How ready is the world to face the imminent transformation in China?
“Transformation?” We’ve been mesmerized by its slow-motion implosion; it’s only how the impact occurs that now matters.
Chinese Communist Party (CCP) leader Xi Jinping, the subject of seemingly endless recent speculation, has become embattled on many fronts. His biggest enemy at present isn’t the United States—it’s the CCP itself.
A collapse of Mr. Xi’s administration or a revolt in one form or another by part of the People’s Liberation Army (PLA) could threaten the Party itself and the unity of China. For the moment, Mr. Xi, the CCP, and even the PLA can put on a unified front of “wolf warrior” bluster against the Republic of China (Taiwan), the United States, Japan, and so on, but it seems increasingly clear that neither the Party nor the PLA relishes the prospect of open warfare over Taiwan.
This would trigger a wider war, in which the outcome for the CCP and China would be problematic.
Mr. Xi, for his part, would be engaged now in a futile attempt to stop dialogue outside of his control between the CCP and the PLA, so he has been attempting to remove potentially “independent” PLA leaders. In so doing, of course, he damages the ability of the PLA to initiate or sustain military operations against Taiwan and the combination of foreign forces that would be introduced to a potential conflict.
At the same time, China—and therefore the CCP—is, in some senses, “broke.” Certainly, China retains enormous foreign exchange and gold holdings. Still, it also faces the prospect of further precipitous declines in foreign trade and increases in the cost of acquisition of foreign food and energy supplies.
Domestically, China faces an escalating security challenge as the housing market continues its collapse—taking with it the savings of tens of millions of Chinese people—and its related local government debt crisis worsens.
Unemployment is so high that the CCP has ceased to issue key employment statistics, even patently untrue figures, knowing they would be disbelieved. Starvation, the hallmark of the era of Mao Zedong (CCP chairman from 1949 to 1976), has returned on a widespread basis, largely because of Mr. Xi’s distrust of private commercial activity and his insistence on reliance on state-owned enterprises, which, as in the Mao era, contribute nothing to Chinese productivity, exports, or self-reliance.
Mr. Xi has made it clear that he’s rushing toward a Maoist state again, with its supposed capability to rely on an “internal circulation” economy. But that, as modern Chinese officials know, is unsustainable; China lacks the capacity to feed its population, even as that population rapidly declines in size.
When he secured a third (unprecedented) term as general secretary at the 20th Congress of the CCP in October 2022, the implication was that he had removed all those key party officials who disagreed with his vision of “Maoist purity.” Events subsequent to the Congress, however, must have convinced many that his repudiation of market economics—which he patently neither understands nor desires; after all, he won’t go hungry—has ignited a wave of anti-party sentiment far greater than the urban unrest of the first decade of the 20th century, when the Imperial era was overturned.
Are we approaching the time when the CCP, to save itself and its control over China, will remove Mr. Xi? If so, can it do this without massive bloodshed of the type seen during the pitched city battles of the Cultural Revolution? Even then, is it too late for a non-Maoist CCP leadership to restore an element of market economics? It’s in no position to repair the property market in the short term nor to service its debts.
It could only hope to impose a rigorous economic reform of the type introduced by Chilean leader Augusto Pinochet after the 1973 overthrow of Castro-ist President Salvador Allende. But even Allende hadn’t gone as far down the path of the destruction of the Chilean society as Mr. Xi has gone in destroying the mainland Chinese society.
Mr. Xi has removed so much hope from the mainland Chinese population that his mere removal and the restart of pro-market activities might stave off or deflect some mass anger. But it would do little for the global economy, which now has no option but to think of a new economic model that isn’t reliant on Chinese markets or manufacturers.
Like it or not, more bilateralism in global trade has already emerged, as became clear in about 2008. Greater self-reliance or shortening of supply lines is also beginning, even as other Asian nations attempt to replace China as manufacturing centers. All of this requires a transformation of tax and investment incentive laws in most countries so that they can stimulate revivals in their manufacturing bases. This, in turn, demands a rethinking in terms of cold sobriety of education patterns, away from nonproductive fantasy.
Talk of climate change will drift away, replaced by talk of putting food on tables. It’s almost dawn, and the world will awaken, cold and hungry.
