China: Beijing’s Statism Is a Source of Fragility
by Minxin Pei
R
ecent political, economic, and social developments in China have refocused
the international community’s attention on the country’s underlying
fragilities. Politically, China’s newly installed leadership is grappling with
multiple challenges — pervasive corruption, lack of credibility, a diffusion of power,
a demand for greater political rights and civil liberties, and revival of economic
reform. On the economic front, growth momentum is flagging, massive nonperforming loans burden the financial sector, and overcapacity plagues many key
industries. Socially, high income inequality, lower social mobility, poor food safety,
and environmental degradation are fueling frustrations among the middle-class, a
social segment critical to the survival of the Communist Party’s rule.
For most governments, such challenges are difficult enough, but for China’s new
leadership, the most complex and intractable aspect is that they are interconnected.
In many ways, effective solutions lie in transforming the existing autocratic political
system. Fighting corruption and reining in the country’s newly emerged kleptocracy
will not likely succeed without the help of a free press or vigilant civil society
groups. Restoring public credibility in the Chinese government requires greater
transparency. Meeting the demands for more political rights and civil liberties
means liberalizing the political system. Re-energizing economic reform entails
overcoming the opposition of entrenched interest groups — the bureaucracy, stateowned enterprises, local governments, and families and friends of party members
who have leveraged their political connections into unimaginable wealth.
Tackling economic and social reforms must also start with their political causes.
The centerpiece of any new economic reform program must be a drastic downsizing
of the role of the state in the economy. In practical terms, this means curbing
the monopoly of state-owned firms, replacing government-directed credit with
market-based financing, and ending discrimination against private entrepreneurs.
The political obstacle to these reforms lies in the nature of the political system;
the ruling Communist Party has to control a significant portion of the economy
to maintain its patronage system and the political loyalty of its followers. China is
unlikely to solve its myriad social problems, such as inequality, poor food safety, and
environmental degradation, without getting rid of the privileges of the ruling elites
and politically empowering the masses.
So the fundamental source of China’s fragility is its ossified Leninist system. It may
have thrived for two decades after the Tiananmen Square protests and the fall of the
Soviet Union, but its future looks bleak.
Minxin Pei is a professor of government at Claremont McKenna College and a nonresident senior fellow with the German Marshall Fund of the United States.
20
Brussels Forum 2013