China’s Failed Economic Strategies

Shipping containers stack at Zhoushan port in Ningbo, in China's eastern Zhejiang Province, on April 19, 2023. STR/AFP via Getty Images

Commentary

China’s economy is unraveling because its economic strategies are failing. Such is the way with communists.

Beijing’s primary economic strategy is to revive international trade and investment ties with the West, especially Europe. The Chinese Communist Party (CCP) sees Brussels as more compliant than Washington, which is true though even the European Commission last month issued a policy that would “de-risk” European supply chains from China and limit exports of sensitive military technologies to the country.

On July 15, China’s foreign minister, Wang Yi, asked the European Union to “clarify” its “strategic partnership” with China, agreed in 2003. The relationship has been under particular stress since 2019 when the EU officially recognized China as an “economic competitor” and “systemic rival” because of Beijing’s support of Moscow’s belligerence, not to mention its broader preference for communism and dictatorship over market democracies.

Mr. Wang adopted his typically imperious tone in response, saying that the China-EU partnership “should not waver.” However, the relationship is unlikely to improve without significantly better observance of human rights and international law by Beijing. That’s unlikely, given the CCP’s hegemonic ambitions. Its culturally homogenizing strategies—to the point of genocide against Uyghurs, Tibetans, and Falun Gong adherents—don’t help.

Second, Beijing supposedly seeks to boost China’s economy by reorienting production to domestic rather than international consumption. This can include elements of greater stimulus spending, including in the sagging property sector. China is also dragging down its economy with too many inefficient high-speed passenger rail lines. The market doldrums of ghost cities and empty trains are a symptom, not a cause, of a more general economic malaise and state-driven diversion of stimulus to inefficient production. Stimulus is overdone already in China, and its debt-to-GDP ratio, including hidden debt, is a whopping 300 percent.

Plus, wealthier populations have historically sought democratization. This was the great unrequited hope of the West’s embrace of economic engagement with dictators, thinking it could thereby democratize them. In the case of China, engagement had the opposite effect, economically strengthening and emboldening an adversary, if not an enemy.

Yet the CCP still sees the private wealth of its own citizens as a threat. Wealthy citizens are less dependent on the Party and more likely to seek improvements to their lives beyond the basics of food, a roof, and health care. They might want more in life, like the freedoms traditionally associated with democracies.

Freedom of speech and the right to vote in real elections for their top leaders would make short work of Xi Jinping and the rest of the CCP, as it did in the former Soviet Union. So these freedoms, and the private wealth that makes them more likely, are rejected by Beijing. Instead, the CCP seeks to skim all private wealth over and above the necessities of economic growth for redeployment to expand its power and influence abroad. That leads to economic inefficiency at home.

A Chinese coast guard ship patrols Scarborough Shoal in the South China Sea on Oct. 6, 2022. STR/AFP via Getty Images

Third, Beijing seeks to increase its regional economic integration and, through this, its economic influence or even control over its near-abroad in Southeast Asia. However, Beijing has abused its relationships in Southeast Asia for decades, including through military attacks on Vietnamese forces in 1973, 1979, and 1988, and island grabs from the Philippines in 1994 and 2012, for example. Few in Southeast Asia really trust Beijing anymore. While they will trade with China, including allowing Beijing to use their territories for the transshipment of goods to places like the United States and European Union, they do not trust the CCP so much as to allow it much more political influence in their countries.

China expert Gordon G. Chang argues in The Hill on July 21 that given China’s floundering economy, Mr. Xi has two stark choices. “He can let economic forces take their course and bring down the Chinese political system, which has depended on delivering prosperity as the primary basis of its legitimacy, or he can whip up xenophobia and nationalism by triggering a conflict with the United States or other victims,” writes Mr. Chang.

Mr. Xi’s frequent advocacy of fighting spirit in speeches over the years, including before People’s Liberation Army officers, and reported plans to invade Taiwan within years, not decades, suggest that he is considering the latter option, at the very least.

“China’s leader is engaging in a total-society mobilization for war,” writes Mr. Chang. “A conflict is something he has long been planning for.”

There is a silver lining to the storm clouds coming from China. Many Chinese are voting with their feet, which is the only way they can vote. They are leaving China by the hundreds of thousands every year.

In 2022, over 350,000 lucky Chinese nationals escaped the grasp of the CCP through emigration. That is good for them and the world if they contribute economically, culturally, and politically to their new countries, many of which are democracies. It also deprives the CCP of brainpower, human capital, and investment that these Chinese citizens manage to take with them. Sometimes, getting private wealth out of a communist dictatorship requires creative accounting, which should get more support from democracies but often does not.

Hopefully, like Russian and Vietnamese emigres and refugees from communism in decades past, our new Chinese emigres will add to the backbone of reason and experience in countries around the world that seek to resist totalitarianism, including of the communist variety.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.