For years, we’ve watched Xi Jinping consolidate power.

• Especially through his anti-corruption campaign that caught both bad actors and his enemies – and put fear in his remaining detractors.
• He’s decimated the ‘collective leadership’ model put in place by Deng Xiaoping to stymie Mao-style strong-man rule.
• And he’s broken the power of competing factions that had been the heart of policy horse-trading.

Or, has he?

• Some are seeing what The Wall Street Journal’s Lingling Wei calls ‘faint cracks in his hold on power.’

Even before Ms. Wei’s essay, I had heard the issue of Mr. Xi’s dominance raised at our last CHINARoundtable by a prominent China expert who suggested that:

• ‘The “stability” theme that came from the December meeting [of the Central Economic Work Conference (CEWC)] - maybe it's a little bit exaggeration to say - is a slap in Xi’s face.’
• ‘It's clearly, a fairly straightforward rejection of the kind of transformative things that he was talking about.’

Remember: The CECW is chaired by Mr. Xi with all the members of the Politburo Standing Committee in attendance – and it’s where Beijing plans how to manage the economy in the coming year.

• So if the speaker at our CHINARoundtable is right, then a slap to Xi’s face is not an exaggeration.
• If the ‘stability’ theme were imposed on Mr. Xi, this creates profound doubts about how absolute his authority is - a big if.

This may sound like the sort of thing of interest only to Pekingologists.

• But the issue, as you will see, has real-world implications, most recently in the rally in Chinese stocks last week.
• And may create a new uncertainty for investors’ and executives’ decision-making.

Then there is Mr. Xi’s support of Russia. He’s hanging tough.

• But a vocal cohort of elites have publicly and not-so-publicly expressed opposition.
• The best known and most commented on is a ‘Possible Outcomes of the Russo-Ukrainian War and China’s Choice,’ [English title] by Dr. Hu Wei.

A ‘faint crack?’ Maybe, maybe not. But as the WSJ’s Ms. Wei notes:

• ‘In a country where leaders often try to present a united front, such different messages betray tensions within the top echelon of the party around Mr. Xi’s policies, party insiders say.’

For my part, I'm still betting that Mr. Xi is still very much in charge.

• But I am also watching for more ‘faint cracks.’

1 | Who’s in charge here?

For some time now we’ve taken it for granted that Xi Jinping has so consolidated his power that his will is China policy.

• And in the last year, we may have discerned that Mr. Xi – a true Marxist – has decided that capitalism in China has reached it use-by date, and the time is right to start getting China back on the socialist road.
• This is in line with what Deng Xiaoping said China would do after it achieved ‘overwhelming abundance’ – because, as he said: ‘Socialism is not poverty, much less communism.’ Another true believer, but a practical one.
• Now with a slowing economy, not only is China in the midst of a ‘course correction,’ but some are questioning just how tight Mr. Xi’s grip on power is.

The themes come together in an intriguing essay by The Wall Street Journal’s Lingling Wei in ‘Rollback of Xi Jinping’s Economic Campaign Exposes Cracks in His Power.’

• Subtitle: ‘In addition to pressure from the West on Beijing over Xi’s Russian entente, he is struggling with a severe slowdown in the economy.’
• ‘The new disquiet raises questions about his unassailed dominance.’

Ms. Wei writes:

• ‘Last year, President Xi Jinping seemed all but invincible.’
• ‘Now, his push to steer China away from capitalism and the West has thrown the Chinese economy into uncertainty and exposed faint cracks in his hold on power.’

‘Chinese policymakers became alarmed at the end of last year by how sharply growth had slowed after Mr. Xi tightened controls on private businesses, from tech giants to property developers.’

• ‘Meanwhile, China’s stringent Covid lockdowns, part of Mr. Xi’s approach to handling the crisis, have ramped up again as Covid cases surge, hurting both consumer spending and factory output.’
• ‘Add to that a pact with Russia in early February, just weeks ahead of its invasion of Ukraine, that has widened a gulf between China and the West and underlined how high the costs could be for China of implementing Mr. Xi’s agenda at home and in foreign policy.’

‘Officials are now speaking of a “course correction” to mitigate some of the effects of Mr. Xi’s policies.’

• ‘In recent months, China has scrambled to dial back some of last year’s efforts, policy announcements and interviews with people close to decision-making show.’

Ms. Wei’s reporting and analysis are, as always, excellent. And we can trust that her sources are, as usual, knowledgeable insiders.

• But, at least from my reading, I don’t see a direct assertion that the ‘course correction’ is being taken without Mr. Xi’s consent – or that Mr. Xi himself was compelled to accept these changes by a concerned elite within the Party and government.

There is of course the alternative explanation:

• Faced with crises and potential crises on all sides, Mr. Xi decided, perhaps influenced by his trusted few advisors, to temper his policies and to postpone the return to the path of socialism until the economy rights itself.

That said, the changes are significant enough - and sufficiently contrary to his prior policies - to raise a reasonable inference of ‘faint cracks’ in Mr. Xi’s authority

• And certainly enough to include that inference in considering investment and strategic business decisions.

2 | Pekingology for institutional investors

All this may sound like the sort of thing of interest only to Pekingologists.

• But the issue has real-world implications.

Last week, following a major selloff of Chinese stocks listed in Hong Kong and New York, Beijing did an about-face on many of Mr. Xi’s initiatives, and the stocks rallied.

• Another ‘faint crack’?

Last Tuesday, before the rally, Bloomberg’s Shuli Ren wrote in ‘China Doesn’t Care If It’s Uninvestable — for Foreigners’?:

• ‘The question of China’s “investability” bubbling up again, as Chinese stocks listed in Hong Kong and New York witness their worst selloffs since the global financial crisis in 2008.’
• ‘The inconvenient truth is that Beijing doesn’t care how much money global investors have lost.’

Then Wednesday those Chinese stocks rallied. Why?

• ‘It took one of the biggest stock-market routs in Chinese history, but President Xi Jinping may finally be heeding the concerns of international investors,’ Bloomberg reports in ‘Global Exodus From Chinese Markets Prompts Xi to Change Tack.’

‘A sweeping set of promises this week from Xi’s government to make regulation more transparent and predictable -- as well as a commitment to overseas markets including Hong Kong -- suggests authorities are appealing to investors abroad.’

• ‘The ruling Communist Party is seeking to regain the trust of international funds and the global business community after the country was lumped in with Russia as an “uninvestable” destination.’

With that inference of ‘faint cracks’ in mind, we now ask a new and heretofore unthinkable question: Did Mr. Xi just start to care if foreign investors lost money and then consent to the about-face, or was he forced (okay, strongly persuaded) to do it?

• If the former, we can have some confidence that the changes will remain in place at least until Mr. Xi gets the nod for a third term at the Party Congress in the fall.
• If the latter, that is less certain – Mr. Xi might reassert himself and revert to his original objectives.

We will no doubt never know the answers to these questions.

• Still just having to ask these questions adds another uncertainty for investors and executives making decisions based on their best prediction of China’s direction in a given area.

But in the absence of evidence of weakness, the smart money is on Mr. Xi’s continuing to have control over policy.

• In any case, although narrowed in recent years, there has usually been more room for discussion of economic rather than political issues.

That’s what makes the circumstances surrounding Dr. Hu Wei’s controversial essay interesting.

3 | ‘China cannot be tied to Putin.’

While, as many have noted he is walking a tightrope, Mr. Xi still supports Russia. He’s hanging tough.

• But a vocal cohort of elites have publicly and not-so-publicly expressed opposition.

A ‘faint crack’? Maybe not. But as the WSJ’s Lingling Wei notes:

• ‘In a country where leaders often try to present a united front, such different messages betray tensions within the top echelon of the party around Mr. Xi’s policies, party insiders say.’

The best known and most commented on is a ‘Possible Outcomes of the Russo-Ukrainian War and China’s Choice,’ [English title] by Dr. Hu Wei.

• Dr. Hu is the vice-chairman of the Public Policy Research Center of the Counselor’s Office of the State Council, the chairman of Shanghai Public Policy Research Association, and the chairman of the Academic Committee of the Chahar Institute.

He writes:

• ‘Russia’s ‘special military operation’ against Ukraine has caused great controversy in China, with its supporters and opponents being divided into two implacably opposing sides.’

His recommendation might be summed up as:

• ‘China cannot be tied to Putin and needs to be cut off as soon as possible.’
• ‘China should avoid playing both sides in the same boat, give up being neutral, and choose the mainstream position in the world.’
• ‘Given that China has always advocated respect for national sovereignty and territorial integrity, it can avoid further isolation only by standing with the majority of the countries in the world.’

As Nikkei Asia, in ‘Analysis: China needs to drop Putin now, scholar insists:

Government adviser says Beijing needs to be on the right side of history,’

reports:

• ‘These words written by a prominent Chinese scholar have dominated the discussion among Chinese foreign and security experts in recent days.’
• And quoting an unnamed source: "They are ostensibly his personal views. But judging from his title, there are influential leaders behind him."
• ‘His local connections hint at links to political forces based in Shanghai.’ [The Shanghai Gang faction headed by former leader Jiang Zemin and opposed to Mr. Xi?]

Although Dr. Hu’s essay has been read by hundreds of thousands of Chinese, it’s his initial target audience that is especially interesting:

• ‘Hu’s article is dated March 5, the opening day of an annual session of the National People's Congress, China's parliament.’
• ‘Marked as "for the judgment and reference of the highest decision-making level in China," the document was distributed among the leadership, which includes Xi Jinping, general secretary of the Chinese Communist Party and the nation's president.’

‘The article was taken down from China's internet only after it had been read internally for as long as a week.’

• Either China needs more diligent censors, or someone had the clout to keep it up.

‘It is safe to say Hu and the publishers were confident they would not be punished for releasing the frank analysis.’

• Ditto on the someone with clout.

It would take someone expert on China’s elite politics to say whether or not this is a big deal.

• But to my eye, that Dr. Hu’s essay was allowed to reach so many Chinese for so long and to stir so much debate - at a time when Mr. Xi is under pressure from the U.S. and even some of China’s leading scholars and influencers to drop support of Russia - suggests that the forces aligned against Mr. Xi may be stronger than we think.

And that we should be on the lookout for any more ‘faint cracks.’