An optimistic view

Minxin Pei, who is the Tom and Margot Pritzker ’72 Professor of Government and George R. Roberts Fellow at the prestigious Claremont McKenna College near Los Angeles, CA, writes, in Foreign Affairs, that “Over the past few years, the United States’ approach to China has taken a hard-line turn, with the balance between cooperation and competition in the U.S.-Chinese relationship tilting sharply toward the latter. Most American policymakers and commentators consider this confrontational new strategy a response to China’s growing assertiveness, embodied especially in the controversial figure of Chinese President Xi Jinping. But ultimately, this ongoing tension—particularly with the added pressures of the new coronavirus outbreak and an economic downturn—is likely to expose the brittleness and insecurity that lie beneath the surface of Xi’s, and Beijing’s, assertions of solidity and strength … [but, while] … The United States has limited means of influencing China’s closed political system, but the diplomatic, economic, and military pressure that Washington can bring to bear on Beijing will put Xi and the Chinese Communist Party (CCP) he leads under enormous strain. Indeed, a prolonged period of strategic confrontation with the United States, such as the one China is currently experiencing, will create conditions that are conducive to dramatic changes.

The greatest fear of the Chinese Communist Party leaders, from Mao to Xi, has always Mao_Zedong_in_1959_(cropped)been the prospect of a counter-revolution. Mao Zedong believed he could contain opposition by force; Deng Xiaoping believed that Lee Kuan Yew was right and a conservative images(Confucian) state could have de facto one-party rule if the Party governed well, in the interests of the people, Xi Jinping is more inclined to Mao’s view and to his methods. It might be deliciously ironic that the best way to counter the counter-revolution ~ by providing good government as Lee Kuan Yew advocated ~ has been cast aside and replaced by a system that actually favours President Trump.

Professor Minxin Pei says that “As tension between the United States and China has grown, there has been vociferous debate about the similarities and, perhaps more important, the differences between U.S.-Chinese competition now and U.S.-Soviet competition during the Cold War. Whatever the limitations of the analogy, Chinese leaders have put considerable thought into the lessons of the Cold War and of the Soviet collapse. Ironically, Beijing may nevertheless be repeating some of the most consequential mistakes of the Soviet regime … [because] … During the multidecade competition of the Cold War, the rigidity of the Soviet regime and its leaders proved to be the United States’ most valuable asset. The Kremlin doubled down on failed strategies—sticking with a moribund economic system, continuing a ruinous arms race, and maintaining an unaffordable global empire—rather than accept the losses that thoroughgoing reforms might have entailed … [and, he says that, now, in 2020] … Chinese leaders are similarly constrained by the rigidities of their own system and therefore limited in their ability to correct policy mistakes. In 2018, Xi decided to abolish presidential term limits, signaling his intention to stay in power indefinitely. He has indulged in heavy-handed purges, ousting prominent party officials under the guise of an anticorruption drive. What is more, Xi has suppressed protests in Hong Kong, arrested hundreds of human rights lawyers and activists, and imposed the tightest media censorship of the post-Mao era. His government has constructed “reeducation” camps in Xinjiang, where it has incarcerated more than a million Uighurs, Kazakhs, and other Muslim minorities. And it has centralized economic and political decision-making, pouring government resources into state-owned enterprises and honing its surveillance technologies … [but, he says] …  all together, these measures have made the CCP weaker: the growth of state-owned enterprises distorts the economy, and surveillance fuels resistance. The spread of the novel coronavirus has only deepened the Chinese people’s dissatisfaction with their government.

The economic tensions and political critiques stemming from U.S.-Chinese competition may,” Minxin Pei says, and I agree, “ultimately prove to be the straws that broke this camel’s back. If Xi continues on this trajectory, eroding the foundations of China’s economic and political power and monopolizing responsibility and control, he will expose the CCP to cataclysmic change … [because] … Since taking power in 2012, Xi has replaced collective leadership with strongman rule. Before Xi, the regime consistently displayed a high degree of ideological flexibility and political pragmatism. It avoided errors by relying on a consensus-based decision-making process that incorporated views from rival factions and accommodated their dueling interests. The CCP also avoided conflicts abroad by staying out of contentious disputes, such as those in the Middle East, and refraining from activities that could encroach on the United States’ vital national interests. At home, China’s ruling elites maintained peace by sharing the spoils of governance. Such a regime was by no means perfect. Corruption was pervasive, and the government often delayed critical decisions and missed valuable opportunities. But the regime that preceded Xi’s centralization had one distinct advantage: a built-in propensity for pragmatism and caution … [but, he says] … In the last seven years, that system has been dismantled and replaced by a qualitatively different regime—one marked by a high degree of ideological rigidity, punitive policies toward ethnic minorities and political dissenters at home, and an impulsive foreign policy embodied by the Belt and Road Initiative (BRI), a trillion-dollar infrastructure program with dubious economic potential that has aroused intense suspicion in the West. The centralization of power under Xi has created new fragilities and has exposed the party to greater risks. If the upside of strongman rule is the ability to make difficult decisions quickly, the downside is that it greatly raises the odds of making costly blunders. The consensus-based decision-making of the earlier era might have been slow and inefficient, but it prevented radical or risky ideas from becoming policy.” I believe that Xi Jinping has bungled, seriously, by pushing aside Deng Xiaoping’s doctrine and replacing it with a sort of imitation Maoism. The US-led West was ready and willing to accommodate China when Deng, Jiang and Hu led; Xi has surrendered that combination of goodwill and hope. Perhaps the hope was misplaced, perhaps none of Deng, Jiang and Hu ever intended to do anything other than what Xi is doing, now, but at least there was some hope for accommodation. Xi Jinping has made it clear that he’s not interested in being “accommodated,” he wants to push America back from the Western Pacific, the China Seas and East Asia.

Minxin Pei says that “Under Xi, correcting policy mistakes has proved to be difficult, since reversing decisions made personally by the strongman would undercut his image of infallibility. (It is easier politically to reverse bad decisions made under collective leadership, because a group, not an individual, takes the blame.) Xi’s demand for loyalty has also stifled debate and deterred dissent within the CCP. For these reasons, the party lacks the flexibility needed to avoid and reverse future missteps in its confrontation with the United States. The result is likely to be growing disunity within the regime. Some party leaders will no doubt recognize the risks and grow increasingly alarmed that Xi has needlessly endangered the party’s standing. The damage to Xi’s authority caused by further missteps would also embolden his rivals, especially Premier Li Keqiang and the Politburo members Wang Yang and Hu Chunhua, all of whom have close ties to former President Hu Jintao. Of course, it is nearly impossible to remove a strongman in a one-party regime because of his tight control over the military and the security forces. But creeping discord would at the very least feed Xi’s insecurity and paranoia, further eroding his ability to chart a steady course.” So, having put China on the wrong course he, now, cannot find a good way to change course.

In terms of US strategy, he says that “A key component of Washington’s strategic confrontation with Beijing is economic “decoupling,” a significant reduction of the extensive commercial ties that the United States and China have built over the last four decades. Those advocating decoupling—such as U.S. President Donald Trump, who launched a trade war with China in 2018—believe that by cutting China off from the United States’ vast market and sophisticated technology, Washington can greatly reduce the potential growth of China’s power. In spite of the truce in the trade war following the interim deal that Trump struck with Xi in January 2020, U.S.-Chinese economic decoupling is almost certain to continue in the coming years regardless of who is in the White House, because reducing the United States’ economic dependence on China and constraining the growth of China’s power are now bipartisan aims … [but] … Since the Chinese economy today is less dependent on exports as an engine of growth—exports in 2018 accounted for 19.5 percent of GDP, down from 32.6 percent in 2008—decoupling may not depress China’s economic growth as much as its proponents have hoped. But it will certainly have a net negative impact on the Chinese economy, one that may be amplified by the country’s domestic economic slowdown, which is itself the product of a ballooning debt, the exhaustion of investment-driven growth, and a rapidly aging population. The slowdown may be further exacerbated by Beijing’s attempt to shore up near-term growth with unsustainable policies, such as increased bank lending and investment in wasteful infrastructure projects.

Harking back to my point (2nd paragraph, at the top) about Chinese leaders fearing a counter-revolution above all else, Profesor Pei says that “As the economy weakens, the CCP may have to contend with the erosion of popular support resulting from a falling or stagnant standard of living. In the post-Mao era, the CCP has relied heavily on economic overperformance to sustain its legitimacy. Indeed, the generations born after the Cultural Revolution have experienced steadily rising living standards. A prolonged period of mediocre economic performance—say, a few years in which the growth rate hovers around three or four percent, the historical mean for developing countries—could severely reduce the level of popular support for the CCP, as ordinary Chinese grapple with rising unemployment and an inadequate social safety net … [and] … In such an adverse economic environment, signs of social unrest, such as riots, mass protests, and strikes, will become more common. The deepest threat to the regime’s stability will come from the Chinese middle class. Well-educated and ambitious college graduates will find it difficult to obtain desirable jobs in the coming years because of China’s anemic economic performance. As their standard of living stalls, middle-class Chinese may turn against the party. This won’t be obvious at first: the Chinese middle class has traditionally shied away from politics. But even if members of the middle class do not participate in anti-regime protests, they may well express their discontent indirectly, in demonstrations over such issues as environmental protection, public health, education, and food safety. The Chinese middle class could also vote with its feet by emigrating abroad in large numbers.

For China, he suggests that “In theory, the CCP should be capable of avoiding or mitigating the damage from an economic slowdown. An effective strategy would incorporate some of the valuable lessons Xi’s predecessors learned from the collapse of the Soviet Union. Moscow continued to provide significant aid to Cuba, Vietnam, and several vassal states in Eastern Europe well into the Soviet Union’s twilight years. The regime also pursued a costly military intervention in Afghanistan and funded proxies in Angola and Southeast Asia. To avoid those kinds of mistakes, Beijing should prioritize the conservation of its limited financial resources to sustain the open-ended great-power conflict. In particular, China should retrench from its expansionist projects, above all the BRI, and other foreign assistance programs, such as the grants and concessional loans it has provided to Cambodia, Cuba, Venezuela, and several developing countries in Africa. Beijing might incur considerable short-term costs—namely, the loss of prestige and goodwill—but over the long term, China would avoid the perils of imperial overreach and preserve enough funds to recapitalize its banking system, which has been exhausted by excessive lending in the last decade … [and] … Beijing should also build stronger ties with U.S. allies to prevent Washington from recruiting them into a broad anti-China coalition. To do so, the regime will have to offer enormous economic, diplomatic, military, and political concessions, such as opening the Chinese market to Japan, South Korea, and Europe; ensuring the protection of intellectual property; making significant improvements in human rights; and abandoning certain territorial claims. Xi’s government has already taken steps to repair ties with Japan. But to truly court U.S. allies and avert a slowdown, either Xi or his successors will need to go further, undertaking market-oriented reforms to offset the economic losses caused by decoupling. The large-scale privatization of state-owned enterprises is a good place to start. These inefficient behemoths control nearly $30 trillion in assets and consume roughly 80 percent of the country’s available bank credit, but they contribute only between 23 and 28 percent of GDP. The efficiency gains that would be unleashed by reining in the state’s direct role in the economy would be more than enough to compensate for the loss of the U.S. market. The economist Nicholas Lardy has estimated that genuine economic reforms, in particular those targeting state-owned enterprises, could boost China’s annual GDP growth by as much as two percentage points in the coming decade.

But he says, China, under Xi, is unlikely to follow that (smart) course and will instead double down on domestic repression and international bullying.

Professor Pei says that, like America, “The CCP is still far from dead. Short of China’s losing a direct military conflict with the United States, the party can conceivably hang on to power. That said, a regime beset by economic stagnation and rising social unrest at home and great-power competition abroad is inherently brittle. The CCP will probably unravel by fits and starts. The rot would set in slowly but then spread quickly.

China’s Achilles’ heel is, I suspect, the lower middle/working-class people who are producing the cheap goods that America and Canada and Europe want to buy. They are, as Justin Trudeau likes to say, striving to join the middle class and enjoy the good life. IF Xi fails to keep them happy, if his policies are perceived to make China’s economy stagnate and, thereby, make climbing the socio-economic ladder too difficult, then the working class might be tempted to rebellion.

It would be ironic if the Chinese working class fulfilled Donald Trump’s dream of making America great again for its working class. Minxin Pei concludes that “The events of the past few months have shown that CCP rule is far more brittle than many believed. This bolsters the case for a U.S. strategy of sustained pressure to induce political change. Washington should stay the course; its chances of success are only getting better and better.

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