China's Politics and Economy as the Winter Olympics Open

The eyes of the world are on China as Beijing hosts the Winter Olympics. 

A successful Games will be used by leader Xi Jinping to bolster his image and status at home and abroad; a status that was given a significant boost in November, when a major meeting of the Communist Party effectively enshrined his position in the party’s historical pantheon, alongside Mao Zedong and Deng Xiaoping.

But while the opening ceremonies and stage-managed meetings played out without a hitch, there are still major tests for the Chinese leadership. This is especially true on the economic front, as growth slows, and concerns about a crisis in the property market persist. In this episode we look at the state of play in Chinese politics and economics with two well-placed observers.

Dr Ling Li teaches Chinese politics and law at the University of Vienna, where she was also a visiting professor.  She has written extensively on topics related to corruption and anti-corruption in China. 

And Dr Isabella Weber is an Assistant Professor of Economics and the Research Leader for China of the Asian Political Economy Program at the Political Economy Research Institute at the University of Massachusetts Amherst. Her recent book, ‘How China Escaped Shock Therapy: The Market Reform Debate’ provides a detailed history and analysis of the debates around economic reform in 1908s China.

As ever, you can find more information on our website 

Transcript

Andrew Peaple: Hello and welcome to Asia Matters, the podcast where we aim to go deeper into some of the stories shaping the world's most dynamic region. I'm Andrew Peaple 

A man of determination and action, a man of profound thoughts and feelings, a man who inherited a legacy but dares to innovate, and a man who has forward looking vision and is committed to working tirelessly. Well, that's how the state owned Chinese newspaper The Global Times described the country's leader Xi Jinping in early November ahead of a major meeting of the Communist Party known as the Sixth Plenum. 

The outcome of that same meeting was to effectively enshrine Xi's position in the party's historical pantheon alongside Mao Zedong and Den Xiaoping. But this further turn towards hagiography in the treatment and coverage of Xi inside China has come just as he and his government are facing some major tests — not least on the economic front, as the country's growth slows, amid something of a crisis in its all important property market. 

In this episode, we're going to look into the current state of play in Chinese politics and economics with two exceptionally well placed observers. 

Dr. Ling Li teaches Chinese politics and law at the University of Vienna, where she was also a visiting professor from 2015 to 2016. She's written extensively on topics related to corruption and anti corruption in China. Welcome to you, Ling Li. 

Ling Li: Thank you for having me 

And we also welcome Isabella Weber, who is an assistant professor of economics at the University of Massachusetts Amherst. Her recent book, How China escaped shock therapy: The market reform debate, provides a detailed history and analysis of the debates around economic reform in 1980s China. Welcome to you too, Isabella. 

Isabella Weber: Thanks so much for having me, Andrew.

Andrew Peaple: Well, thank you both so much for your time. It's wonderful to have you on Asia Matters. Ling Li, to kick off, can you first explain to us a bit more about this recent sixth plenum? What were the outcomes of the meeting? And why was it so important? 

Ling Li: Well, the party holds all kinds of meetings and conferences at any given time, because holding conferences is basically a form of governance for the party state. However, this plenum is special. 

First of all, the plenum refers to the annual meeting of the Party Central Committee, which is the highest decision-making body of the party. According to the party Charter, the highest decision-making body of the party is the National Party Congress and the Central Committee that the Congress elects. We normally tend to think that the Politburo and its standing committee are the highest decision making body, but it's not. Their power is derived from the National Party Congress and its central committee. The Central Committee meets in plenary sessions only once in a year, with the exception of the year of its election. And this time, when the Central Committee meets for the sixth time of the 19th Party Congress, the main item on their agenda is the historical resolution. And so far, there have been only two historical resolutions. And this one is a third, which elevates the significance of this plenum. 

Andrew Peaple: I referred in the introduction to Xi now taking his place amongst the pantheon of Communist Party leaders as part of this historical resolution. Can you take us a little deeper into this? Why are these resolutions so important? As you say they're obviously very rare. But why would Xi Jinping have seen it as so crucial to take this step now? 

Ling Li: We have only had altogether, as I said before, three resolutions, and only two of them are old enough to allow us to have the benefit of hindsight and to see what happened both before and after the passage of the resolution. The timing of the third resolution seems very similar to the other two. It is also occurring at an interregnum period, after Xi has reshaped the power dynamics at the top of the party and before the 2022 Party Congress, where he is expected to translate that new power dynamic into a formal power arrangement. 

And on the second point, which is about justification of the path to power, Xi's case is a little bit different. Because, unlike Mao and Deng, who rose to power through a bottom up rebellious approach, Xi came to power in a totally legitimate way, because he was anointed by his predecessor and elected at the party congress. He did not launch a coup or step out of line before he came to power. So he has no explaining to do for his current position. That is why the third resolution does not dispute the political legacy of his predecessors, as the previous two historical resolutions did, and he did not deviate from the previous narrative about key historical events. 

However, given that Xi does not need to use a historical resolution to justify his path to the power that he is currently having, then it necessarily begs the question, why would he want a new resolution, after all? It makes sense, if we take the future into account in this analysis. Yes, he may have nothing to justify about how he got to the place where he is. But he does need an

ideological narrative to justify what he is going to do, or where he is going if he plans to continue after 2022. 

Andrew Peaple: That's an absolutely fascinating historical perspective on the timing of this and the reasons behind it. Isabella, if I could bring you in here, the meeting we've just seen, and the resolution on Xi's role has been taken as heralding something of a ‘new era’ for China. Can you explain, in economic terms at least what you understand by this new era, and what it's 

supposed to be about, and whether economically at least, it will be a break from the recent past in terms of China's economic practice and history. 

Isabella Weber: I think there's kind of a big picture, ideological evolution type of dimension to what Ling Li has just outlined in such wonderful detail, which is the context that of course, 2021 is the year of the 100th anniversary of the Communist Party; it was also the year in which the first centenary goal that [former president] Jiang Zemin announced in 1997 has been considered to have been achieved, which is to build a ‘moderately prosperous society in all respects’. So in that sense, I think one important part of the context, why we see this resolution issue now, is precisely the context of the year 2021, and the context of the centenary anniversary of the Communist Party. 

Now, if we take a step back, and ask ourselves how this fits into the evolution of big ideologies over the last decades, we can see that the previous revolution of 1981 was issued at a time when there was a shift away from late Maoism; and that shift was in some senses consolidated by that resolution, where the idea was that China had to give up on the ambition of continuous revolution, and had to give up on the ambition of creating socialism in the here and now; but instead had to acknowledge that China was in the so-called primary stage of socialism, and that at this stage, the main task of the party and the state would be to enhance the forces of production, that is to pursue economic development, which would then in the logic of orthodox historical materialism, eventually lay the foundations for higher levels of socialist development. So the logic goes. 

Now, I think, in this context, from continuous revolution to the primary stage of socialism, we are currently at the kind of turning point towards a new big ideological orientation, which is signalled by all these big announcements that have been issued, such as the ‘Chinese Dream’, national rejuvenation, ecological civilization, common prosperity and so on. All of this, to my mind, seems to signal that there is a new vision coming out that is meant to point beyond this idea of the primary stage of socialism. 

Now, what does this tell us from a more economic kind of perspective. In many ways, the last decades, catching up economically was the main goal of China. This was the context in which exports were very important, although I think we have to be careful in thinking of it simply as export-led growth. Since pretty much since the late 1980s, when China started to systematically develop its export industries, there was a sense that the re-linking of China into global capitalism was not the goal in itself, but the goal of doing that was always to create space in terms of external financial stability and to generate funds through exports — which would then

help to upgrade China's own economy and eventually enable the Chinese economy to move up the so0called value chain. 

Now in the context of the current situation, in the context of climate change, in the context of enormous tensions in the realm of trade, and in the realm of supply chains, and so on, and also in the context of China basically trying to avoid getting trapped in the so-called middle income trap, there's this whole new urge towards a new kind of development model, since the development model that has been dominant so far, which has been really predominantly focused on GDP growth, with exports as an important driving force, is clearly running out of steam — both due to internal reasons that have to do with China's own development level, with limits to natural resources, and limits to the degree of pollution that a country can take, and so on. 

So in this big context, we see this reorientation towards a new kind of development model that should serve to address some of these major difficulties that China is facing, but to some extent, are also inherent in the kind of path that has been mapped in a very long run kind of fashion. Since eventually, it was always in some sense clear that the ambition of China was not to simply be the workshop of the world, and for companies that had orders in Europe and in the United States, but to become a major economic hub that really has companies, has technological capabilities, and so on, that bring the country to the technological frontier, instead of simply implementing supply chains that have been created from elsewhere. 

Andrew Peaple: Do you see, in terms of this reorientation of the economy, do you see a coherent programme emerging? On Asia Matters in the past we've talked about the crackdown on the tech sector that's taken place over the last year; there's obviously uncertainty hitting China's property market at the moment. But for you, is this adding up to a coherent programme that can address some of the imbalances and problems in China's economy? Or have you been disappointed by what you've seen so far? Can you just give us some perspective on that, please? 

Isabella Weber: First of all, I think we have to acknowledge that typically, these vague slogans such as common prosperity, dual circulation, and so on, come out and kind of indicate a general direction and tend to initially not be terribly precise. It starts with such an articulation of a big direction, which sends a signal to the whole system that this is the big issue that everybody should be working on. And then all sorts of organisations issue studies, experiments are being conducted on all sorts of levels within the Chinese system. So in that sense, I think it's somewhat too early to make judgments on this kind of new development model. 

I think it's pretty clear that there is a pretty far ranging attempt to move towards a new economic model. But what exactly that will look like I think, is still pretty difficult to say. That being said, I think there are certain elements that certainly do feed into one another. So if we think, for example, about the redistributive dimension, to the whole new slogan of common prosperity; and we think that together with the idea of dual circulation, which I think, is clearly not the same as decoupling, but at the same time, does imply a greater role for domestic demand and the

domestic market, then such a redistribution within China could be beneficial towards increasing the purchasing power of a whole large share of the population in China, which would then, again, kind of feed back into the idea of dual circulation. So in that regard, for example, I think we can see that there's a certain consistency between these two big slogans. 

Andrew Peaple: And if I could just stay with you for one more question, Isabella: In your book on the economic policy debates of the 1980s you describe how there was a lot of internal debate about whether China should go for a sort of Big Bang reform of liberalising prices, or whether it should take a more gradual approach. Now what we've seen recently, say in the case of Evergrande — which is this big property developer in China that seems to be on the verge of collapse, or at least is in extreme financial trouble — we've seen the government so far at least not really stepping into support Evergrande, do you see in steps like that, a sort of danger that China that the leadership now Xi Jinping is looking for sort of Big Bang approaches, or dramatic reform to the economy? Or do you think that the approach being taken is more in keeping with what we saw come out of the 1980s, which is a more cautious, gradual approach. I wonder what your thoughts on that would be? 

Isabella Weber: Great question. Thanks for the shout out to my book! 

I think that what we are seeing right now is a rebalancing of state and private actors in the market economy that emerged from a process in which state institutions played a critical role as market creators. So as such, it is a moment of shift and it is a moment of rebalancing. But I don't see it as a radical break with the reform trajectory that I'm tracing in the book. Of course, the 1990s saw a much more neoliberal set of policies. But even at the height of privatisation, in the late 1990s, the major slogan that prevailed was that of ‘letting go of the small and grasping the big’, which follows the logic of liberalising, letting go of the less strategically significant assets and keeping control and transforming the most strategic assets, or keeping control of the commanding heights of the economy. 

And I think we have to remember that even in relation to the first centenary goal, as it so happens, in October 2017, Xi Jinping was spelling out what he saw as the three tough battles that had to be fought in pursuit of the first centenary goal. And those three tough battles were poverty alleviation and pollution control, but also forestall and defuse major financial risks. So this idea that there have been major financial risks in the Chinese economy, and that the state had to step in to strategically start deflating some of these inflated sectors, and thereby rebalance the economy, is an idea that has been around for quite some time. 

So in that sense, the situation that we are seeing around Evergrande, I think, is quite different from the situation that we saw around Lehman Brothers where, in the case of Lehman Brothers, you had the bubble that was building up. And then eventually, you had this collapse of Lehman Brothers, which was coming out of this dynamic of the private market, and then had the repercussions in the global system that everybody is well aware of.

In the case of Evergrande, and the other companies that have now started to come under scrutiny in China, you also have the building up of a bubble, but you have basically the state stepping in towards setting stricter regulations that are meant to deflate that bubble. And this is conditioned on the specific kind of state market relations that have emerged through this gradualist kind of reform, where the state has this very active market-participating mode of economic governance, which is in some sense reflected in the ways in which the Chinese state is now trying to rebalance the economy. 

Andrew Peaple: Ling Li, if I can come back to you for some final questions. The passing of this resolution, and the framing of Xi Jinping in the history of the Communist Party is a good time, I think, to consider the progress of his role and his government over China to date. As a close observer of the way those institutions are run, what do you think have been the major changes that she has made since he came to power? And can I also ask about his anti-corruption drive: Do you see that as being something that Xi has now triumphed in, as he has driven out corrupt forces within the party? Or was it always a more of a political move to drive out the enemies of Xi Jinping within the government? 

Ling Li: Okay, there's two questions. The first one is about the major changes that Xi has introduced, since he came to power. Obviously, the more conspicuous changes that we notice as observers are the introduction of a number of illiberal policies, including the reinforced censorship in basically all media forms, restrictions on academic freedom, the explosion of party-sponsored propaganda output, the expansion of ideological education, etc, etc. 

But having said that, I would like to add that we tend to ignore or overlook some of the more positive policies that he has introduced, which have improved the quality of living and the access to public services of the ordinary people. One thing that leaves a strong impression on me is the breakup of the monopoly of taxi services, that has long been held by the transportation bureaus, who very often collude with local mafia groups. And the monopolistic interest of the Transportation Bureau was so entrenched, and their resistance was so strong against any type of reform, that no leaders seem to be able to change it despite the strikes by the taxi drivers, and the complaints from citizens from all over the country. And this situation was changed under Xi’s administration by allowing the platform-based taxi riding services such as Uber at the beginning, and then later, Didi and many other platforms into the market. So we tend to forget about this side of CDP's policies. 

There are other examples in the political legal sector. At the beginning of his first term, there's a major judicial reform introduced, and that reform was unprecedented in terms of the scope and the complexity that it had. And I think it started from a good place, which is to reduce local protection in judicial activities. But as the reform proceeded, it somehow got distorted, because of the inherent interests of the traditional bureaucracies, and also the incongruence between the supremacy of the party leadership and the supremacy of the rule of law, so it didn't achieve the kind of results it was intended to achieve. But it has made some impact.

I think, when Xi Jinping, if and when he retains his office or creates a new office to continue to rule in 2022, some of the same policies probably will be pushed even further and continue. 

The second question is about the anti-corruption [drive]. People often put those two motivations into a dichotomy, asking is it driven by political convenience, or is it really about the reduction of corruption? I think these two goals are not mutually exclusive, one can pursue a goal for both moral purity and political convenience. So it is even better that you throw one stone, and kill two birds. And actually, the more birds one stone can kill the better. So I believe the campaign is driven by both motivations. 

Andrew Peaple: Final question then for you Ling Li. The last time one of these historical resolutions was passed was in 1981. And that was the beginning really, of the era of Deng Xiaoping. One of Deng’s signature moves was to try and avoid the sort of personality cult that had grown up in China under Mao's long rule, and he instituted systems whereby future rulers of China would have term limits, and we saw that with successors such as Jiang Zemin, and then Hu Jintao. Under Xi Jinping that seems to be going into reverse. Most obviously, of course, he's removed term limits on his power, which means he may stay in office for another five years, maybe even longer. But this broader reassertion of a kind of personality cult of Xi Jinping: Is that something that is facing any resistance within China and why do you think this is happening at this time? 

Ling Li: To me, this is not very surprising that a new cultist politics is emerging, because when you study the party rules, you will find that the rules on decision making are very loose when it reaches the apex of the power hierarchy. And the system rarely renders any specific substantive power to any personal office. And the power that such personal office has been given by the party charter, or other party rules, is mostly procedural, which can be manipulated to one's advantage, of course. So those who are better at such manoeuvres will rise up and create a more autocratic structure. And those who aren't, or those who have no ambition or interest to do so, will retain a more oligarchical structure. So it's not really surprising for me that this situation reoccurs under Xi Jinping. 

Andrew Peaple: And do you think there's concern about it within China, within the upper reaches of the Communist Party? 

Ling Li: Well, the resistance will come from two directions, right? One is from outside of the party, but then the civil society is basically crushed, through a number of mechanisms of political control. And the other source of resistance will be from within the party. In that sense, corruption and the associated anti-corruption campaign is a godsend for the party, because everyone is exposed to corruption, because the opportunities are abundant and the incentive is very strong, and that makes everyone vulnerable to the anti-corruption campaign. 

Andrew Peaple: Isabella, I wonder if there's anything you want to come back on from what you've heard from Ling Li there.

Isabella Weber: I mean, if one thinks about these historical resolutions in terms of these big ideological shifts that I've tried to outline, then I think what we are seeing currently clearly is another shift. But I think it's not a shift back to what the previous resolution shifted away from, where the shift away was really from this whole late Maoist idea of continuous revolution, all of that, and I don't see this returning. So yes, there is a break happening. But I think, to think of it as a return of Maoism would be a rather surprising conclusion. 

Andrew Peaple: Well, thank you, both of you, for all of those fascinating insights and for a really thorough discussion of what's taking place in China, both in the political and economic sphere. I'm truly grateful to both of you for sharing your expertise with us.