Is China’s Communist Party Doomed?

Is China’s Ruling Party on the Brink of Collapse?

[With and HO-FUNG HUNG, ARTHUR R. KROEBER, HOWARD W. FRENCH, SUISHENG ZHAO]

“The endgame of Chinese communist rule has now begun,” influential China scholar David Shambaugh wrote in a March 7 article in the Wall Street Journal. “And it has progressed further than many think.”

Is the ruling China’s Communist Party (CCP) on the brink of collapse? We asked several China hands for their take:

Ho-fung Hung, Associate Professor of Sociology, Johns Hopkins University:

I agree with Shambaugh that there are serious cracks in the CCP regime, not only because of his arguments and evidence but also because of his deep knowledge about and long-time access to the party’s elite. Whether these cracks will lead to the end of CCP rule, nevertheless, is difficult to predict. The prediction about a CCP endgame this time might end up like the many unrealized predictions before. It may also be like the story of boy crying wolf: The wolf didn’t come the first two times, but it finally came when nobody believed it would come. The bottom line is, the CCP is facing very tough challenges. Whether and how it can weather them is uncertain.

“Xi’s purges surely make new enemies and make most of the Party elite feel deeply anxious about their fortunes.”

Xi is a leader who came to power with very few sources of legitimacy. Mao and Deng were among the founding fathers of the People’s Republic of China. Deng handpicked his successors Jiang Zemin and Hu Jintao — both of whom got the backing of party elders when they came to power. Xi, despite his princeling background, is the first leader chosen out of a delicate compromise among party factions.

“It won’t be so surprising if some of those anxious elite conspire to depose Xi.”

Amidst Xi’s rise to power, the mysterious Wang Lijun incident occurred, followed by the unusual downfalls of former top leaders Bo Xilai and Zhou Yongkang. What Wang actually told the American diplomats during his sleepover in the U.S. Consulate in Chengdu, and what sensitive information he eventually conveyed to Beijing is still unknown. But the rumor that he revealed a plot by other princelings to get rid of Xi through a coup does not sound too crazy. If this is true, then Xi’s frenetic purge of other factions in his anti-corruption campaign makes sense as a desperate move to whip the disrespectful elite to submission through creating a culture of terror within the Party.

Xi’s purges surely make new enemies and make most of the Party elite feel deeply anxious about their fortunes. It won’t be so surprising if some of those anxious elite conspire to depose Xi. Such internal coup against unpopular leaders is not alien to the CCP — it happened with the downfall of the Gang of Four in 1976, and former party chairman Hua Guofeng a few years later.

Second, the party’s internal rift is unfolding at the worst possible time, as far as the economy is concerned. Yes, a 7.4 percent annual growth rate is an enviable number to many other emerging economies. But with the soaring indebtedness of the Chinese economy and the ever aggravating unemployment problem, the Chinese economy needs higher-speed growth to stay above water.

[Read the full text here, at Foreign Policy]

The debt hangover of the 2008-09 stimulus is worrying. China’s debt to GDP ratio jumped from 147 percent in 2008 to 282 percent now, and is still growing. It is at a dangerously high level compared to other emerging economies. The economic slowdown will lead to profit decline for companies and revenue shortfall for local governments, increasing their difficulty in servicing and repaying debts. A vicious cycle of defaults and further growth deceleration could turn a slowdown into something uglier.

It is possible that the CCP elite, no matter how much they dislike Xi and his anti-corruption campaign, will still prefer not to rock the boat. They are aware that they are nobody without the protection of the party-state, and their privileges will be under far greater threat in the wake of a regime collapse. It is also possible that in the years of pacification and domestication following the 1989 Tiananmen Square crackdown, China’s civil society and dissidents have become so timid and cornered that they are incapable of taking advantage of any cracks in the regime.

Is Xi successfully increasing his grip of power through the anti-corruption campaign, or does his rule still suffer from inadequate legitimacy behind the mask of invincibility? Only time can tell. But besides the endgame of CCP rule, we should also ponder another possible scenario: the rise of a hysteric and suffocating dictatorial regime which maintains its draconian control over a society gradually losing its dynamism. Perhaps we can call this hypothetical regime North Korea lite.

Arthur Kroeber, Editor, China Economic Quarterly:

Neither China nor its Communist Party is cracking up. I have three reasons for this judgment. First, none of the factors Shambaugh cites strongly supports the crackup case. Second, the balance of evidence suggests that Xi’s government is not weak and desperate, but forceful and adaptable. Third, the forces that might push for systemic political change are far weaker than the party.

Shambaugh thinks the system is on its last legs because rich people are moving assets abroad, Xi is cracking down on the media and academia, officials look bored in meetings, corruption is rife, and the economy is at an impasse. This is not a persuasive case. True, many rich Chinese are moving money abroad, both to find safe havens and to diversify their portfolios as China’s growth slows. But in aggregate, capital outflows are modest, and plenty of rich Chinese are still investing in their own economy. Following an easing of rules, new private business registrations rose 45 percent in 2014 — scarcely a sign that the entrepreneurial class has given up hope.

The crackdown on free expression and civil society is deeply distressing, but not necessarily a sign of weakness. It could equally be seen as an assertion of confidence in the success of China’s authoritarian-capitalist model, and a rejection of the idea that China needs to make concessions to liberal-democratic ideas to keep on going. It is also related to the crackdown on corruption, which Shambaugh wrongly dismisses as a cynical power play. Corruption at the end of the era of Xi’s predecessor Hu Jintao had got out of control, and posed a real risk of bringing down the regime. A relentless drive to limit corruption was essential to stabilize the system, and this is precisely what Xi has delivered. It cannot work unless Xi can demonstrate complete control over all aspects of the political system, including ideology.

As for the economy and the reform program, it is first worth pointing out that despite its severe slowdown, China’s economy continues to grow faster than that of any other major country in the world. And claims that the reform program is sputtering simply do not square with the facts. 2014 saw the start of a crucial program to revamp the fiscal system, which led to the start of restructuring local government debt; first steps to liberalize the one-child policy and the hukou, or household registration system (discussed for years but never achieved by previous governments); important changes in energy pricing; and linkage of the Shanghai and Hong Kong stock markets. News reports suggest that we will soon see a program to reorganize big SOEs under Temasek-like holding companies that will focus on improving their flagging financial returns. These are all material achievements and compare favorably to, for instance, the utter failure of Japanese Prime Minister Shinzo Abe to progress on any of the reform agenda he outlined for his country two years ago. Read the rest of this entry »