After several decades of unprecedented growth and global adulation, China watchers are increasingly focusing on the headwinds. The world’s second-largest economy suddenly appears to be dithering – to be, perhaps, even frail.
The reasons are not only systemic economic contradictions. They are also a result of ad hoc governance solutions that President Xi Jinping has been forced to undertake to fortify the redoubt of Communist Party rule.
Economically, some observers are vexed by the daunting balancing act demanded of massive debt deleveraging and continued stimulus to maintain growth required to escape the so-called middle-income trap.
Others are gloomy about an apparent China-lite approach to the macro-monetary conundrum known as the “Impossible Trinity,” or the trilemma.
In short, the trilemma is the impossibility of fixing the value of your currency while maintaining an independently determined interest-rate policy and allowing free cross-border capital flows.
The argument runs that you can have two, but not all three. To have your dough, in other words, and eat it is an invitation to financial disaster. But compounding China’s problems is a less remarked upon governance trilemma.
Like the economic “Impossible Trinity,” this can be summed up as a balancing act between control and the freedom, not of monetary flow, but of ideas.
Xi’s China Dream envisages a grand rejuvenation of the nation, reinstating its centrality to the global order.
Overshadowing this vision, however, is the state’s increasingly assertive control over the content of discussion – the currency of discourse, if you like – and control over the emergence of new ideas or even the evolution of old ones, as well as control over the international trade of ideas and technology.
China’s shift to closed-circuit repression seems unlikely to spark rejuvenation. On the contrary, China’s governance trilemma is more evocative of an authoritarian treadmill with only one exit.
Skeptics need only look to the evolution of China’s abandonment of cash for a transactional Internet social-credit scoring system, or to look to the rise of a personality cult centered on Xi, and the expansion of a long-running anti-corruption drive to include non-Party members.
On the last point, according to RSDL Monitor, a website, the newly formed National Supervision Commission (NSC) will oversee Residential Surveillance at a Designated Location (RSDL), which the Monitor calls “a massive extension of the shuanggui detention system, which only targeted Party members.”
“China is pioneering multiple custodial systems targeting increasingly broad demographics, in a manner that often amounts to enforced disappearances, [which] arguably means that China will utilize enforced disappearance on a scale never before seen,” the report said.
China has been grilled on just such an outcome in the Xinjiang Uyghur Autonomous Region at the United Nations during the past two days.
The UN is responding to what it calls “many credible reports that 1 million ethnic Uyghurs in China are held in what resembles a ‘massive internment camp that is shrouded in secrecy.’”
A recent United States commission report described the situation in Xinjiang as “the largest mass incarceration of a minority population in the world today.”
The Chinese UN delegation denied the re-education camps even existed. The question is whether this is a governance conundrum arguably born less of design than of necessity.
At East Asia Forum, William H Overholt of Harvard University argued that Xi’s entire administration was a reaction to the “pressures of political complexity that forced political reform elsewhere.”
In around 2005, he maintained, the Chinese leadership became fretful the center was losing its grip. Economic reform was foundering. Powerful interest groups commandeered policy. Local governments went their own way. Corruption was endemic.
The response, according to Overholt, was “a desperate centralization of government.”
It fell on Xi Jinping to undertake the impossible – consolidating Party control and implementing reform. “Market allocation of resources would damage the power and finances of every major power group … [and] Xi’s instrument for dislodging reform opponents — the anti-corruption campaign — not only alienates the leaders of all those sectors but also leaves officials frightened to implement reforms,” Overholt said.
In a recent, widely read critique of the situation, academic Xu Zhangru spoke of the comeback of “an atmosphere of fear, a trepidation among intellectuals.” He continued: “The leftward turn in educational policy and a mooted Thought Reform movement may indicate that even more extreme developments are on the cards.”
Almost as if in response, the Communist Party of China has announced an ideological campaign targeting intellectuals that are insufficiently “patriotic.”
Mid-climb, China finds itself on a rock face, buffeted by the gusting imperative winds of economic and political reform. How China deals with these will have global repercussions.
In the meantime, the country’s “Impossible Trinity” is manifold in dimensions and quite likely crippling to its stated domestic ambitions. If the “fear” that academic Xu refers to in his essay “Imminent Fears, Immediate Hopes” becomes general amid a shifting geopolitical landscape, it is unrealistic to expect rational reactions from a beleaguered central government.
How those reactions might play out is anyone’s guess, but misjudgments have already been made and the scope for further misjudgments are immense in scale.