Commentary on Political Economy

Saturday 25 September 2021


For those analysts who deal with the reality of modern China, a whole new raft of analytical studies about Xi’s moves within China – and his dramatic changes to Chinese national policy and orientation – are providing a new level of understanding of what the Xi presidency means to China, and the world.

There is a slew of such analyses to draw on but one of the best, which brings much of the work ­together in a coherent whole, is a recent paper for the Asia Society by Rudd entitled Xi Jinping’s Pivot to the State. Rudd rightly argues that ideology is much more important in modern China, and certainly in understanding Xi, than most Western analysts realise.

Rudd doesn’t use these words but in effect Xi’s historic project is the full-scale restoration of orthodox communist ideology, root and branch, throughout every sector of Chinese life.

The demise of Soviet communism was emphatically not the demise of Chinese communism. All of Xi’s actions, Rudd argues, are linked by a “red thread”.

Rudd attributes Xi’s big moves to three causes: ideology, demographics and economic decoupling from the US. I have my disagreements with Rudd on different things, but he is a superb analyst of China. His paper outlines a wide range of economic ­actions Xi has recently taken that have wiped more than $US1 trillion off the stockmarket value of Chinese tech companies, shut down numerous profitable digital services, and effectively shut down the nation’s vast private tutorial sector. There have also been social moves, such as calling for an end to the portrayal of “effeminate sissy men” on television.

All of the economic measures indicate Xi is reversing the long-term Chinese reform agenda of ­allowing the market to allocate a good deal of resources and the private sector to grow. Xi is determined to refashion the Chinese economy, with state entities dominant and growing, and with absolute Communist Party control of the economy and society.

Xi is determined to end the influence of private-sector billionaires, to redistribute income, and to increase central control. His New Development Concept involves a so-called dual circulation economy that will reduce China’s exposure to trade.

At the same time, he wants the sheer size of the Chinese economy to act as a “giant gravitational field” which pulls in and dominates the world economy, so that China is simultaneously more dominant but less exposed.

In Rudd’s view, Xi is moving the economy to the left, meaning more state control, and nationalism to the right, becoming more strident and belligerent. Not only is Xi pivoting the economy to state control but, within the governing structures of China, the Communist Party is more important than the formal organs of the state, and dominates them.

State-owned enterprises are being expanded and increasingly are taking equity shares in what were once private-sector Chinese companies.

Xi interprets modern communist history as encompassing three eras: under Mao Zedong China “stood up”; under Deng Xiaoping it “grew rich”; and under Xi it will “become powerful”. In 2013, the party notionally decided to emphasise the private sector, but Xi has been rowing back against that ever since he assumed office in 2012, and the direction was formally reversed in 2017.

Xi seems driven by great urgency. This might be because of his nature, or his age. In his late 60s, he might feel that there is a limited amount of time to accomplish what he wants.

But Xi is also driven by what he sees as contradictory elements of both opportunity and danger in the external environment. Xi, like the rest of the Chinese leadership, is convinced of Western decline, especially US decline. At the same time, Beijing is scared of US military capabilities and mindful of the US’s hi-tech virtuosity, relatively strong economic growth and, until the Covid pandemic, high population growth.

China, on the other hand, faces steep demographic decline. Rudd reports that China’s fertility rate now stands at 1.3, below even Japan’s. Soon it will face huge ­demands on retirement income, health expenditure and a declining population and workforce.

The most important take-out is that Xi is leading a powerful resurgence of communist ideology. This already dominates Chinese politics. Xi is bringing it to dominance in the Chinese economy, and it increasingly dominates Chinese foreign policy.

Rudd doesn’t say this but communism in foreign policy is traditionally paranoid, belligerent and militaristic. Most analysts think Xi’s economic and social policies will harm the Chinese economy. Combined with aggression abroad, that’s an extremely dangerous combination.

A final thought: it certainly ­justifies AUKUS. 

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