There have been dramatic events inside and outside China in recent years, not the least of which include the extremes of droughts and floods, devastating hurricanes, and the havoc wrought on the Chinese people and economy by the COVID-19 pandemic. China watchers have been speculating on whether China is rising, cresting, or declining.
The socio-political-economic trends in a country of 1.4 billion souls are difficult to gauge. A key indicator is determining whether the Chinese Communist Party (CCP) is living up to its promises to the people. Part of the existing social contract between the CCP regime and the Chinese people is that the regime would deliver economic opportunity and an improved standard of living. The people concede their political rights and freedoms to the CCP in return for the promise of never-ending economic prosperity. If either side violates its end of the bargain, then the result is social unrest and potential chaos.
As long as the regime can appear to deliver relative prosperity to the average Chinese, the Chinese people can tolerate the regime’s authoritarian measures. That contract was on the verge of going up in smoke during the pandemic as communist leader Xi Jinping’s unscientific attempt to stop the spread of the virus through his zero-COVID policy involved the forced incarceration of hundreds of millions of Chinese in their homes and in field hospitals, resulting in major riots and unrest in the fall of 2022. The CCP cannot withstand prolonged widespread dissent because that exposes the lie that is its social contract, and Mr. Xi was forced to completely rescind his signature zero-COVID policy.
Whenever tyrants have problems at home, “overseas adventures” are often used to distract disgruntled domestic audiences. Mr. Xi is no slouch in that regard, as he has used his communist diplomatic corps and state-run media to create narratives that appeal to Chinese nationalism (a belief shared by many Chinese that China is the center of the world and its rightful leader). His ire is aimed at the CCP’s main roadblock to their ambitions: the United States of America and its allies.
The Social Contract Frays
If the CCP were delivering on its side of the unwritten social contract with the Chinese people, then prosperity and living standards would be ever-increasing. People would be content and be more willing to spend their money rather than to save it for rainy days. Unemployment would be low across all demographic groups. And people would have children as a direct reflection of their hope for the future.Regarding that last point, partly thanks to the CCP’s “one-child policy” (one child per family) implemented in the late 1970s through 1980s to limit China’s population growth, the communists have a major demographic problem on their hands. Despite changes to that policy and efforts to incentivize having children, there were only 9.56 million births in 2022, down 10 percent from 2021, and the lowest level on record since birth statistics were first reported by China’s National Health Commission in 1949.
There were also serious secondary effects from that “one-child policy” as China’s overall sex ratio skewed toward males over time—partly because of the tradition of preferring male children but also tied to inheritance of property and traditional responsibilities of caring for elderly parents.
China’s demographic trend creates a serious problem for the CCP. Its domestic claim to legitimacy has been increasing living standards maintained through explosive growth over the past two generations. That growth is threatened by an aging workforce, a decline in replacement workers, and the problem of ensuring improving living standards for the average Chinese.
Concluding Thoughts
The social contract is a delicate balancing act and challenge for China’s “authoritarian capitalism” model. Some have claimed that “communist economist” is an oxymoron based on past performance, with the CCP’s vaunted growth bubble bursting because of a host of self-generated problems, such as massive default risks, over-built real estate, an increasing ratio of corporate debt to GDP, a looming debt crisis, and opaque financial reporting.No bailouts for the CCP!