For nearly a decade, Chinese President Xi Jinping has promised to bring “the great rejuvenation of China.” This promise, which he called China’s dream, took clear shape by introducing two-century goals: the creation of a “moderately prosperous society” by 2021 (the century in which the Communist Party of China and the CCP were founded) and the “modern socialist state” by 2049 (100 years after the founding of the People’s Republic). . Today, China is a hundred years younger and, according to Xi, it has achieved its first goal. Is China’s dream near?
When the second century goal of strength, prosperity, democracy, reconciliation and cultural progress is reached, it sees China as a world economic and political power. In the end, Xi seems to want to create a box cynica that will compete and change with the box box that has existed since the end of World War II.
These are ambitious goals. But China is no stranger to ambition or success. Although the CCP made serious mistakes in the early years of the People’s Republic, it led the country through a significant economic and social transformation. For more than three decades, China has recorded double-digit GDP growth. Millions of people have been lifted out of poverty.
This change is made possible by “capitalism with Chinese characteristics” – an organization that has proven to be more effective and sustainable than many can imagine. The Chinese government plays a key role in mobilizing resources, building national infrastructure, supporting export companies, and facilitating the inflow of foreign capital and technology.
China’s record shows that a dictatorial political system will not stifle growth and will in fact lead to rapid progress. In fact, the evidence for the question of which political system – dictatorship or democracy – is most appropriate for economic development is unclear.
Darren Asemoglu and James A. Robinson argued that “separatist political institutions”, in which political power is concentrated in the hands of a small group, lead to “separatist economic institutions” in which the ruling class exploits the majority. This, in their opinion, results in weaker incentives for most economic agents to engage in productive economic activities.
Yet China has built economic institutions that include separatist political institutions. Like the dictatorial states of East Asia – such as the Lee Kuan Yew regime in Singapore and the Park Chung-hee government in South Korea – China’s dictatorial one-party government has used its power to implement good economic policies and achieve political stability and both. Strong economic growth.
However, this does not guarantee that the China dream will come true. As many commentators have pointed out, China faces enormous internal and external challenges that could hamper economic growth and provoke political instability.
Initially, after decades of strict family planning policies, China’s working-age population is expected to decline by 170 million over the next 30 years. Meanwhile, returns on investment have fallen, productivity growth has stagnated, and China’s underdeveloped financial system has no need to allocate resources to high-yielding, non-profit “zombie” companies.
Today, China’s per capita income – $ 10,484 by 2020 – is much lower than advanced economies such as Japan ($ 40,146) and the United States ($ 63,416), and opportunities for rapid profits are fading. The GDP growth rate in 2012-20 was averaging 6.5% per annum — below double-digit figures of the past — and is expected to decline to 3-4% over the next 30 years.
In addition, the rapid growth of the Chinese private sector may pose a challenge to the model of Chinese state capitalism. Already, large private companies are reluctant to follow government guidelines as they once did.
Chinese leaders have been cracking down on those who challenge them, including Alibaba founder Jack Ma (for publicly criticizing government regulations) and rights-sharing site Didi Suxing (including going public on the stock market and distracting the government). But while technology companies need to be better controlled, this drastic approach can be disruptive to entrepreneurs and prevent innovation.
All of this would undermine the legitimacy of the CCP. As GDP growth slows, growing income and wealth inequalities between regions and social groups can lead to popular frustration and political unrest. This comes at a time when the ability to impose the will of the CCP is declining, largely due to the party’s own success in creating a strong middle class, which now includes more than 700 million people, and is growing rapidly, especially in the last 20 years due to the boom in education, with an enrollment rate of 8% to 54% Has risen to become.
According to the modernization theory of sociologist Seymour Martin Lipsett, the development of the educated middle class often leads to democratization because they demand that this group has rights, freedoms and the possibility of political participation. It happened in Korea in the 1980s, and the same thing could happen in China, although it is difficult to predict what and when such a change will be encouraged.
The external environment does not help. To support economic growth – hence the legitimacy of the CCP – China must maintain its position as an excellent global producer. Intermediate products such as raw materials and semiconductor chips must be continuously secured by a stable global supply chain and its finished products must be exported to the United States and other markets. If China does not find a painless way out of the trade and technology war with the United States, it will be very difficult to do so.
Finally, in order to gain the respect of the world, China must establish democratic values and ethics and begin to develop peaceful relations with other countries. Box Americana survived so long that many countries, including China’s neighbors, relied heavily on the United States for trade, finance, technology, and security. They will be reluctant to accept Box Cynica unless China offers them better. And it should start with the box.
By Lee Zhang-wa
Professor of Economics, University of Korea