Since the demise of Chairman Mao Zedong, the Chinese state has embraced drastic changes in its priorities. The Communist Party’s efforts toward market-oriented economic reform represent a change of the party-state’s priority from political to economic leadership. After the Tiananmen Square crackdown of 1989, paramount leader Deng Xiaoping sent an unambiguous message to the Chinese public, denying the possibility of political reform while keeping the doors open for economic growth. This is widely considered the political bargain structuring relations between the Chinese Communist Party (CCP) and the Chinese people. In other words, the CCP has premised its political legitimacy on its ability to generate economic growth.
However, this understanding of the party-state’s decision to reform misrepresents the CCP’s fundamental objectives. The party’s ruling legitimacy does not depend on China’s economic advancement. Instead, the fundamental aim of the CCP behind the reforms was to ensure its own security. Logically, should economic reform become an obstacle rather than a solution to the CCP’s political monopoly, the CCP will quickly jettison economic liberalization. In some cases, it already has.
Recovering from the economic catastrophe caused by the Cultural Revolution, Deng Xiaoping struggled to lead China forward. While Deng is widely credited for China’s economic boom, the idea of market reform did not originate with him. In 1978, eighteen peasants from Xiaogang village in China’s Anhui province signed a secret agreement to privatize communally owned land for household farming. Notably, this reform attempt was bottom-up, not top-down. It was not until after observing the success of this ground-breaking private experiment that the Central Committee of the CCP officially approved the Household Responsibility System (HRS) in 1980 and incorporated it into the 1982 Constitution, which effectively reprivatized rural land ownership.
Examining Deng’s words, it is not difficult to notice his confused idea of his policies. When Deng famously described his policies as akin to “Cross[ing] the river by feeling the stones,” he effectively denied the supposedly scientific doctrine of Marxist-Leninism. Further, even after the unprecedented wave of privatization in the late 1990s and early 2000s, the leading principle for China’s reform is illustrated as “grasping the large, letting go of the small.” Privatization may be allowed but only in areas of lesser importance to the national economy. The dominant sectors of the Chinese economy must remain state-owned.
Nonetheless, the private sector has always been the primary contributor to Chinese economic growth. The private sector churns out roughly 60 percent of China's GDP, 70 percent of innovation, 80 percent of urban development, and 90 percent of new jobs. Therefore, if economic advancement is genuinely where the CCP has premised its ruling legitimacy, it has failed to harness its most enduring source of prosperity.
Aside from historical observations, the decisions made by today’s CCP flawlessly display where its actual concerns lie. The party-state’s political prosecutions and judicial interference in Hong Kong triggered a series of protests in Hong Kong throughout 2019–2020. In particular, the city’s residents demonstrated against an extradition bill allowing the city government to extradite criminal suspects directly to mainland China. However, instead of striking a deal with protestors (as it did in 2012 when Hong Kong residents protested the introduction of “Moral and National Education” to school curricula), the CCP feared a knock-on effect in the mainland and decided to intervene with an iron fist, introducing the draconian National Security Law (NSL). Given the deliberately vague, overly broad, and manipulatable nature of the new NSL, its implementation has dramatically affected civil liberties on the island. The legislation’s wide coverage spans all disciplines and professions in Hong Kong, while its extra-territorial application threatens any businesses with ties to Hong Kong around the globe.
As a result, the NSL devastated Hong Kong’s status as an international financial center. According to an American Chamber of Commerce survey, 68 percent of 183 companies polled in Hong Kong are increasingly concerned about sustaining business operations. Moreover, many international companies are reconsidering their investment in Hong Kong, and an increasing number of multinational firms are building offices in Singapore to service the Asian market instead. In addition, the U.S. government also revoked Hong Kong’s special status for trade benefits. Clearly, “national security” is more valuable than mere commerce.
The trade-off of sacrificing Hong Kong’s economic prosperity for the party-state’s regime security was not an isolated incident. One need only examine a series of crackdowns on China’s private sector, especially high-tech and internet companies. In November 2020, regulators halted Ant Group’s $37 billion Initial Public Offering (IPO), considered the largest IPO globally at the time. Since then, the bureaucracy has commenced a series of regulatory crackdowns on Chinese high-tech and internet companies, wiping approximately $1.1 trillion from the market capitalization of Alibaba Group, Tencent, Meituan, Baidu, and JD.com in the Hong Kong stock market. However, as China relies on the United States and Taiwan for most of the advanced technologies, like semiconductors and microchips, there seems to be neither a rationale nor an incentive for the government to crack down on its own high-tech companies. This would inevitably hinder economic growth, restrict military capabilities, and curb technological innovation. While the crackdowns seem aberrant, the reason behind them is clearer when one considers that China’s high-tech industry is private instead of state-owned. While private enterprises in China enjoy limited freedom, they are dangerously autonomous in the eyes of the party-state. Therefore, they must be suppressed.
China’s development indicators also show how the regime has obstructed growth for its own ends. While China’s overall GDP and GDP per capita have been consistently rising over the past decades, it is not difficult to notice the striking inequality in the allocation of resources between Beijing and individual households. Chinese households only retain around 55 percent of the national GDP, compared to industrialized democracies, where household income represents roughly 70 to 80 percent of GDP. As a result, state investment, not private consumption, drives China’s GDP. Had economic prosperity been the determinative ruling legitimacy, Chinese households would retain a significantly larger share of the overall GDP. Moreover, despite the rhetorical goal to elevate extreme poverty, former premier Li Keqiang openly admitted that the monthly income of some 600 million Chinese people is still barely ¥1,000, which is equivalent to roughly $140. Namely, around 600 million Chinese people earn less than $5 per day, lower than the $5.50 benchmark recommended by the World Bank to evaluate extreme poverty.
When sustainable economic growth threatens its survival by creating independent sources of wealth and power, the party-state can no longer tolerate it. This way of thinking is also reflected in President Xi Jinping’s numerous speeches, which he calls “bottom-line thinking.” Here, the bottom line is the unchallenged political authority of the CCP. Therefore, if the requirement for economic advancement would cost the life of the Party itself, economic progress becomes expendable, regardless of its apparent prior role as a hallmark of the CCP’s legitimacy.
Wilson Y. Wen is a Juris Doctor candidate at Osgoode Hall Law School and serves as a senior editor of the Osgoode Hall Law Journal. He is also the research director at HanVoice and serves as an East Asia associate for the Open Foreign Policy Initiative.
Image: Kazakh Press Office.