China’s Communist Party on Its Last Legs

If the Chinese ruling party fails to open up and reform, it will lose legitimacy once the economy slows down.

The ambitions of a rising China on its way to global dominance could look very different in the year 2030. If the country fails to diversify its economy and the ruling Communist Party remains reluctant to challenge vested interests, it not only loses legitimacy but could be seen as an obstacle to further economic development.

This prospect of a Chinese Communist Party on its last legs is offered by E. Andrew Eccleston, a contributing analyst for the geostrategic consultancy firm Wikistrat. It ran a “China Hits the Great Wall” simulation through March in which researchers from all over the world explored the potential and likely ramifications of a slowdown in Chinese growth.

Eccleston recognizes that China’s ruling party derives much of its legitimacy from high economic growth rates. He writes, “The social contract that the CCP had offered its citizens was economic freedom and rapid economic growth in exchange for the CCP’s unquestioned political monopoly.”

That contract is now under pressure as China’s burgeoning middle class begins to assert itself politically. It will be all the more so if the economy slows down while hundreds of millions of Chinese remain in poverty.

The catalyst could be a “rebalancing” of the world economy which forces China to decrease its dependence on exports to the West and enables foreign companies to boost their sales in China.

The United States are particularly adamant that such a rebalancing should occur. They complain that China’s currency is undervalued which poses an unfair advantage to Chinese exporters over their American competitors.

“The concept of rebalancing,” projects Eccleston, “was based on the idea that China could simultaneously withstand an increase in the value of its currency while climbing the production ladder of the global supply chain. This thinking,” he adds, “greatly overestimated the strength of China’s economy and institutions.”

The transition from an economy based on cheap exports to an economy based on services and higher end manufacturing was too big a change for the CCP to manage.

China’s response would likely have come in the form of increased protectionism — which exacerbated corruption in state-owned enterprises and reversed the trend toward privatizations — possibly backed by military threats against low wage competitors in East Asia. Forced by great powers to retreat from such showdowns, the Communist Party could have only lost face.

Rather than embracing reform and extending party membership to businessmen and other bourgeois interests, Beijing’s mandarins “chose to circle the wagons and protect the interests of the existing leadership.”

Local party chiefs and mayors of China’s sprawling coastal cities could pose another challenge to the system as they win popular support by “running” against Beijing. Crackdowns from the central government would only enhance their popularity so the party grants them autonomy and privileges instead.

“This trend toward localized rule swept through the country, further reducing the CCP’s ability to govern nationally. Local politics,” Eccleston predicts, “soon became the most dynamic parts of Chinese society.”

This development caused the CCP to become even more insular as it experienced brain drain to the more dynamic polities of the coast and local government.

As a result, when confronted with popular protests against corruption, pollution or failed economic and infrastructure policies — “there are Tiananmens everywhere” — the party fails to respond to them positively and sends in the troops instead. “This is the final delegitmizing factor for the party and rather than scare the people into submission, protests explode everywhere.”

This time, “there is no figure equivalent in stature to Deng Xiaoping to plot a course of action and reconcile feuding elements within government and disagreements over how to respond to the protests.”

Or is there? In another scenario, Wikistrat senior analyst Robert Jordan Prescott suggests that “Nixon opens China, again.” Only a shrewd leader who is respected by both the party establishment and ideological purists, he believes, can proceeding with selective liberalization and safeguard China’s economic future.

“When China hits the great wall,” writes Prescott, this Nixonesque figure “is the one who saves the party and country from complete stasis.”

If China’s future hinges on the emergency of a single, powerful leader, that is only testament though to the institutional weaknesses which Eccleston exposed.

One man may be able to bring together warring factions within the party and bridge the diverging interests between party and business and cities and hinterland but for such an accomplishment to last, the party itself must open up and channel the aspirations of the whole of China. Else, it could be on its last legs in less than two decades from now.