In recent years, China’s economic landscape has undergone a perplexing transformation, leaving experts and observers puzzled about the motivations behind it. The nation, aspiring to become the world’s dominant economic power, has taken steps that seemingly undermine its potential for sustained growth. This phenomenon has raised the question: Why is China disrupting a successful economic model that has lifted hundreds of millions out of poverty?
The debate over the root causes of these economic shifts primarily revolves around two factors: President Xi Jinping’s leadership and the fundamental nature of the Chinese Communist Party (CCP), which has governed China since 1949.
China’s recent economic actions are difficult to reconcile with the pursuit of increased economic growth. These actions include the disappearance of prominent entrepreneurs, the introduction of restrictive espionage laws affecting business, and a significant redirection of capital and loans from the private sector to state-owned enterprises. These changes have led to predictable consequences, including a slowdown in economic growth, reduced private investment, and a noticeable capital flight.
Many experts attribute these shifts to President Xi Jinping himself, who has been described as the “real decoupler” by Orville Schell, Director of the Center for U.S.-China Relations at The Asia Society. Xi’s ideological rigidity and desire for control, in contrast to the pragmatism that defined China’s earlier period of economic reform, are seen as contributing factors. This shift has also affected the private sector, traditionally a vital engine of China’s economic growth.
Kevin Rudd, former Prime Minister of Australia and an expert on Xi’s worldview, suggests that Xi’s embrace of Marxism-Leninism has led to greater state control over the private sector, the expansion of state-owned enterprises, and the pursuit of “common prosperity” through wealth redistribution, all of which could potentially hamper economic growth.
However, not everyone places the blame squarely on Xi. Anne Stevenson-Yang, founder of J Capital Research, argues that the wider Chinese Communist Party is also responsible. She believes that the CCP’s fear of diminishing power due to the rising role of the private sector is a driving force behind these changes.
Stevenson-Yang suggests that China’s economic reforms initiated in 1979 were always intended to be temporary measures aimed at accumulating resources. As the private sector and entrepreneurs gained more influence, the CCP began reasserting its control, leading to the sidelining of high-profile business leaders like Jack Ma.
One crucial event that shapes the thinking of most China observers is the fall of communism in the former Soviet Union in 1989. Xi himself has referenced this event as a warning against ideological decay. Many experts believe that Xi is determined not to follow in the footsteps of Mikhail Gorbachev, the last leader of the Soviet Union.
Despite these changes, some critical economic reforms, such as property ownership rights and the ability to start businesses, remain in place. Chinese officials also assert their commitment to supporting the private sector, citing a high number of private companies in the country.
Nevertheless, skeptics remain unconvinced. They believe that once China develops indigenous technologies, foreign companies will face increasing challenges. Journalist Bob Davis, who was present in Beijing in 2013 when Xi emphasized the role of the market, noted that Xi’s true beliefs were often misinterpreted.
In conclusion, China’s recent economic shifts have sparked intense debate among experts and China watchers. While some blame President Xi Jinping’s ideological rigidity, others point to the broader ambitions of the Chinese Communist Party. Regardless of the driving force behind these changes, they represent a notable departure from the economic reforms that propelled China’s meteoric rise, leaving observers concerned about the nation’s economic future.
