China Victory Day Parade, 2015. Wikimedia Commons/KOG. Some rights reserved.Something remarkable is happening in China, or has happened. Slowly but methodically, the system of government is being transformed. In his first three years, Xi Jinping has built a new regime, radically harder than the one created by Deng Xiaoping and that he inherited.

The new shape of things became conspicuously visible through a series of mishaps around the middle of the year.

Not only did the stock market implode. In three weeks, the markets lost a third of their value, and later continued to slide. Except for the many who lost money, the crash has not mattered all that much economically, since equities are not very important in the Chinese economy. But it mattered enormously for perceptions.

The government had encouraged the preceding boom. It wanted to make investors happy, sell off share ownerships in state enterprises, and find a safe haven for some of its social insurance capital. It tried to stem the slide but failed and wasted billions. Those who can are taking their money abroad, foreign currency reserves are depleted, and the home currency is losing value. The government looks incompetent and impotent.

More bad news was to follow. In part as a result of the crash, it has hit home that the Chinese economy is not all it has been made up to be. Only a few months ago, the Financial Times, not an uncritical source, described the Chinese economy, without blinking an eye, as the world’s largest (in an interview with premier Li Keqiang). Today, no serious observer would entertain that kind of fantasy.

Brokerage office, Harbin. Demotix/Tao Zhang. All rights reserved.From about 2010, even official growth rates have been edging downwards, from about 10 to about 7 percent. But independent analysts, such as the Conference Board, Capital Economics and Lombard Street, have found that either growth has long been officially overstated and/or that the decline has been steeper than officially stated, down now to about 4 percent or less in annual growth.

In a survey of American economists by the Wall Street Journal, the overwhelming majority said that they do not believe that the official estimates accurately reflect the state of the economy. The government that takes pride in its economic prowess has long been delivering less than it boasts.

On 17 August, a chemical plant in Tianjin exploded, killing at least 173 people and injuring hundreds more. This proved not to have just been an accident, but the result of rules having been flaunted by longstanding regime-insider corruption. The episode revealed that the political-economic system is as rotten as ever, in spite of Xi Jinping’s anti-corruption campaign.

Internationally, China has been exposed as having engaged in aggressive cyber-espionage against the United States, in part to steal industrial patents. States of course spy on each other, but it is incompetent to be caught at it. The attempt to forge an alliance of friendship with Russia failed. With a sudden abundant supply of cheap oil, Russian friendship proved to be more trouble than it was worth. China is back to where it has been, a giant without genuine friends.

Barack Obama and Xi Jinping. Flickr/US Embassy, The Hague. Some rights reserved.States of course spy on each other, but it is incompetent to be caught at it

The Chinese leaders could not have foreseen these misfortunes but they have been preparing for harder times. The regime is geared above all to stability – for itself of course. This it maintains in an elaborate ‘good cop, bad cop’ double act. With one hand, it has purchased legitimacy, above all by steady economic management. With the other hand, it holds down anything that might develop into systemic opposition.

The new leadership has, however, shifted the balance of rule. The new leaders put less trust in the people’s trust in them and are instead relying more strongly on controls and repression.

Xi Jinping has, step by step, tightened all the screws of dictatorship. Censorship is harder. Propaganda and ‘thought-work’ has been intensified, as has political education in schools and universities. Maoist mass-line and rectification campaigns are back in use. Internet control is ever more uncompromising. Non-official NGOs have less space for action.

Activism is increasingly dangerous: activists are more severely persecuted, even for non-subversive causes such as women’s rights. Human rights lawyers are detained and disappeared and have their practices shut down. Some are forced to leave the country, others detained for ‘threatening national security’ when trying to cross into Hong Kong. Liberal-minded professors are shamed, fired or locked up.

Underlying these practices is a re-centralization of power, in the country to Beijing, in Beijing to the party, and in the party to Xi Jinping. Collective leadership is no more. There is an aura of personality cult around the new supreme leader. Within the party-state, a reign of terror is spreading under the guise of cleaning up corruption.

Xi Jinping. Flickr/NZ National Party. Some rights reserved.Xi Jinping has, step by step, tightened all the screws of dictatorship

The events of 2015 have seriously dented the regime’s ability to purchase legitimacy with the help of economic performance and the delivery of effective governance. It is to be expected that it will continue the now steady trend towards tighter controls, since controls are ever more necessary for stability.

It is also responding with a new emphasis on ideology, but now in the form of nationalism rather than Marxism. In so doing, it is substituting narrative for delivery in the promotion of itself. Its narrative is one of national and military glory and strength, as was on display in the massive military parade in Beijing on 3 September.

The Chinese state is now more ideological and more repressive than ever since the days of Mao. So much so, that it is a new state.

The Chinese system has presented itself to the world as a mildly authoritarian one that deals with the problems and delivers. That presentation has, for a while, been broadly accepted, and the system has enjoyed great respect and a good deal of admiration. But what has become visible through the recent mishaps is that the government and its leaders are in fact not delivering steady management, neither economically, domestically nor internationally.

Fortunately for them and their prized stability, they have had the foresight to tighten their controls over a society they do not trust. The cost, however, is that the system looks less attractive. It is impossible, even for the Chinese masters of self-promotion, to reshape the system into a naked dictatorship and continue to have it seen as one of benevolent governance.