The Misnomer of Communist China’s Authoritarian Capitalism

International Monetary Fund (IMF) Managing Director Christine Lagarde (L) attends a meeting with Chinese Premier Li Keqiang (R) at the Diaoyutai State Guesthouse in Beijing on April 24, 2019. Parker Song/Pool/AFP/Getty Images

Commentary

The long-term goal of the Chinese Communist Party (CCP) is world economic dominance in all spheres: manufacturing, trade, control of natural resources, policy, legal, technology, and more. With economic dominance comes geopolitical and military dominance.

That goal was set long before Xi Jinping came to power in 2012–13. Xi’s grandiose plans, including the Belt and Road Initiative (BRI) and Made in China 2025, were predated by a strategy developed by Deng Xiaoping after Mao Zedong’s death in 1976. Deng delegated economic development responsibility to the CCP bureaucracy, giving them limited freedom and encouragement to pursue policies on their own. Resulting in a wave of Chinese studying Western methods abroad, which accelerated through the 1980s to the present, these changes coincided with a leveraging and exploitation of the international system that fueled China’s growth during the past 50 years.

Deng’s strategy involved penetrating, coopting, and leveraging international institutions in order to gain access to resources, foreign direct investment, advanced technology, and Western know-how. The strategy also involved waging war on the post-World War II order established by the U.N. and the Bretton Woods international monetary framework, as manifested in the World Bank, the International Monetary Fund, and the General Agreement on Tariffs and Trade (GATT—later the World Trade Organization).

The Chinese Communist Party’s (CCP) goal has always been to corrupt, co-opt, and ultimately replace it with an “authoritarian capitalist system” controlled by Beijing. Authoritarian capitalism is an amorphous euphemism that includes “features such as authoritarian shareholding, predatory nationalizations, the extraction of private rents using the state as a tool, and the reduction of economic pluralism through the alignment of economic and political interests.” And those “political interests” are always arbitrarily defined by the CCP at the expense of democracy, civil liberties, and the rule of law.

Thus, authoritarian capitalism is ultimately defined by state control in a totalitarian system.

A better phrase to define the CCP economic system, especially in terms of its global objectives, is “predatory mercantilism.” Beijing provides cheap loans and subsidized products to developing countries in Asia and Africa in order to achieve long-term strategic objectives, expand power, create long-term dependencies, and influence geopolitical outcomes through debt-leveraging. Predatory mercantilism is at the heart of the BRI.

U.S. President Richard Nixon inspecting a guard of honor with Chinese leader Chou En Lai, at Beijing airport, on Feb. 21, 1972. Keystone/Getty Images

How did China transition from a developing country devastated by decades of communist purges to “the world’s largest producer of over 220 types of industrial products, including vehicles and computers,” according to People’s Daily? Little did U.S. President Richard Nixon and Secretary of State Henry Kissinger know that when they “opened communist China” to the rest of the world in 1971 it would become an industrial giant, with many U.S. and multinational production facilities relocating to China during the past five decades.

Or did they know what they were doing?

Communist China Corrupts Bretton Woods

The CCP’s onslaught against the international system began with the corruption of Bretton Woods institutions such as the World Bank, the IMF, and the GATT. Originally established to help rebuild post-war Europe, the purpose of the World Bank morphed over the years into functioning as the world’s “poverty fighter” by providing developmental assistance to selected developing countries. And China, with a paltry gross domestic product per capita of $165 in 1976, was a perfect candidate for investment in the minds’ eyes of Western capitalists and politicians. In comparison, U.S. GDP per capita in 1976 was $8,592.

The original—and principal—IMF objective was “to secure international monetary cooperation, to stabilize currency exchange rates, and to expand international liquidity [access to hard currencies].” Its primary purpose was “to eliminate destructive mercantilist trade policies, such as competitive devaluations and foreign exchange restrictions—all while substantially preserving each country’s ability to pursue independent economic policies.” Beijing’s continuing predatory mercantilist practices described above are therefore major roadblocks to the achievement of the IMF’s stated purpose.

Originally, Bretton Woods negotiators envisioned an “International Trade Organization,” with GATT being a waystation toward that goal of an international organization aimed at “liberalizing trade” among the nations of the world. GATT was focused on implementing free trade by reducing import quotas and tariffs. In 1994, GATT morphed into the WTO, with its objectives being to increase the transparency of central bank decision-making processes, to liberalize trade, and to resolve trade disputes.

In 1970, the CCP was on the outside of this international system, thanks to the bipartisan anti-communist political coalition in the United States in the 1950s and 1960s. Nixon and Kissinger believed that communist China could be “brought into the family of civilized nations” through the democratization and integration of the country over time with its inclusion in these international institutions. The U.S. political class was convinced that the People’s Republic of China (PRC) could be peacefully brought into the global system through open trade policies and access to world markets and Western technology. The Nixon–Kissinger “opening of China” led to the below chronology, paving the way for CCP corruption of Bretton Woods and the international system of free trade.

In 1971, the United Nations General Assembly voted to admit the People’s Republic of China (PRC) to the U.N., after which began the CCP’s corruption of the U.N. (with the World Health Organization being a key example in 2020).

China replaced the Republic of China (Taiwan’s official name) as a permanent member of the U.N. Security Council in 1971.

The PRC’s representation at the World Bank began in 1980, and its first project loan was approved in 1981.

China’s association with the IMF began in 1980, although the yuan wasn’t officially designated as a foreign exchange reserve currency until October 2016.

The trifecta was completed when China became a member of the World Trade Organization (WTO) in 2001.

Recall that the IMF’s goal was to “eliminate destructive mercantilist trade policies.” China remains mercantilist to the core, having frequently manipulated its currency to gain an unfair competitive advantage, as noted in a 2019 report to Congress from the U.S. Treasury Department, “Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States.”

The Treasury Department formally designated China as a currency manipulator in August 2019. So much for the Nixon–Kissinger school of Chinese appeasement.

Conclusion

China’s financial system and economy are opaque, Byzantine, and authoritarian capitalist in nature, serving the CCP’s arbitrary priorities first and foremost. In justifying current crackdowns on ultra-wealthy Chinese industrialists and tech giants, the CCP has promulgated the latest in a series of slogans that masks its authoritarian economic controls: transformation from a capital-centered to a people-centered economy.

The CCP’s goal is to corrupt, undermine, and ultimately control—through proxies or directly—the existing international framework and organizations. This would profit and benefit the Chinese economy while replacing free enterprise and laissez-faire capitalism with a government-managed authoritarian capitalist economy, replete with predatory mercantilist practices.

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