No, China's Communist Party Is Not Running on Borrowed Money

October 19, 2019 Topic: Security Region: Asia Tags: ChinaCommunismXi JinpingEconomyRecession

No, China's Communist Party Is Not Running on Borrowed Money

The CCP seems deathly afraid of facing up to even a mild recession. But why? It’s not as if the end of the economic party means the end of the Communist Party.

A limit of two five-year terms for the president and vice president had been written into China’s constitution by Deng Xiaoping in 1982. The two-term limit was meant to establish a routine reshuffling at the top of China’s political hierarchy, though all the while Deng remained the unofficial power behind the scenes. China’s presidency under the 1982 constitution was at first a largely ceremonial post. The first two presidents, Li Xiannian (1983–1988) and Yang Shangkun (1988–1993), served one term each before being forced to retire by Deng. The next two presidents, Jiang Zemin (1993–2003) and Hu Jintao (2003–2013), each served two terms. After Deng died in 1997, Jiang started the practice of aligning the office of president with that of general secretary of the CCP, handing over both posts to his successor at the end of his presidential term. Hu went one better at his retirement, handing over the third key role of chairman of the Central Military Commission and commander-in-chief of the People’s Liberation Army (PLA). Thus when Xi took over in 2013, he wore all three hats right from the start: president of the prc, chairman of the CCP and head of the PLA. So much for collective leadership.

What really puzzled China experts in 2018 was why Xi was willing to waste political capital on removing presidential term limits when there are no term limits on the positions that really matter: chairman of the CCP and head of the PLA. Trapped in an outdated understanding of China that placed all power in the Party and the army, Western China experts have missed out on one of the biggest China stories of the twenty-first century: the growth of the state. The Party is still important, especially at the highest levels, but the days when Party commissars made day-to-day decisions in all realms of society are long since gone. Today, state bureaucracies and state-owned enterprises (SOEs) have become power bases of their own, as amply illustrated by China’s difficulty in shutting down steel production. The CEOs of big SOEs like Sinopec (oil), State Grid (electricity) and ICBC (banking) may report to Xi Jinping, but their junior vice presidents certainly don’t answer to their local Party branches. And what goes for SOEs applies even more to big private-sector companies like Huawei, Alibaba and Tencent.

Mao’s China may have once fit the political commissar model to a T, but the period of international opening and economic reform that Deng put in motion made that model obsolete. Interestingly, it was Xi Jinping’s father, Xi Zhongxun, who in 1979 as governor of Guangdong Province set up China’s first special economic zones (SEZs). Xi the son graduated from Tsinghua University that year, and one can only wonder what career advice his father may have offered at the dinner table. Xi junior would later serve as vice mayor of Xiamen (1985–1988), which, although in Fujian Province, was one of four initial SEZs that his father had been instrumental in setting up. During the Cultural Revolution of Xi’s early years, when he and his father were both sent for “reeducation” in the countryside, the Party was clearly in charge. But in 2018, at a time when government expenditures exceeded $3 trillion and China’s SOEs turned a collective profit of $180 billion on revenues of $4.3 trillion, the state is king.

THE HEADLINE news from China’s 2018 constitutional reforms was the removal of term limits and the associated implication that Xi might rule as president for life. Less noted were several other constitutional and administrative changes that help explain that move. The constitution was amended to create a new anti-corruption agency, the State Supervision Commission (SSC). The SSC will absorb the former anti-corruption agency, the Central Commission for Discipline Inspection, which is an organ of the Party, not the state. Like every other element of the Chinese government, the SSC is still ultimately beholden to CCP authority at the highest levels, but the 2018 reforms will reduce the ability of lower-level Party officials to settle scores by prosecuting rivals for corruption. The new structure of anti-corruption investigations is likely to reinforce the concentration of power at the top of the party-state hierarchy.

Administrative reforms undertaken at the same time will also increase Xi’s ability to govern from the top. China’s cabinet, the State Council, has been restructured and reduced from thirty-five members to a more manageable twenty-seven. The avowed aim of this reform is to increase “the capacity for governance of the State,” and there seems to be no reason to doubt this straightforward and forthright explanation. Taken together, the removal of presidential term limits, the centralization of anti-corruption prosecutions and the streamlining of reporting channels all point toward one conclusion: Xi intends to complete the historical transition from governing China through the CCP to governing China through the state.

This is not to say that the Party is going anywhere, anytime soon. The CCP remains firmly in charge. But the structure of its rule is changing. In the not-so-distant Maoist past, the CCP dominated society in every functional domain (farms, businesses, schools, social services, etc.) and at every level, from the village to the nation. In the rapidly-emerging Xi-ist future, the CCP will dominate the central government, which will dominate everything else. The power of the CCP will remain the same, perhaps even strengthen, but the power of petty local Party secretaries will decline. It already has. The route to the top in China no longer starts in some remote local Party branch—it starts at Harvard.

Viewed through this lens, one otherwise meaningless 2018 change to the prc constitution becomes strangely telling. A seemingly gratuitous statement was added to Article 1: “The defining feature of socialism with Chinese characteristics is the leadership of the Communist Party of China.” Taken at face value, this is utterly superfluous pap. But if so, why bother, and why now? One possible interpretation is that this statement was inserted to reassert the ultimate authority of the CCP in the face of the many other changes (constitutional, administrative and economic) that have reduced the importance of the Party at all levels of Chinese life except at the very top. The amendment is a concession to the wider Party membership to reassure them that they still matter.

It also comes at a time when the Party’s core mission, social control, is increasingly being taken over by the state. China’s latest tool for repression, the infamous social credit system, almost entirely bypasses the Party bureaucracy. The CCP just doesn’t have the expertise to run a sophisticated twenty-first-century technology operation. Although some ham-fisted attempts by local authorities to encourage neighbors to spy on each other have attracted a lot of international media attention, the real organizational muscle behind the social credit system comes from internet giants like Alibaba and Tencent. They have the big data analytics capacity to integrate myriad local systems and mine them to detect behavioral patterns. And they don’t report to local Party branches—they report to Beijing.

China’s new monitoring tools, which include social scoring, algorithmic profiling of people’s online behavior, automated facial recognition at potentially millions of invisible checkpoints, and even gait recognition for those who may cover their faces and ditch their phones, are giving the Chinese government unprecedented power to control its citizens. As China moves rapidly toward a cashless (though thoroughly monetized) economy, it will soon be possible for the government to control people’s every action simply by controlling their wallets. At the first sign of trouble, protesters could lose their ability to communicate, travel or even buy food. This new and strangely impersonal form of totalitarianism won’t rely on the Party’s human informants and thugs. Artificial intelligence will be more effective at keeping people in line than human muscle ever was.

China continues to use the heavy hand of military force in the restive Xinjiang region of western China, where a million or more Uyghur Muslims and other minorities have been interred in “re-education camps.” But Xinjiang is very remote from China’s power centers, and unrest there could never threaten the CCP’s rule over China as a whole. China’s leaders are much more concerned about the possibility of urban street protests of the kind that overthrew governments in Egypt (2011) and Ukraine (2014), and it is these that the social credit system and associated big data tools are designed to prevent.

AS THE CCP passes its own centenary and starts to look forward to the 2049 centenary of the People’s Republic, it will realize that the only meaningful threat to its continued rule comes from inside. The breakup of China is sheer fantasy, but the breakup of its ruling party is a real possibility. The rapid economic growth of the reform era may not have conferred legitimacy on the CCP, but it did give the Party leadership plenty of resources with which to buy off potential opponents. When the economy was growing at 8 percent per year, every project succeeded, and everyone got rich. Now that the economy is growing slowly (if at all), party discipline is becoming much more problematic. Facing much stricter fiscal constraints than his predecessors, Xi has shifted from placating internal rivals with corrupt payoffs to prosecuting them for corruption.