China’s communist century: An ongoing balancing act

Yu Jie outlines the contradictions Beijing must resolve if it is to achieve its goal of stability and prosperity

The World Today
5 minute READ

An ageing building in the Shanghai district of Xin Tian Di sits sandwiched between some of the most sought-after designer boutiques and chic wine bars in town. This is where the Chinese Communist Party was born a hundred years ago in July 1921. The contrast between this cosy quarter of capitalist extravagance and the ideals of the embryonic party could not be more stark.

Such a juxtaposition dominates the debates between Chinese and western pundits over what exactly the ideology and aims of the party are, with many sinologists approaching the question in a balanced manner, while others see it as either a question of Communist China ruling the world one day or collapsing under the weight of its contradictions.

While not predicting the future of a political party with 92 million members, it is clear it has set itself two centennial goals. These were outlined by President Xi Jinping within a month of his becoming leader in 2012. 

The first was to make China a ‘moderately prosperous society’ by doubling its 2010 per capita GDP to $10,000 by the centenary of the party’s formation in 2021.

The second deadline is 2049, a hundred years after the founding of the People’s Republic of China, by which time China should have grown into a ‘fully developed, rich and powerful’ nation.

To achieve such a national rejuvenation, the party has to perform a balancing act in three key areas: between the pursuit of economic growth and achieving an equitable income distribution; between intervention by the party and the operation of market forces; and between healthy trade partnerships and combative foreign policies.

The ‘principal contradiction’, a concept in communist dogma that defines the most pressing issue that needs to be addressed, has been debated by the party leadership since its inception. The term comes from Mao Zedong’s 1937 essay On Contradiction. Since then, leaders in Beijing have shifted the ‘principal contradiction’ three times.

Soon after 1949, it was ‘the people versus imperialism, feudalism and the remnants of the Kuomintang forces’ which evolved into ‘proletariat versus bourgeoisie’.

Chinese cultural revolution poster

Chinese cultural revolution poster

In 1981 this changed into ‘the ever-growing material and cultural needs of the people versus backward social production’, a shift that would drive China’s rapid economic growth.

President Xi initiated the current principal contradiction at the 19th Party Congress in 2017. It lays out that the party must resolve ‘the contradiction between unbalanced and inadequate development and the people’s ever-growing needs for a better life’. 

This is easier said than done.

Rich v poor

Beijing rightly recognizes that the rapid economic development created by Deng Xiaoping’s reforms came at the expense of huge wealth inequality and severe environmental damage. This has been accompanied by a lack of social mobility between urban and rural residents as well as gender inequality between men and women. The situation is so extreme that it could challenge the very survival of the party leadership.

The economic disparity between inland and coastal provinces has remained alarmingly wide

The economic disparity between inland and coastal provinces has remained alarmingly wide and shows no sign of abating. This persistent imbalance is a direct result of a division of labour between different provinces. The rural-urban gap in income is also large.

A rigid approach to the Hukou system – a family registration system that controls where a person can live – reinforces the regional inequality of opportunities. New migrants to urban areas, who are expected to number 300 million over the next two decades, often lack access to social entitlements such as healthcare, unemployment cover, secondary and tertiary education, and affordable housing due to stringent registration requirements. 

Liberalizing the residency system, as some provinces have begun to do, will allow more migrants to contribute to and benefit from the social safety net. This would fit into the pursuit of ‘ever-growing needs for a better life’ for ordinary Chinese.

Efforts should also be renewed to promote gender equality in Chinese society, something that has made little progress in recent years. Female representation is scarce in state-owned enterprises. Women hold no positions on the Politburo Standing Committee – the party’s ultimate decision-making body. If, as Mao once proclaimed, ‘women hold up half of the sky’, they get little recognition for their efforts.

If the party defends a status quo that is manifestly unfair in its distribution of wealth and opportunity, trust from ordinary people will collapse. Chinese men and women yearn for a tangible improvement in their living standards. The party must look after those who have not prospered under Deng’s reforms.

While trying to resolve inequality, the party must also address to what extent it allows the market to determine economic activities. Implementing market economic reforms has always been an uncomfortable process in China as it leads to a loss of political control, as the party’s ideological apparatus yields ground to a growing cohort of economic technocrats.

Since Xi came to power, he has reinforced the party’s central role in governance, which inevitably encompasses the economy as well. Policy planners have always disagreed over how far the party should intervene in the market. But Xi believes Deng’s ethos for reform – ‘crossing the river by feeling the stones’ – must be combined with ‘top-level design’. In other words, the party decides everything.

The emphasis on the omnipresence of the party in delivering domestic economic growth must disappoint free-market enthusiasts.

Party v market

Xi invites the party to interfere in the market

While advocating market allocation of resources, Xi invites the party to interfere in the market. He campaigns for reform of state-owned enterprises while at the same time strengthening the party’s control of business decisions in both the state and private sectors.

Moving beyond regulation of private enterprises, the party is now mapping out their future, as seen in the reining in of tech firms such as Ant Group and Tencent after they branched out into fintech services. 

The Chinese leadership also prescribes industrial policies that actively manage private enterprises by channelling capital into innovation-driven industries, notably in quantum technology, digital communication, AI and robotics, as indicated in its latest Five-Year Plan.

Despite the challenges from both home and abroad, the party’s ambitions have not been dented. Faced with the paradox between the centrality of the party and market forces, Xi promises both a stronger party and a freer market, which may prove difficult to deliver. Xi and his lieutenants envisage building a ‘modern socialist society’ by 2035 by which time it will have ceased to be a labour-intensive global assembly line and will have fulfilled its ambition to ‘invent in China and made in China’.

Economic growth v global diplomacy

At the same time, challenges to China’s economic model are increasing, as witnessed by the ongoing tussle between the world’s two largest economies. It exposes another tension in Beijing’s foreign policy, that of pursuing economic growth with trade partners while simultaneously conducting diplomacy with countries that are ideologically poles apart from Beijing. There are no signs of this abating in the near future, and it will hinder China’s 
capability to shoulder greater responsibilities globally. 

Relations between Beijing and the West are, meanwhile, going from bad to worse. Behind an exuberant chorus of pandemic diplomacy performed by some senior Chinese diplomats in 2020, there has been a sombre tone on international challenges posed by the pandemic inside the Zhongnanhai – the headquarters of the Chinese Communist Party.

China under the Communist Party today is a major global power that is more formidable economically, more sophisticated diplomatically and more flexible ideologically than the Soviet Union ever was. And unlike the Communist Party of the Soviet Union, the CCP wants the country to ‘go out’ and deeply integrate into the world to further its ambition.

As it is, its foreign policy today combines a strange mix of high-octane rhetoric intoxicated with pragmatism and past grievances. There is a strong feeling among its population that China does not get the respect it deserves from the international community, but the party can make China ‘stand tall and big’. 

This dangerous mixture of China’s historical humiliation and its staggering economic success could prove a lethal combination which leads to a further deterioration in  China’s relations with other countries.

The current diplomatic rift with the West will not help the party to fulfil its foreign policy priority – the creation of a stable external environment to foster its domestic economic development. This conservative maxim was advocated by Deng Xiaoping but it should remain as the mantra for Beijing in its handling of foreign affairs today.

In response to the Covid pandemic and a tougher international environment, Beijing proposed a new concept, the ‘Dual Circulation’ strategy, that promotes domestic consumption. Essentially this is to boost the domestic economy’s ability to power itself. 

But the key word remains ‘dual’. As a string of policy documents show, Beijing’s economic strategy is not isolationist. Beijing is fully aware that it can only prosper if its foreign economic partners prosper, and it can only achieve resource security and the stability of its borders if its neighbours to the south and west cease to fight over territory.

Towards 2049

Looking ahead to the second centenary in 2049, despite talk of Xi being as powerful as Chairman Mao, a return to the tumultuous Cultural Revolution will be resisted. Neither of his two predecessors openly denounced that decade-long trauma as Xi did, both as an affair of state and as a matter of personal tragedy for his family. When Xi was in his teens, his father, a leading party official, was purged and imprisoned and the family home ransacked.

The biggest challenge will be how to manage the financial risks involved in a debt-fuelled economy

For the party the biggest challenge in the future  will be how to manage the financial risks involved in a debt-fuelled economy without reducing economic growth to levels that affect the personal wealth of millions of ordinary Chinese people and as a result foster social discontent.

Although the party does not face any electoral pressure, anger over inequalities could undermine its authority and trigger resentment if the CCP fails to take actions that alleviate the people’s pain.

The Chinese people are watching closely. So are foreign nations, not least the United States. Life as a rising power with publicly stated leadership aims and reform ambitions is not comfortable. Even without an opposition party, Beijing faces ever-growing scrutiny.

The rest of the world still has a profound interest in a less turbulent and reform-oriented China. While many of the leadership’s recent decisions have disappointed those who hoped Beijing would embrace a western style of government, it is important to realize that the party is still finding its own way and quite often it is about finding the path of least resistance without historical precedence. 

What is certain, though, is that its future will not be decided by the United States, but by the 1.4 billion Chinese people who have expectations of a better life well before 2049.