One of the great stock statements about China, which most people accepted, was that since 1978 economic growth has been the overriding aim of the country’s Communist leaders. It seemed odd that people committed eventually to seeing the phasing out of capitalism and the arrival of a new egalitarian utopia on earth subscribed to such a creed. But the double-digit GDP growth rates posted from the 1980s up to about a decade ago testified powerfully to the fact that though they were Communist in ideology, China’s leaders were more than happy to support market-driven, often private sector-based sources of enrichment.
As a provincial leader in Fujian and then Zhejiang province, from 1985 to 2007 Xi Jinping, China’s current supreme ruler, was content to subscribe to this consensus. No strong economy, after all, equalled no strong country, and no fulfilment of the dream to one day be a great, modern nation. The only slight difference that Xi showed from other Chinese leaders was a keener interest in environmentalism, more effort in improving quality of growth rather than quantity, and an awareness that the Party, while presiding over all this activity, needed to never take its eye of its main goal: to be a political actor, not a commercial one.
Since elevation to central leadership in 2012, Xi has focused on politics above all else, including economic success. Initially, lower growth was expected, simply because no one could continue doubling the size of their economy every three years, something that had happened since China’s entry to the World Trade Organisation in 2001. This speed was not sustainable. But then came the push against non-state businesses as grand and successful as Alibaba, founded by Jack Ma, and Didi, the Chinese version of Uber. Over 2019, these companies were subjected to official scrutiny, with the latter forbade from doing an Initial Public Offering (IPO) in New York. Smaller businesses were increasingly told to ensure they kept their workers well abreast of recent ideology, using their Xi Jinping Thought apps. Even in the private zone, politics was in command.
The Party’s processes of reaching into all areas of social and commercial life have been accelerated by two things. The first was the Trump era pushback, where limited but unexpected trade wars made Beijing realise that it needed to wean itself more quickly than expected off western export markets, and most imported technology. The national Five Year Plan launched in March 2021 set aside 7 per cent of GDP to research and development, in order to make the country more autonomous in technological and business knowledge. Developments in Artificial Intelligence and other areas showed this investment was starting to pay off. It was also clear that everyone in the country needed to be united in this great mission to strengthen China’s autonomy.
The second has been the Covid pandemic. Here the impact may well have been deeper. The all-out commitment to achieve zero infections, even as the more transmittable Omicron variant appeared in February 2022, has made it even clearer that the government no longer places economic factors at the head of everything. The closure of the mighty city of Shanghai from March, emptying what were once some of the most dynamic commercial centres in Asia, is one symptom of this newly apparent mindset. Despite factories being closed down, ports experiencing major disruption, orders being unfulfilled, and supply chains domestically and internationally being temporarily paused, as of mid-June there is no sign that Xi and his colleagues are going to relent on achieving zero Covid, despite some signs of moderate opening up of public transport.
This is true even despite the falling growth rate indicators. The National People’s Congress in March stated a target of about 6 per cent GDP growth this year. The current rate is far below this, with some predicting that the US will actually have a faster growing economy that China’s in the current quarter—something that hasn’t happened for a long time.
Xi can continue to fire his grand project with nationalism. This is, after all, the era of what the party’s propagandists call “national renaissance.” The hundredth anniversary of the foundation of the Chinese Communists last year allowed its current leader to wax lyrical about its achievements, its unique and irreplaceable role in China’s future, and its great, stirring vision for Chinese people. The country, in official discourse at least, is currently in something akin to a life and death struggle. Everyone is obliged to view the virus as something that needs to be defeated, like an enemy in battle, and everyone is expected to make sacrifices.
This nationalism has been well-tended and prepared in the last three decades at least. It probably will allow the country to experience quite a deep amount of economic pain in order to defend what the party claims is national interests. But despite the shift away from purely economic objectives under Xi, no one knows what a China experiencing flat growth—or, even more unsettlingly, a recession—would actually look like. This is a phenomenon that just hasn’t occurred for many decades.
There are two things we can be sure about. The first is that after 10 years in power, it is pretty clear that Xi does not think in economic terms, and is not likely to change. A more pragmatic leader would have found a way around the zero Covid obsession. Evidently Xi sees this as a political issue, and one where he is not for turning. Secondly, while we don’t know what faltering or regressing growth might have on Chinese people, we can be sure that it will have some kind of impact. It will either make them restive, which is a problem for Xi, or even more nationalistic and assertive, which is a problem for the outside world. Whatever way one looks, a declining Chinese economy is bad news.
