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Defectors invariably paint their erstwhile regimes in the grimmest of colours. Cai Xia’s forensic broadside on the 100th anniversary of the Communist Party of China (CCP) is as grim as it gets.
Professor Cai taught for 15 years at the Central Party School, the sanctum sanctorum of the Communist elite and the motor engine of revanchist doctrine. The cadres learned that there can be no modus vivendi with “American imperialist wolves”. The foe must be smashed.
Her long essay on the CCP’s ideological reflexes published by the Hoover Institution should be read with caution but it is nevertheless a seminal text for our time. It is both an exposé of the incorrigible character of this totalitarian beast but also an indictment of Western wishful thinking over forty years of failed strategic engagement.
You cannot engage with the CCP. The party is implacably hostile, because it sees the foreign democratic virus as a threat to its own internal control of China. “The two conflicting systems cannot be reconciled, and they cannot indefinitely coexist,” she says.
Nor does the CCP wish to coexist with the West any longer, having concluded (wrongly) from the global financial crisis in 2008 that the US is in irreversible economic and strategic decline, and that “socialism with Chinese characteristics” has shown itself to be superior. “It is the CCP that has unilaterally ruined the engagement policy, because it believes engagement has served its purpose and is no longer useful,” she said.
In my view, historians will ultimately conclude that China suffered greater damage from the Lehman shock since the country resorted to promiscuous credit creation and industrial over-investment to avert social protest, clinging to a catch-up development model that was already past its sell-by-date.
This Faustian bargain created the illusion of growth but at exorbitant environmental cost (China’s modernisation tsar Cheng Siwei confessed to me at a dinner, after some wine, that GDP growth was minus 8pc when adjusted for water depletion, soil erosion, air pollution, and so on).
But it was also subject to diminishing economic returns. Credit fatigue slashed the GDP multiplier of fresh loan creation by two thirds. The smoking gun is found in a World Bank study of total factor productivity. The growth rate of TPF has fallen from 3pc in the early 2000s – the rate you expect in a catch-up economy – to near Western levels of 0.7pc.
In other words, China is no longer on the trajectory of previous Asia tigers. It is acquiring the productivity profile of mature economies before it is mature. Premier Li Keqiang long warned that China would slide into the middle income trap without a change of course – by which he meant less top-down planning, and more free-thinking – but hubris has prevailed.
President Xi Jinping and the top cadres think they can overcome the Impossible Dilemma: achieving a vibrant, hi-tech economy under the 24-hour surveillance of an absolutist police dictatorship.
Like many amateur observers of China, I had assumed that Xi Jinping’s iron-fist policies at home and abroad were a break with the more emollient approach from Deng to Hu Jintao (if you can call the Tiananmen Square massacre emollient), when China seemed to be softening from a totalitarian to an authoritarian regime. Cai Xia makes clear that the fundamental character of the CCP has been unchanging.
The party has merely dropped the facade and dispensed with Deng Xiaoping’s tactical dictum: “bide your time, and hide your strength” (韬光养晦). It has also acquired the means of totalitarian control that Hitler and Stalin could only dream of, whether face recognition technology or digital tracking through the Social Credit System.
The long list of Xi’s affronts, from the Nine Dash Line to the South China Sea, to the pitiless asphyxiation of Hong Kong, to the intimidation of Australia, to the Uighur camps, are by now well-known, culminating in wolf warrior diplomacy and state-sponsored disinformation on Covid-19.
We are so inured to it that President Xi’s “wall of steel” speech at the 100th birthday party almost seems banal. We know what the party thinks. The Fifth Plenum text setting out China’s strategy until 2035 revives the term “prepare for war” (备战), not used for over half a century.
It has long been an article of faith among the Western establishment that Deng’s economic opening would bring political opening in its wake. Bill Clinton presented China’s accession to the World Trade Organization as an instrument of liberal penetration. “The genie of freedom will not go back into the bottle,” he said.
George W. Bush echoed the theme. “Economic freedom creates the habits of liberty, and habits of liberty create expectations of democracy. Trade freely with China and time is on our side,” he said. One winces today.
This is not to criticise Washington for trying. Optimism is America’s great charm (or once was). But it is by now obvious that the US and Europe persisted with this false course for too long.
Cai Xia’s contention is that the Communist regime is more brittle than it looks, like the Soviet regime before the end. “I recommend that the US be fully prepared for the possible sudden disintegration of the CCP,” she said.
It is not just the broken economic model and debt saturation, or the corruption, or the “insurmountable contradiction between exaggerated ideological propaganda and social reality”. She highlights the power-struggle at the core. “Xi Jinping’s overly suspicious and narrow-minded personality has led to continuous purges inside the party, which have brought extreme dissatisfaction among the middle and high-level officials. Everyone feels unsafe,” she said.
This is hard for an outsider to judge. China literature is a graveyard of those who predicted the CCP’s demise too soon. Remember The Coming Collapse of China by Gordon Chang in 2002? It is also heady stuff to urge regime change in collusion with Xi’s internal enemies.
Yet the debate is taking shape in the West. The Atlantic Council floated the idea earlier this year in its “Longer Telegram”, modelled on George Kennan’s anonymous “Long Telegram” for Foreign Affairs in 1947, the blueprint for Soviet containment during the Cold War.
It calls for a US-led alliance to raise the cost of China’s predatory actions, exploiting fault lines within the regime to bring about “leadership change”, first by helping pragmatists to stop Xi Jinping’s attempt to perpetuate his rule beyond the 20th Party Congress in 2022.
“With a perfect combination of internal and external pressures, triggered by a series of acute systemic crises, the CCP may indeed collapse. It would, however, be foolhardy for US strategists to bet the bank on it,” said the paper. It proposes the use of strategic leverage to nudge China in a more pro-market, less nationalist direction, keeping open the possibility that this may lead to the downfall of the party in the end.
Former British diplomat Roger Garside, a veteran of the Cultural Revolution, goes further in China Coup: the Great Leap to Freedom, arguing that the CCP is bent on world supremacy and must be overthrown before it becomes powerful enough to act on its intentions.
Mr Garside said Xi has no instinctive feel for how the free world works and has fatally misjudged the resilience of the democracies, like 1930s totalitarians before him. He has turned a well-meaning America into a determined enemy, awakening a slumbering giant before China is close to strategic parity. “No people on earth is less forgiving than the Americans when they believe that their trust and friendship have been betrayed,” he said.
In his semi-fictional account, premier Li Keqiang and a nucleus of party bosses recognise the danger of this course, fearing a confrontation that China cannot win. They launch their coup d’état once Washington starts to flex its global financial muscles.
The trigger is the delisting of 250 Chinese companies on New York exchanges, though China has ironically preempted this over recent days with its own curbs. The trigger might equally be a move to freeze China out of the Swift payments system.
My view is that the incoherence of the Xi model will blunt the threat over time so long as the West remains united: the contradictions and controls will sap the dynamism out of the Chinese economy. Whether it is backtracking on reform of the dysfunctional state-owned companies (needed for party patronage), or the posting of commissars inside private companies, or the Maoist flirtation with the autarkic self-sufficiency, Xi is systematically undoing the Deng legacy that brought China out of the economic dark age.
Demographics will do the rest. The workforce peaked in 2017. It is already shrinking by three million people a year and the annual decline rate will accelerate to 0.5pc after 2030.
There may be a sorpasso a few years hence when China’s economy briefly overtakes the US but it will not last long and the process will then go into reverse if the Chinese Communist Party remains in office. The US is likely to be the world’s unchallenged economic superpower again by mid-century.
This does not preclude a dangerous few years of peak hubris before Chinese decline becomes obvious. For the next decade we live in the shadow of the Thucydides trap.
Xi Jinping’s totalitarian regime cannot coexist with the democratic world
China is no longer on the trajectory of previous Asia tigers and its economy will shrink if the Communist Party remains in power