Does CCP’s Overproduction Model Mean Regime Readying for War?

Visitors look at a full-scale replica of a ZTZ-99 tank displayed at the Chinese Industry Museum in Shenyang, Liaoning Province of China, on Sept. 15, 2013. (Getty Images)

News Analysis

China’s weak demand economy is in the doldrums. But instead of lenient incisiveness for the hard-hit consumer base, the Chinese Communist Party (CCP) is ramping up production overcapacity and exacerbating the economic woes at home while also bringing troubles to the rest of the world, experts suggest.

China watchers shared on “Pinnacle View,” a forum program of New Tang Dynasty TV, that this political and economic model is an attempt to penetrate overseas markets aggressively with massive cheap products like EV cars and, more importantly, an accelerated development toward a planned economy preparing for possible wartime shortages.

James G. Wen, a retired professor of economics and international studies at Trinity College in the United States, said on “Pinnacle View” that China’s economy is facing multiple layers of barricades.

“Many systematic problems within the ruling party have turned the Chinese economy into ‘a monster,’ that is, it has some market economy elements, but the most decisive power to allocate resources comes from the party that lack of legitimacy,” he said.

Reflecting on the Chinese economic dynamic, Mr. Wen noted, “More than a decade ago, mainstream economists in China already reached a consensus that if China did not carry out further reforms, the economic growth rate would continue to drop. At that time, some senior members of the CCP government, such as former premier Wen Jiabao, also pointed out that without political reforms, the fruits of economic reforms would be lost.

“Those reformists advocated that the market should be a decisive factor in allocating resources, while the current CCP head reaffirmed that the party determines everything including the market and resources, it is “a complete 180-degree turnaround.” Mr. Wen said.

“Xi Jinping came on stage with the image of saving the Party, and he upheld the slogan to crack down on opponents and those who are more reform-oriented in the economy, especially private entrepreneurs.”

Mr. Wen said the CCP leadership wanted to grow the state economy at any cost, with the state treasury subsidizing state-owned enterprises. However, economic theory and practice have shown that this method, which resembles a planned economy, may provide some short-term stimulus but will not solve the fundamental problem.

A migrant worker waits to meet potential employers at the Jinjiang District Human Resources Market on February 17, 2009 in Chengdu of Sichuan Province, China. China is facing a difficult employment situation in 2009 as the global financial crisis impacts on the country's economy. (China Photos/Getty Images)

“Take employment as an example. Not merely rural migrant workers are unemployed, fresh university graduates are unable to find a job. This is a major problem in the Chinese economy,” Mr. Wen said.

In addition, mass production under the state-planned economy resulted in products being dumped into the market at low prices, Mr. Wen said that the United States, Europe, and other countries are starting to react to the CCP’s scheme to seize the global market.

As a crucial component of the economy, the domestic land market is monopolized by the communist regime, as it has deprived the Chinese of their right to private ownership of land, Mr. Wen said. The regime has also expanded its land acquisition overseas.

“The CCP has long used land finance to extract the wealth from land appreciation, a small portion of which invested in infrastructure, a majority in raising its bureaucracy of nearly 100 million civil servants, buying off some poor countries or their dictators to be its allies and also expanding military expenditures and war readiness.”

Refuting the official propaganda that “China has eliminated absolute poverty and become moderately prosperous,” Mr. Wen said that China is still at a backward level. “We know that 600 million people earn less than 1,000 yuan (about $138) a month, and more than 900 million people earn less than 2,000 yuan (about $276) a month.”

‘Not Sustainable’ Chinese Economy

Western economists and politicians have expressed concerns over the crippling Chinese economy

In an interview with Bloomberg on June 3, Nobel laureate in economics, Paul Krugman said China’s economic model is “not sustainable.” He said China’s leaders are “bizarrely unwilling” to use more government spending to support consumer demand instead of production.

In August 2023, Mr. Krugman wrote that ideally, China would push for long-term demand reforms that would give households more income and growing consumption would replace unsustainable investment.

Li Jun, an independent TV producer, said Mr Krugman, this year, has “found that Beijing has gone completely the opposite way, so he believes that this blunder of Xi Jinping has made China’s economic crisis come early.”

“The Western economist believes what Beijing urgently needs to address is domestic demand and that it should do what the U.S. government has done, which is to provide welfare or money, which is simple and effective so that when people have the money, demand will come up,” Mr. Li said on “Pinnacle View.”

U.S. Treasury Secretary Janet Yellen called for the CCP government to stop relying on exports to stimulate the economy and to boost domestic demand and consumption during a visit to China in April this year. She said that if China’s economic policies remain unchanged, it could trigger tariff adjustments in the United States.

Ms. Yellen also made it clear that the United States won’t accept China’s exports of electric vehicles, batteries, and solar products dumped on the United States.

In a recent interview with Time Magazine, U.S. President Joe Biden cited a series of problems with China’s economy, suggesting that it is not booming, but on the verge of collapse.

Planned Economy and Wartime System

Guo Jun, editor-in-chief of Hong Kong Epoch Times, said on “Pinnacle View” that the CCP’s focus on production rather than consumption is to “strengthen a power-operating mechanism.”

Ms. Guo said there are two possible reasons for Xi Jinping to do so.

“The first is that the system of the Communist Party’s regime was itself designed to cope with the shortage of economy in times of war. So when encountering trouble and pressure, the CCP will be accustomed to moving in the direction that it’s familiar with and most apt at,” she said.

“The second possibility is that the CCP is making preparations for a future war. Particularly concerning the extreme lockdown and anti-virus measures that have been in place for the three years since COVID broke out.

“Some have questioned whether this is a stress test for Xi’s transformation of the war system, as he wants to see where the bottom line of tolerance is for the Chinese people so that the totalitarian government will have more room to maneuver in future extreme situations,” Ms. Guo said.

The CIA has estimated that the CCP may be ready to wage a war against Taiwan by 2027. Some intelligence experts have predicted the most dangerous years will be 2025 and 2026.

Anti-tank fortifications from previous conflicts line the beach in front of the Chinese city of Xiamen on April 09, 2023 in Kinmen, Taiwan. Kinmen, an island in the Taiwan strait that is part of Taiwan's territory, is so close to China that the deep-water port of Xiamen, one of China's biggest, lies less than three miles away across the water. (Chris McGrath/Getty Images)

“We do see some changes in mainland China, such as weak consumption, the large-scale military industrial enterprises in full production, the strengthening of social control, the restriction of the management of the mobile population, the censorship of public opinion, the battle mobilization of the military, the recruitment of soldiers and so on, all these signals that the CCP is moving towards the war readiness,” Ms. Guo said.

Given the need to have the Party Planning Committee deploy various raw materials and factors of production during the fighting, the CCP is also experimenting with state-owned canteens to provide personal food rations, Ms. Guo said.

“This kind of wartime economy can also be called a shortage economy that is centrally planned, in which all necessities and supplies are subject to a quota system,” she said, pointing to the rationing systems in the UK and United States during World War II.

“If it is the wartime of the CCP, all will be designed to ensure victory in the war, and all social resources were prioritized to meet the needs of the war.” Ms. Guo said.