China's president has extended his term to life — what does that mean for his country?

Since the global financial crisis, educated Chinese people have lost a degree of confidence not only in the Western neoliberal economic model, but also in the West's democratic political systems.

But there is still a deep shared aspiration in China that the country will develop its own unique model adopting the best international principles of democracy, transparency, and the rule of law.

Some now feel that the Chinese Communist Party is leading them away from that goal; the reality is more nuanced.

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The party's decision to remove the constitution's presidential term limit has come as a surprise to many.

The change is not in itself crucial, given Chinese president Xi Jinping's consolidation of power over time.

He has been in an unassailable position for some years, having been named the party's "core" leader, with his political thoughts added to the constitution.

Xi's actions have certainly empowered the party, but it remains to be seen whether the removal of the presidential term limit is a personal power grab or more about buying time to ensure that his radical agenda is preserved.

Less reported than the term-limit change was the Government's recent announcement of major restructurings aimed at empowering the country's environmental protection, financial regulation, and anti-corruption agencies, among others.

It would be a misreading to think the party is totally subservient to Xi or that his political longevity is guaranteed; much will change over the next seven to 10 years neither he nor the party can forecast.

Unless the party, with Xi at its head, can continue to deliver results for the people, it will lose its mandate to govern, as emperors who were perceived to have lost the mandate of heaven never held on to power for long.

Out of chaos

From the mid-90s, Chinese provincial governments and the central administration were able to lobby for their own interests and engage in limited debates on both social and economic policy. Years of high economic growth flowed from China's relative openness and often-chaotic commercial experiments. China became and remains one of the most internally competitive economies in the world. Villages, counties, cities and provinces compete with each other relentlessly, driven by ambitious business leaders and officials.

A degree of graft bound state and private sector interests together; the state released assets or conferred use-rights to private companies, fuelling a period of sustained economic growth. China's middle class grew and prospered as its markets expanded and privatised.

But corruption got out of hand as officials and their business cronies became increasingly profligate and greedy.

Environmental degradation accelerated, and the Chinese-language internet teemed with images of officials sporting $20,000 watches, gorging at expensive banquets, and driving imported luxury cars.

It was in this context that President Xi came to power in late-2012, implementing a harsh anti-corruption campaign, which reduced the potential for economic instability and social unrest.

In his first term, Xi gained unprecedented popularity among the masses and garnered fear and respect from Party officials. He restructured the military, arresting and dismissing corrupt officers while empowering the police and judiciary.

He confronted interest groups centred on powerful political families which had been distorting the economy and stoking the ire of ordinary Chinese people. Xi consolidated his power to a degree unknown since the era of Mao Zedong, but critics miss the fact he has also empowered the courts to become more independent and strengthened legal institutions.

Government and Party

Chinese and foreign observers alike have expressed concern at what they see as Xi's personal power grab, possibly setting up life-long rule.

If Xi wanted to rule indefinitely, he need not have expended political capital to change the constitution.

He could have instead given up the presidency at the end of his current term while retaining his posts as General Secretary of the Chinese Communist Party and Chairman of the Central Military Commission — neither is bound by a term limit.

It is striking that he chose to consolidate his power through legal means, by amending the constitution. Counterintuitively, some observers have noted that this may reflect the actions of a man who does recognise the importance of the rule of law.

Instead of risking the political imbalance of ruling through the party while placing a figurehead in the role of president, Xi has restructured the constitution to reflect the fact that there is no real separation between the government and party.

As head of the Party, military, and state, Xi sets a precedent that the leader chosen and supported by the party will have unquestioned control and sufficient time to advance the party's agenda, but that this person must in turn be bound by the diktats of the party and its constitution.

None of this resolves the difficult question of what happens when Xi dies or is no longer able to rule.

Xi's legacy will depend as much on his ability to leave behind a more participatory political system as on his ability to continue to deliver prosperity and stability.

The enduring masses

Western analysts have long assumed the Chinese middle class would evolve to challenge China's one-party rule. In fact, moderately affluent Chinese may perceive they have the most to lose in the event China becomes politically unstable.

From 1990 to 2016, China's per-capita GDP rose from around US$300 to over US$8000, and average wages grew more than 30-fold. This was a period in which wages remained stagnant in the West. A conservative estimate of the number of people China will add, over the next decade, to the ranks of its already large urban middle class is 100 million.

As long as China's middle class continues to grow and prosper under the rule of the party, significant political activism aimed at regime change is unlikely. Educated Chinese people do express concern with the dangers of political power becoming overcentralised.

But this tends to be balanced with a concern that there is too much to lose if the political structures established by the party are discarded without consideration for what would replace them. Incremental progress is preferred over bloody, chaotic revolution.

There was little sympathy among ordinary mainland Chinese people toward the student protesters in Taiwan and Hong Kong agitating for independence from the party's influence; this goal is not a practical reality or desired by most people in China now, and it is unlikely to become so in the foreseeable future.

The view from the West

Condescending views of China and its people are still prevalent among citizens of developed Western countries. They stem from a colonial mindset which produces an enduring sense of Western exceptionalism, and a propensity to dehumanise cultures that they cannot or are unwilling to try to understand.

There is a lack of appreciation that Chinese people — and particularly the growing middle class — aspire to the same material and emotional well-being as people around the world.

Over 300,000 Chinese students study in the United States each year (as did President Xi's daughter), and a further 200,000 in other developed countries. In 2016, 135 million Chinese tourists travelled the world, observing social and economic models different from China's.

Years of exposure to Western systems have had an impact on this cohort, and their growing expectations and demands for better environmental conditions, safer food, and greater transparency are changing China. This force is more subtle and gradual than disruptive.

The determination and common sense of the increasingly technologically connected masses in small towns and the countryside is another, equally important pressure on the Chinese leadership.

The party may be able to control public dialogue to some extent, but it cannot alter the shared experience of millions of increasingly globally minded people. Instead, it is more focused on understanding their needs.

The people look ahead

Social network conversations and anecdotal evidence indicate a significant number of China's middle class are apprehensive about the term-limit change, as it may open the leadership (more probably a successor of Xi) to a dictator like Mao.

There has been no widespread negative reaction, in part due to media censorship and the government's disruption of social networks. In China, surveillance is extensive and the internal security budget exceeds that allocated to external defence.

But private debate is generally unrestricted, and while people may disapprove of some of Xi's actions, he remains widely popular.

No one in China, let alone China watchers in the West, can accurately predict the implications of recent events. But Chinese people will likely deal with this and future challenges as they have over the preceding heady decades, waiting to see how their own prosperity and freedom is impacted before deciding whether and how to make a stand.

Just as the party sets long-term strategies, the Chinese people have become used to maintaining a longer-term view.

David Mahon is executive chairman and Charlie Gao a partner in Mahon China Investment Management