The Chinese Communist Party may yet go the way of its Soviet peer

As China’s rulers celebrate a centenary, political and economic headwinds are starting to blow

July 01, 2021
100 years—but how much longer? Beijingers pass an exhibit celebrating the anniversary of the CCP. Photo: Newscom / Alamy Stock Photo
100 years—but how much longer? Beijingers pass an exhibit celebrating the anniversary of the CCP. Photo: Newscom / Alamy Stock Photo

The Chinese Communist Party (CCP) will trumpet its own version of history as it celebrates its centenary on Thursday, and remind its citizens and the world of its centrality to China’s lofty economic and global aspirations in the decades ahead. It rules with a swagger about its accomplishments and a grand narrative about the future, and yet also with a repression and prickliness that are more consistent with a state of siege. China’s party leaders still fret about what happened to their Soviet counterparts and are determined to avoid a similar fate. China’s Leninist party has fared much better, but it nevertheless has good reason to be wary that the 2020s will be an important acid test.

There are few direct parallels between modern China’s status as an economic behemoth and hub of the global economy and that of the Soviet Union, once facetiously referred to as “Upper Volta (as Burkina Faso was then known) with rockets.” Built on a centralised production and planning system and with heavy military and internal security resource demands, the Soviet Union never advanced beyond a backward consumer sector, in which durable goods were distributed mainly according to political status and privilege. Broadly defined to include some public consumption, Soviet consumption per head was never more than about 10-15 per cent of what it was in the United States, while income per head when Mikhail Gorbachev came to power was around $6,500, or about a quarter of the American level at the time.

Yet these numbers should also give us pause for thought. China’s GDP may be more than 60 per cent of that of the United States, but on the IMF’s data for income per head, China’s $11,000 is still only 16 per cent of America’s. According to the World Bank, China’s household consumption per head, measured in constant US dollars, is nearly $3,500, which is not even 10 per cent of its US counterpart. In global terms, it is flanked by countries such as Jamaica and Iraq. Seen this way, China is not so different from the former Soviet Union. This is about China’s chronic structural imbalance between investment and consumption and the underdevelopment of the latter, which at 36 per cent of GDP is barely higher than a decade ago.

The failure to embrace structural change, from a Leninist focus on production and supply towards one based more consumption, services, much higher levels of educational attainment and productivity improvements, threatens to sour China’s economic prospects in years to come. The country faces a difficult transition, entailing awkward political decisions that are incompatible with the tenets of a strict Leninist party.

To be fair, such dilemmas did not stand in the way of previous party leaders, who presided over wrenching changes in the structure of ownership in China’s economy, the establishment of basic property rights and contracts, large-scale privatisation, the creation of the world’s largest private residential housing market, and extensive liberalisation required first by membership of the World Trade Organisation and subsequently by the needs of a modern financial sector. China’s rulers did not earn their reputation as technocrats and pragmatists for nothing.

Since Xi Jinping came to power in 2012, however, China’s economy has grown in complexity, and efforts to advance the cause of reform have run aground, been diluted by opposition to the point of irrelevance, or produced consequences the government has been unwilling to manage. The corollary has been a hardening of the command-and-control governance system, suppression of the private sector and entrepreneurs, and renewed emphasis on the “essential and relentless” functions of the party and state. The CCP never lost its Leninism, but on Xi’s watch it has a status and significance unparalleled since Mao.

China’s pre-existing structural economic headwinds, including diminishing debt capacity, stretched balance sheets, poor demographics and stalled productivity are being joined now by new constraints. These include a reversal of job creation in manufacturing and construction, an approach to governance that inhibits the innovation that leaders rightly emphasise, and rising hostility and distrust abroad.

Whether CCP leaders will use their antecedents as role models, capitalising on the opportunity in the 2020s to undertake difficult but necessary reforms, is an open question. They no longer permit mention of the middle-income trap, which ensnares nations at China’s level of development. But the country’s fortunes, along with their own, are dependent on avoiding it.

By 2022, the CCP will have ruled China alone and without formal opposition for 73 years, matching exactly the Soviet Communist Party’s longevity in power. Yet it is a matter of conjecture as to how long the CCP will outlast its Soviet peer. It is caught in a sort of political vice, in which the more it doubles down on party control and discipline in the name of economic and political stability, the more unstable things are likely to become.