GEOFF RABY.  An Economic Giant With More Brittle Politics Than Ever. AFR 1 October 2019

Oct 2, 2019

China’s 70th Anniversary will be a razzle-dazzle extravaganza celebrating the achievements of the Communist Party of China since the founding of the People’s Republic in 1949.  The party-state’s propaganda machinery has already been in over-drive extolling the Party’s achievements over the past 70years.  On Tuesday, it will reach its peak with a massive military parade which will out do all others.

Indeed, the Party has much of which to be proud as it ticks off ahead of time its many self-imposed performance indicators on its way to becoming a “fully developed society with advanced technology and science” by 2049, the centennial of the PRC.

No mention, however, will be made of the many wasted years under Mao Zedong when the Party careered down numerous blind alleys, such as the Anti-rightist Campaign in the late 1950s, the Great Leap Forward in the early 60s, and the destructive decade-long Cultural Revolution, ending in 1976 after Mao died.  There will be no “seeking truth from facts”, as in former paramount leader Deng Xiaoping’s instruction to the Party, when it comes to accounting for the chaos and death caused by these campaigns.

Nor will there be an explanation as to why, on the thirtieth anniversary of the PRC’s founding, China was a dirt poor, backward, marginal country scarcely able to feed itself, stiff with fear of enemies without and political repression within.

Party General Secretary Xi Jinping, in order to bolster the Party’s legitimacy and to lay claim to Mao’s mantle, has urged the Party to embrace the first thirty years of the PRC as well the stupendously successful past forty years.  Xi is also keen to diminish Deng’s legacy lest this becomes a challenge to his own authority.

Australia’s engagement with China really begins from Deng’s return and the flickering start of the reform and open-door policies.  Diplomatic relations commenced in 1972. For the next decade, however, because of China’s closed system and clapped out planned economy interest in the relationship remained limited.  A diplomatic posting to Beijing was a boutique assignment for specialised sinologists and for the type of “colourful characters” that were attracted to obscure places in East Asia.

It was under Prime Minister Hawke that the relationship was significantly ramped up on both sides.  Hawke immediately understood the tremendous opportunities for Australia if the Chinese leaders did even half of what they confided in him they wanted to do.

Hawke believed that China’s open door and market-based reform policies would replicate the experience of other industrialising economies in north-east Asia, such as Japan, South Korea and Taiwan.  In view of the profound complementarities between China and Australia, and China’s vastly greater size, there was every possibility that the commercial relationship with China would in time, as it eventually did, come to dwarf the others in East Asia.

Hawke and his former economic advisor, Ross Garnaut, whom he appointed in 1985 as Ambassador to China to lift the relationship, were often seen as naïve optimists about China.  The China scholars and the small number of journalists and academics who published on China in those years were sceptical about the reforms and argued, for various reasons, that it would all end in tears.

Some of the same Cassandras are still making a living on China collapse theories.  They have now been joined by new entrants, the China Threat people.  But even the wildest optimists of the 1980s never foresaw forty years of un-interrupted economic growth, underpinned for nearly thirty years by double digit productivity growth, nor the emergence of a consumer led, services-based economy, and where the private sector accounts for more than 70 per cent of GDP.

Over this time, China has, in terms used by the conservative US economic historian in the 1960s, Walt Rostow, “taken off” into self-sustaining growth.  Some 200 million or more Chinese along the eastern littoral now have developed-country levels of per capita incomes.  For them, the “middle income” trap is a thing of the past.  And in terms of classical economic growth theory, many hundreds of millions more are catching up.  In economic performance, China has far exceeded the wildest optimists’ imagining.

Australia has until recently, when a more ideologically influenced view has begun to prevail in Canberra, taken a pragmatic realistic view of China.  While happily being continually surprised on the upside on the Chinese economy (think of the years of materially under-estimated fiscal revenues by Treasury last decade), we have not generally believed that China was on a path to some form of a more open, competitive, political system.

Policy makers in the US are palpably disappointed that China has not chosen this path, and that the experience of South Korea and Taiwan, which both moved on from authoritarian dictatorships, has not been replicated by China.

Belief in convergence by China to some sort of western norm has now been replaced by fear of the other.  In the terms used by the influential Hudson Institute writer, and sometime Trump adviser on China, Michael Pillsbury, China is now seen to be on a 100-year marathon for world dominance.  China has become a strategic competitor or threat to the US. Fu Man Chu is abroad again.

A decade ago, there was a sense that China’s political system was becoming more open and participatory.  The rights lawyers’ movement was gaining momentum, NGOs and churches were expanding in number and membership increasing, internet commentary was less stifled and criticism of government performance by some newspapers and magazines was increasingly tolerated.

Since Xi has taken charge, all of that has been reversed.  So too has the effort by the Party over the past thirty years to moderate the use of power and institutionalise its transfer from leader to leader.

One of the great achievements of Deng Xiaoping was political reform which was intended to ensure that China would never again be subjected to the wilfulness and capriciousness of a single ruler, as it was under Mao.  Xi has dismantled collective leadership and fixed terms for the President (presumably also for the Party General Secretary). Ideology in all aspects of life, especially at school and work, has returned, as has the cult of the personality around the leader.  Party representatives are now embedded in China’s thriving private sector.

All of this has made the political system more brittle.  The risks for China are not in its economy as it looks towards the PRC’s centennial, but in its politics.  These remain as opaque and pre-modern as they were when the PRC was founded, notwithstanding China’s breathtaking economic development, prosperity and weight and power in the world.

The conundrum China has presented western observers since the market reforms and open-door policies began is now more pronounced than it has ever been.  Is market authoritarian inherently stable or not?  It is not obvious that the next thirty years will answer this question.

Geoff Raby is a former Australian Ambassador to China.

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