Xi Jinping’s China seeks to be rich and communist

President’s ambitions rely on avoiding ‘middle-income trap’ and placating a more demanding populace

Martin Wolf

Will China emerge as a high-income country still ruled by a communist party state? If China were to achieve this, it would transform a world in which all large, high-income countries are currently democratic. It would reshape the global balance of power, not just economically and militarily, but also politically and ideologically. This is what President Xi Jinping expects to happen. But how likely is it, in fact?

Today, China is not quite exceptional. True, the number of countries ruled by a party that calls itself communist is far smaller than it was before 1991. Yet there remain a few others, notably Vietnam. True, too, it has achieved four decades of staggering economic growth. Yet it is still a middle-income country, ranked by the IMF at 75th in the world, in gross domestic product per head at purchasing power parity — a little behind Mexico and Thailand.

In terms of quality of governance, too, it is not extraordinary, at least on standard World Bank indicators. As one would expect, it ranks far higher for “government effectiveness”, on which it is ranked close to Italy, than for “voice and accountability”, on which it is below Russia. But it is not really exceptional among middle-income countries. If, however, it were to become a high-income country, with GDP per head at, say, the level of South Korea but with government accountability where it is today, something quite new would have emerged. After all, even Singapore’s “voice and accountability” is ranked far higher than China’s.

If this were to happen, China would succeed in becoming rich, while its political system stayed much the same. This, it is clear, is what Mr Xi is trying to ensure. Sustained growth of real GDP per head at 4 per cent a year over another generation would bring China into the middle of the high-income group. Its economy would then be far bigger than those of the US and EU combined. This would be a new world. Yet is it a plausible one? South Korea is, after all, the only sizeable country to have moved from low-income to high-income status over two generations.

To achieve this, China’s party-state must prove able to reach high levels of government performance and the Chinese economy able to attain high-income levels of prosperity, without succumbing to demands for greater accountability from a population that would, by then, be prosperous, urbanised, highly educated and demanding. Moreover, this must also happen without the unmanageable splits in the party elite that destroyed the Soviet Union.

Why might China fail? It might succumb to the “middle-income trap”. Some argue that China’s economic growth is already significantly overstated. Moreover, as the population ages, environmental constraints bite, the economy is arguably more state-dominated, and returns on investment fall, growth — already far below rates achieved before 2008 — might fall to levels little, if any, higher than in the high-income countries. Convergence would then stall. A debt crisis might make such a slowdown more abrupt.

Meanwhile, social changes might undermine the legitimacy of the party-state, particularly in the context of such a slowdown. Moreover, in the long run, the party might find it impossible to contain the inherent corruption. It might also find it increasingly difficult to sustain the legitimacy of an organisation rooted in an outmoded Marxism, especially one responsible for such catastrophes as the Great Leap Forward and the Cultural Revolution. As Kerry Brown of King’s College London notes in China’s Dream, a fascinating book on the culture of China’s communism, the past is “full of doors that have been carefully closed and locked, and territories that are vigorously blocked off and policed”.

Why, nevertheless, might Chinese communism succeed? One answer is that the party-state has proved astonishingly flexible and pragmatic. Switching so quickly from the Cultural Revolution to “reform and opening up” was a feat. The ancient notion of the “mandate of heaven” is also helpful: since the communists are in power, they are meant to be so. Another answer lies in the deep roots of bureaucratic absolutism in China. Also crucial is the party’s claim to have redeemed the nation from poverty and victimhood and delivered, instead, prosperity and power. The party always frames the national narrative. It is, in Prof Brown’s words, the “repository of the national mission”. The marriage of party to nationalism is a potent fount of legitimacy. The way the US is conducting its trade diplomacy is likely to cement nationalist support.

The Communist party has additional assets. One is the drive towards education and entrepreneurship of the Chinese people, which greatly increases the likelihood of achieving prosperity. Another asset is the ability to transform modern technology into a system of comprehensive surveillance over virtually every Chinese person. Yet another is the ability to point to the recent economic and political failures of the high-income democracies: the global financial crisis; declining productivity growth; the tendency to choose incompetent leaders (such as US president Donald Trump) and doomed causes (such as Brexit). For a huge number of Chinese the democratic alternative must look less attractive than before. For them to risk domestic political stability for today’s versions of democracy, not least the west’s rejection of the pragmatic competence on which China’s progress is based, will seem foolhardy.

Will China turn itself into a huge Singapore, with high-income levels of prosperity and government effectiveness, but retain one-party rule? Or will its political system, economic progress or, more plausibly, both together, founder? Will Mr Xi go down in history as the man who brought China to the top of the world, or as a Chinese version of Leonid Brezhnev, whose conservatism brought the Soviet system into irretrievable disrepair? It is impossible to know how this will end. The Chinese alone will decide. We only know that it matters for us all. Meanwhile, the west has to look within, to repair its failing democratic system.

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