media has been filled with reports deploring the dangers posed by what pundits here are calling “gray rhinos“—large Chinese companies with murky ownership structures, high-debt ratios and extensive holdings overseas. It’s almost as if Beijing’s vaunted “Go Global” investment policy has been rebranded as “Go Home.”
Concerns about the risks over-leveraged firms pose to China’s financial system are well-founded. And yet, of the four gray rhinos China’s bank regulators have singled out for greater regulatory scrutiny in recent weeks, at least one, Dalian Wanda, was an established business with a coherent global strategy.
Shai Oster, a China tech correspondent for The Information, worries in a thoughtful essay published today that all the “euphoria” over the dazzling innovations in China’s tech sector in recent years masks the heavy-handedness with which Xi has dealt with private firms. If Xi himself can order the takedown of China’s most high-profile and politically connected property developer, no one is safe. “Even someone as famous as Alibaba’s founder Jack Ma could face increased political risks in the current climate.” Executives many of foreign firms operating in China say they feel equally vulnerable.
The optimistic view is that the many recent measures to tighten political control in China are temporary and that Xi will loosen up after the Party Congress once he has his ducks in line. It’s a comforting thought. If only there were more evidence to support it.