The Failure of Communism With Chinese Characteristics

Chinese media hide problems with China’s economy

A man walks past the Central Business District in Beijing on May 31, 2023. (Jade Gao/AFP via Getty Images)

Commentary

The debate between supporters of authoritarian communism (or Marxism) and free market capitalism has been raging for over 100 years. The pro-communist clique claims that although communism has failed everywhere it has been tried, if the “right communists create the right conditions in a country,” then it will deliver egalitarian largesse for everyone. The Chinese Communist Party (CCP) is the latest incarnation that is attempting to defy human nature and thwart catastrophic failure.

With growing and insurmountable economic and social crises looming, communism with Chinese characteristics is headed for the ash heap of history along with every previous historical example in which communists have taken control of a country.

Let us examine the topic.

A Communism Primer

In a communist country, a collective owns, controls, and manages the means of production: labor, entrepreneurship, capital, and land. That collective is the communist party acting through the power of the central government, which purports to act on behalf of the interests of “the people” by making as many decisions as possible for citizens (or as many as their power and authority will allow them to do, with the ultimate goal to micromanage every aspect of a person’s life to ensure “correct thinking”).

The government makes centralized decisions affecting commerce and production through a “command economy”—a centrally planned economy—that cannot possibly take into account the motivations of millions of citizens as they make individual economic decisions in their daily lives. This elimination of the free market is the Achilles’ heel of communism: the inability of communist economists (an oxymoron if there ever was one) in micromanaging a country’s economy over any extended period of time. The chronic failure of the Soviet Union’s “five-year plans” is a case in point, as the goals put forth were rarely achieved regardless of the communists’ ham-handed allocation of resources aimed at reaching them.

Communism ultimately fails because the laws of supply and demand don’t set prices in communist countries; ultimately, the government does, and this takes consumers out of the equation in balancing supply and demand. Surpluses and shortages are common in all communist countries as a result. The result is a failing or collapsed economy accompanied by years/decades of cynicism as the promises are exposed as lies. The trajectories vary by country, but the results expose the failures of communism to deliver on the theoretical predictions of Karl Marx et al.

China Teetering

China is no different from other communist countries, as the lifespans of communist regimes appear to be finite. Russian communism and the variants propped up in Eastern European countries are good examples. But the CCP’s tight control over economic statistics, business regulations, dissent (through extensive internal security forces), social media, and traditional media obfuscate economic realities resulting in a search for breadcrumbs to discover the truth of where China might be as history bends toward the demise of the CCP.

The aforementioned are some of the characteristics of Xi Jinping’s implementation of “communism with Chinese characteristics.” The CCP has kept the lid on Chinese citizens for decades by faithfully adhering to these characteristics, but cracks in the facade continually appear. State-run Chinese media regularly posts articles lauding Chinese economic activity based on data from China’s National Bureau of Statistics (NBS).

For example, People’s Daily reported on July 18 that “China’s second quarter GDP grew by 6.3 percent from a year earlier.” That seems good, but the growth is ephemeral because the growth comparison is with a locked-down economy in 2022. The improvement obfuscates the dire straits of the Chinese economy during the COVID-19 lockdowns that forced Mr. Xi to reverse his signature “zero-COVID” policy. The narrative being painted about China’s “recovery” since December 2022 hides the underlying problems that a mere reversal of the policy did not fix.

Others point out what is being hidden. The Wall Street Journal reported on July 17 that China’s economic recovery in 2023 has “lost momentum.” From the article: “Growth in the second quarter was less than half the 2.2 percent quarterly pace recorded in the January-to-March period. The result reflected weak retail sales, subdued private-sector investment, and a reversal in exports, which had propelled growth throughout the pandemic but are suffering now as major central banks ratchet up interest rates.”

The Economist piled on more bad news about China’s economy in an article that described how pressures are being exerted on multinational banks and other institutions to cease reporting bad economic news (there’s that suppressive element of communism with Chinese characteristics again!). From the article: “Inflation data released on July 10th showed that consumer prices were flat year-on-year in June, indicating weakening demand. Goods-price disinflation is also intensifying as manufacturers sit on more capacity. ... Growth in the seven-day moving average of home sales was down by 33 percent [from a] year earlier.”

The real problems brought about by Chinese communist economics include an enormous real estate bubble that skews internal investments, record Chinese youth unemployment, and a slump in exports and foreign direct investments in China as the United States and other nations seek to decouple from Chinese supply chains in response to Chinese saber-rattling.

A general view shows Evergrande residential buildings under construction in Guangzhou, in China's southern Guangdong Province, on July 18, 2022. (Jade Gao/AFP via Getty Images)

The long-running land speculation by local governments could be the straw that breaks the back of the Chinese economy, as bank lending to local governments has not resulted in the promised returns, which increases the risks of failure by already shaky Chinese banks that hide their accounting from public scrutiny. The poster child for land speculation is the bankruptcy of Evergrande, which used to be China’s largest real estate company. Zerohedge reported on July 18 that “in 2021 and 2022, the company generated mindblowing losses of $113 billion, on $340 billion in liabilities.” This is the tip of a very large iceberg that could sink the Chinese economy.

Capitalism to the Rescue

Another breadcrumb is this quote from a China Daily article on July 18: “China has pledged efforts to bolster its private economy, which plays a key role in supporting the recovery and stabilizing employment.”

More details were forthcoming from China Daily on July 21: China’s National Development and Reform Commission “issued a top-level document for promoting the development of the private sector, which details 31 measures such as supporting private enterprises’ access to funding, reducing market entry barriers and promoting fair competition.”

These are amazing words from the Chinese tabloid Global Times on July 19 in reporting on efforts to bolster China’s private economy: “[The new measures] will accelerate the creation of a first-class business environment that is market-oriented, ruled by law and internationalized, and optimize the environment for the development of the private economy.”

Concluding Thoughts

Turning to the private Chinese economy to stimulate economic growth is the antithesis of communist thought. The private economy is the real growth engine in a communist country, and even the communists know that it must be nurtured to deliver the economic growth numbers promised to the people. The communists know this, of course, as it was Deng Xiaoping who brought down the bamboo curtain in 1978 at the Third Plenum of the 11th Central Committee of the CCP, which led to the “economic miracle” of China’s rise. In short, “capitalist roaders” saved China and the CCP in the latter decades of the 20th century.

Things must be getting really bad in China since the CCP appears to be turning to the private economy to stimulate the desired GDP growth and to soothe the fears of foreign investors.

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