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China: The Ground Shakes, Is An Earthquake Coming?

China: The Ground Shakes, Is An Earthquake Coming?
 François Godement
Special Advisor and Resident Senior Fellow - U.S. and Asia

China’s party state is multiplying disciplinary and regulatory actions that amount to a top down shake up of China’s urban economy and society. This received only limited attention due to the events in Afghanistan dominating the news. The most notable were a succession of societal announcements, which are due to intensify control and eliminate any informal or grey zones that have long coexisted with CCP authoritarianism. To cite just a few examples, they include restricting teens (in the world’s most digitalized society) to three hours of video games a week, banning tutoring schools, which are very common in East Asia, "rectifying" the mass entertainment industry, and going after LGBT behavior or looks. These are all themed challenges to a civil society that had already been rendered politically passive but nonetheless kept important areas of free behavior, including pre-Covid mass tourism abroad. 

Simultaneously, the personality cult of general secretary Xi is reaching a new intensity, from a relentless occupation of the People’s Daily front page, to having "Xi Jinping Thought" imposed on all school curricula. Purges - admittedly a permanent feature of life under Xi - are happening in Zhejiang province (where Alibaba and Jack Ma originally took off), but now also in show business and the arts. 

These moves take place in a two-sided context: 

There is first an intensification and broadening of a regulatory onslaught on the economy, under the banner of "common prosperity" (gongtong fuyu 共同富裕). The slogan is not new - recorders of CCP politics trace its use since 1953. They contrast it with the Deng Xiaoping era "get rich first" (xianfu qilai, 先富起来) motto. As happened a year ago with another resurrected concept, that of "dual circulation", "common prosperity" has two faces: commentators will endlessly note that "common" does not cancel "prosperity", just as "domestic circulation" (self-reliance) does not exclude "external circulation" ("going out" e.g. investing abroad) and global integration. And in truth, some of the developments are welcome corrections to the mixture of blind wealth acquisition and insider connections that have accompanied China’s economic rise. Taxing real estate and limiting "unreasonable" income, capping the price of medical drugs, moving against platform and e-commerce monopolies, curbing the gig economy, protecting personal data privacy from commercial use (but not from party-state control…), and perhaps even moving back from the examination hell and money-based education for children could be the goals of any social-democratic program.

Some of the developments are welcome corrections to the mixture of blind wealth acquisition and insider connections that have accompanied China’s economic rise.

But CCP ideology is dynamic and has its own logic. Xi Jinping has openly declared that his objective is first and foremost political. As Fan Xingdong, a widely publicized Chinese observer has noted, "platform antitrust is not only a matter of economics and profit, but also a matter of politics and power [...] The superplatforms [...] do not show their capabilities and power easily in normal times, but this does not mean that they will not impact or even subvert the social and state order in unexpected situations or extraordinary times". Rather than progressive taxation, the changes emphasize "tertiary distribution" (sanci fenpei, 三次分配): this is fast becoming a euphemism for mandatory philanthropy.

China’s rich pay minimal income tax (1.2% of GDP). They give very little so far (donations are 0.03% of GDP) - in contradiction with the age-old Confucian tradition. They now understand the new message, and are falling over themselves - including giant companies such as Alibaba and Tencent - to donate part of their revenue, or to pretend that they are investing in "common prosperity". 

Indeed, just as the implicit message of the dual circulation slogan was on decoupling, that of "common prosperity" is on curbing the private sector and market forces. This is now accompanied by radical outbursts in China’s policed social media - violent verbal attacks on Chinese "capitalism" and liberalism in any form - that find a relay at the highest official level. On August 29, when a nationalist blogger said as much, his words were reproduced on the web by eight top Party media, and have not been taken down yet. According to Li Guangman, "a monumental change is taking place in China[...] it marks a return from "capitalist cliques" to the people [...] This transformation will wash away all the dust: capital markets will no longer be a paradise for get-rich-quick capitalists, cultural markets will no longer be heaven for sissy-boy stars, and news and public opinion will no longer be in the position of worshipping western culture [...] It is not enough to clean out the rot, we must scrape deep to the bone".

The incident sparks alarm bells and for a good reason. To any old timer in China or historian of CCP politics, this is a sign of a potential political earthquake. Mao’s most catastrophic policy turns - the Great Leap Forward and the Cultural Revolution - were preceded by mass campaigns targeting either softies and experts (the Anti-Rightist Campaign in 1957) or (in 1962-1965) the entire local cadre apparatus, including their leniency to such immoral behavior as playing cards or mahjong and other traditional pastimes. The performing arts and literature were a key arena of political struggle: writers, artists, ideologues were used to launch thinly-veiled attacks inside the Party. 

Over the past decade, Xi Jinping has not only put Marxism on a pinnacle, but he has also steadily brought up Mao and Stalin to the forefront. He has eulogized political struggle - whether inside China or internationally. The expert commentariat about Xi is certainly right to estimate that Stalin - or Liu Shaoqi, once China’s number two and a famous control freak - are more of a role model than Mao, who unleashed the chaos of the Cultural Revolution and wreaked havoc on Xi’s family. Yet the vanquished also learned from the victor: mass intimidation and fear play a large role in power grabs. During his 2008-2012 ascent to supreme leadership, Xi never once denied hardcore nationalists and ideologues. He then stamped out public demonstrations of any kind, but he also gave a free rein to these currents in social media and propaganda in general.

We now approach another milestone in Xi’s quest for absolute power - the 2022 Party congress and assorted meetings, which are likely to implement a presidential mandate without time limit. In preparation, it is easily conceivable that he would use the possibility of a radical mass movement to deter CCP colleagues from resisting this. Anybody who has been through CCP history knows the ravage from personal power within a strong and pitiless organization.

The 2022 Party congress and assorted meetings, which are likely to implement a presidential mandate without time limit.

And even if much of daily life in China seems remote from Party statements, its apparatus, reinforced by limitless financial resources and digital technologies, has grown only stronger. In Xinjiang, Xi and the CCP have demonstrated to what extremes they can go to eliminate a potential threat over the horizon. 

Elites, even Party elites, are not the whole people, in China or elsewhere. Their very interests make them vulnerable to attacks from a populist base or from a Mao-style political offensive. Economists and retired economic officials, the only circle of expertise that is still allowed to have some public policy debate, currently express their doubts or anxiety: for the past few months, the code word for this has been any mention of "the laws of economics". Li Daokui has expressed the concern that "common prosperity" be interpreted as another Great Leap Forward. In Zhejiang, an emblematic province for the success of private entrepreneurs that is now singled out as a model for "common prosperity", economists express similar reservations, seeking to curb a slide into neo-Maoist politics. On August 26, the CCP’s Propaganda Department released a lengthy laudatory text on the Party’s history. It nonetheless includes the remark that Mao acknowledged his mistakes in launching the Great Leap, a critique of the Cultural Revolution and a reminder that "the Party proscribes all forms of personality cults". Hu Xijin, China’s best known "wolf warrior" propagandist on the international front, has sharply criticized the Li Guangnan blog’s "excesses". At the time of this writing, however, the official social media still display Li’s blog post. 

China’s domestic situation must be watched very closely in the year to come, before Xi is elevated to Mao status by the next Party congress. 

First, we should not discount the rationality of many of the new rules being introduced. In the past, since Deng’s reign, China has combined arbitrary Party authority with a species of unbridled crony capitalism. But step by step since the mid-1990s, state management, state enterprises, public policies and at least the first steps of a redistributive economy have taken hold. 

China’s domestic situation must be watched very closely in the year to come, before Xi is elevated to Mao status by the next Party congress. 

Second, we should not discount either the possibility that the current measures are largely political, designed to force compliance from the elites and appeal to China’s frustrated lower middle classes. One can even think that Xi is learning from the West: hasn’t Bill Gates donated two-thirds of his wealth? Isn’t Joe Biden’s program explicitly about the interests of the middle classes? Isn’t welfare politics, and taxing digital wealth, a central topic of European politics alongside identity? Xi Jinping is actually catering both to nationalism and populism. 

Third, along with this comes the issue of implementation: no amount of philanthropy can replace a truly progressive taxation that would change the face of China’s society. It is highly unlikely that China’s educated classes, which rebuilt their position after Maoism and the Cultural Revolution, will desist from advantaging their children in the Chinese (and East Asian) educational rat race. The Chinese never gave up mahjong, will their children lastingly give up video games?

But there is a fourth perspective. Xi Jinping has pulled all the stops on his personality cult. And no one so far has ever been punished for radical or ultra-nationalist activism. His likely critics and opponents - about whom we hear preciously little, and even less with the Covid travel ban - can be targeted by mass campaigns and Party disciplining over issues such as corruption, morality or ideological incorrectness and "hypocrisy". In fact, should there be signs of resistance inside the Party to Xi Jinping’s absolute power, it is very likely that Xi and his courtiers would immediately cast this as a "two-line struggle". They have already laid all the building blocks on the ground. In spite of all the talk about how much Chinese society has changed in the past 45 years, its enforced passivity leaves open that most uncomfortable option. 

These trends will be the subject of a series of blogs and policy notes at Institut Montaigne in the coming months.



Copyright: GREG BAKER / AFP

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