Lth 20e Congress of the Chinese Communist Party (CCP), from October 16 to 22, 2022, confirmed the leadership of President Xi Jinping for the next five years. China’s fundamental institutions are totalitarian, reflecting the CCP’s control over every facet of society, including the economy. The institutions of the party-state were completely copied from those of the Soviet Union (USSR) in 1949. But, while Soviet totalitarianism collapsed three decades ago under the weight of its economic failures, China has seemed to be an exception. Is it sustainable?
“Chinese-style totalitarianism” » combines highly centralized control of politics, ideology and population, with decentralization of administrative and economic affairs. This arrangement facilitated post-Mao reforms. But since Xi came to power in 2012, China has slipped back into global totalitarian control, especially over a growing private sector. This reversal is a central reason for the severe economic downturn in 2022.
Much of the rapid economic growth of the 1990s was just a catch-up after the devastation inflicted in the late 1950s through the 1970s by the Great Leap Forward and the Cultural Revolution.
After Mao’s death, the CCP came to believe that growth was the key to its survival. Regional economic performance became the determinant of the promotion of local party-state bureaucrats, leading to competition among regional bureaucrats. To gain advantage, some of them concealed or supported private companies and thus facilitated the rapid growth of the private sector.
Massive debts
The CCP then amended the Constitution to recognize private property rights (2004). The private sector, a rudimentary civil society, and independent media outlets were allowed to flourish — the latter grew at breakneck speed — on the condition that they did not oppose the CCP’s political monopoly. China’s accession to the World Trade Organization (WTO) in 2001 led to a huge influx of foreign investment and a dramatic increase in exports which, together with the rapid expansion of the private sector, have become the engines of growth.
But the regime relied on massive debt accumulation to boost infrastructure development. With most of this investment inefficient, China has entered a vicious circle of over-leverage and over-capacity.
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