March 9, 2018

The beginning of the end of the rise of China

By reversing Deng and embracing Mao, Xi Jinping is undermining the bases of China’s remarkable growth and development.

By reversing Deng and embracing Mao, Xi Jinping is undermining the bases of China’s remarkable growth and development.

This is an unedited draft of today’s column in Business Standard)

Among the phrases censored from the internet in China after Xi Jinping proposed to waive off presidential term limits was I don’t agree”. That is the extent to which the Xi government is going to ensure that the Chinese people enthusiastically support a move that sets the stage to make him President for as long as he likes. It might snow in summer in Chennai before the 2980 delegates of the National People’s Congress gathered in Beijing for their annual session fail to ratify the constitutional amendment that would put Xi back in the place Mao Zedong once was, and Deng Xiaoping astutely avoided being in.

This is an archived blog post from The Acorn on Medium.

With that the Deng Xiaoping era will official be over. With that, perhaps more likely now than ever before, we are at the beginning of the end of China’s rise. Now, obituaries of China’s rise have been regularly written and regularly proven wrong, but have also made Gordon Chang famous and perhaps rich too. However, I do not intend to offer you a prediction. Rather, my object is to alert you to the emerging risk of the party being over. No pun intended.

The reason to believe that China’s phenomenal economic and geopolitical ascendency will now begin to slow down and possible even decline is because, in a nutshell, Xi is reversing all the successful elements of the Deng formula and going back to many of Mao’s failed ones. The abandonment of a more institutional process of leadership succession is the latest and the most visible of them all.

Deng’s reading of Chinese history and the depredations of Mao’s disastrous rule of China that caused the untold suffering, entirely avoidable deaths of 30 million people and a per capita GDP lower than India’s led him to create a system that would balance the chaos’ of democracy with the tyranny of a one-man rule. He was committed to a one-party state with the Communist Party firmly in power — Exhibit A: Tiananmen Square,1989 — but with a collective leadership that would opaquely achieve separation of powers, and checks and balances, through shared interests and norms. It was Singapore’s Lee Kuan Yew who likened such a system to the Vatican — with cardinals deciding who to elevate to their level, and electing one among them to be the Pope.

Whatever others might think of the system, it worked for China from 1979 till around 2010 when vicious factional infighting erupted ahead of the selection of the first party general secretary not anointed by Deng. Those who’ve witnessed family disputes after the patriarch passes away will be familiar with how this works, except that in this case you can’t split the family empire. Instead of shoring up a wobbling system, Xi decided to topple it. Even the method in which he did so is more Mao than Deng: tighter thought control, imprisonment of top Party leaders and persecution of their family members.

In a new book that couldn’t have been published at a better time, Carl Minzner, a professor at Fordham Law School, argues that the trifecta of factors” — stable, institutionalised Party rule, high economic growth and an openness to the outside world — that characterised the reform era are all coming to an end. In his view, China is entering a new counter-reform era where concentration of political power in one man, a slower economy with bigger boom-bust cycles in an increasing number of asset classes and a strident ethno-nationalist narrative have replaced them.

Minzner’s reckons that China may not be at a crossroads. Rather, it may be in a downward spiral. Soft Authoritarianism could decay into steadily more intense versions of Hard Authoritarianism, possibly lurching into Populist Nationalism, with the specter (sic) of Regime Collapse looming in the background.”

The beginning of the end of China’s rise is not necessarily the beginning of China’s fall. Even if the spiralling doesn’t go all the way down, it is almost certain that the favourable external environment — where the powerful West invested in China’s rise in the hope that this would bring the country into the international community — will no longer obtain. Trump’s trade tariffs and the increasing regional enthusiasm for political and security frameworks to balance China’s dominance will increasingly constrain Beijing’s policy space.

Meanwhile the domestic social consequences of slower growth — with the manufacturing, construction, real estate and infrastructure industries not growing as fast as before — will start kicking in. In a recent report, Complete Intelligence’s Tony Nash writes China has reached the limits of this export-led growth and is attempting to focus more on internal consumption without drastically reducing growth, which could put jobs and, by extension, social stability at risk.” Also, disempowered Communist Party factions don’t go away. They operate clandestinely. Finally, strident online nationalism pervading a highly connected population undermines the scope for the moderation necessary for the leadership to contain political crises involving ethnic minorities, disputed territories or foreign affairs.

The risks for anyone dealing with China are growing. Businesses in China must prepare for what they’d never encountered before, from labour unrest to expropriation to outright nationalisation. Countries expecting windfalls from Belt and Road projects might find themselves holding the baby. Trade wars and unintended escalations of military conflict also become more likely.

We in India should hope that the Chinese people escape the chaos that they so dread, as quite so often in their history by and because they prefer concentration of power in the hands of an all-powerful emperor.



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